Investment_in_Africa

Recently, international investors have turned their sights to Africa, whose expanding consumer class and abundant natural resources make it the next prime location for development and innovation. According to the Africa Attractiveness Survey, investment in Africa totaled $128 billion in 2014, up 136% from the previous year. Investment reached $174 million per project, an increase from $67.8 million in 2013. This vast increase is largely spurred by several megadeals on the continent rather than many smaller ones. Although this “big money” form of investment may crowd out smaller investors, it paves the way for future funding from all types of businesses.

According to Charles Brewer, managing director for DHL Express Sub-Saharan Africa, an update in the way investors perceive the continent has been the source of increased funding. Economic growth coupled with an improved business environment and strengthened infrastructure has caused foreign investment to hit a historic high. Sufficient infrastructure is key to successful development because it lowers the expense of logistics. In the past, supply chain costs were nine times greater in Africa than on other continents. Deals such as DHL Express’s not only expand the frontier for international corporations but also lend to growth within Africa as well. Brewer predicts millions more in investment dollars from his company alone in 2015.

“With increased Foreign Development Investment and macroeconomic growth, I believe that Africa will become an economic powerhouse in the future. The region is abound with untapped opportunities and has much scope for growth,” says Brewer. With more and more people benefiting from international aid and earning money, the consumer base in Africa has grown rapidly. This provides immense opportunities for companies to move into these countries and provide previously undeveloped services. Brewer lists 18 countries for which his company has planned major projects. Such economic development will also provide more jobs to African workers and increase spending across the economy, leading to even more economic growth and future foreign investment. Companies such as DHL Express will help reinforce the business environment and create opportunities for African businesses all over the world. In this way, Africa is not a market to be cornered by the rest of the world; the world is a market soon to be cornered by Africa.

– Jenny Wheeler

Sources: It News Africa, African Business Review
Photo: Flickr

Quanzhou

Urbanization in China experiences challenges when expanding out to rural areas and having to reclassify villagers as urban citizens. One consequence of expansion is the sale of farmers’ land in order to create space for urbanized living or development.

Quanzhou’s gross domestic product is about $84 billion, and the city hosts one of the lowest unemployment rates in the world at 1.22 percent. The economy is driven by textile factories, food processing plants and emerging industries such as petrochemicals and automobiles.

In 2014, protests over the urbanization and development plans through the sale of land became heated, as rows of villagers held up banners to show their dissent. The government did not negotiate with the villagers before selling their property, which forced some residents into poverty.

“The land belongs to the farmers, but the government sold it off, and the farmers haven’t received any of the money,” said Chen, a resident of the Xunbu village in Quanzhou.

The government’s seizure of rural land resulted in violent suppression and pressure for the local villagers to comply with Beijing’s actions.

While property is being sold off for the government to expand their business expenditures, there have been many successful developments and labor changes to alleviate poverty in Quanzhou. For example, improved working conditions make the city attractive to migrant workers. These workers will then be less likely to leave Quanzhou city, softening any labor shortages.

The Quanzhou Federation of Trade Unions has a new model to protect immigrant workers and benefit both workers and employers. These efforts provide individual contracts as well as collective contracts that extend their rights to neighborhood levels, such as street, village, or enterprise. Due to the success of their new model, $12.91 million in salaries have been paid to workers. This has alleviated the poverty felt by many migrant workers of Quanzhou.

With over 13,000 foreign enterprises reaching a total of $34.5 billion in investments, Quanzhou has the ability to expand and become the national center of urbanization and development that China is hoping to accomplish. As long as working conditions continue to improve and wages continue to climb, Quanzhou will be able to fill vacant positions and keep migrant workers returning. If their business model continues to succeed, Quanzhou may become the most important investment city to get the 82 million people below the poverty line out of extreme poverty.

– Donald Gering

Sources: China Daily, China Knowledge, Harvard, International Business Times, RFA, Rappler
Photo: China Mike

emerging_markets
Emerging markets are important to the economy and they provide opportunities for investment and they usually occur in developing countries.

Developing countries have the ability to be more stable than developed markets such as those in the U.S. and Western Europe. This is because emerging markets such as Brazil have high revenues with a budget surplus. Since these markets have little or no debt to pay off, they are actually safer places to invest. Another country that is experiencing the benefits of a strong emerging market is India. Hedge funds there went up 49.1 percent in October and financial advisors in the U.S. are taking note.

Marko Dimitrijević, the founder of firm Everest Capital said, “We believe in their reform agendas, they are doing the right things from a macro standpoint, and their currencies are also more likely to hold their value against the U.S. dollar.” Investors turn to macroeconomics to decide whether or not to invest in a region or specific country. When it comes to investing it is important to be focused on a certain country and the specific economy within that country. Emerging markets are growing economies and these are important areas that investors can see a return on their investments. In other parts of the world and in developed economies the trend is not so positive.

Pradipta Chakrabortty is a manager of a fund that specializes in emerging market investments. He believes that it is necessary to look past the obstacles such as social unrest or infrastructure problems that often plague developing countries. Businesses have the ability to succeed even in a context that seems to counter the political issues.

Investors are looking to profit in emerging markets because they have attractive features such as growing populations and high government spending on infrastructure. These and other factors are important when looking to invest.

There are also negatives to investing in emerging markets. For instance, they sometimes are at risk due to the value of their currency because it is not always stable. Fluctuations in the market leave the currency at risk and the likelihood that it will be devalued increases. The term investors use to describe investing in many different economies is “diversification.” Portfolios need to be diverse so that if the market were to plunge in one place, they have investments in other places.

– Maxine Gordon

Sources: Bloomberg, CNBC, Yahoo Finance
Photo: Business Insider

mission to mars
In November of 2013, the Indian Space Research Organization (ISRO) launched its first mission to Mars. The achievement was met with mixed feelings.

For many Indians, it was a moment of immense national pride. India proved itself capable of working with and persevering through the technological challenges of the 21st century. For others, it was a source of unmitigated fury. How could a nation with so much poverty spend so much money on something as irrelevant as a space mission?

This is a generalization made for unpacking.

The mission to Mars cost India 74 million dollars. To put this in perspective, this is about 21 percent of the $3.5 billion dollars allotted to Meal Scheme, a project aimed to improve nutrition among school-age children. About the same amount, $2.5 billion, was given to the Ministry of Drinking Water and Sanitation.

The budget for the mission is a significant fraction of all the numbers listed above; it could do a great deal of good in any one of the programs. Though it is important to understand this, it is also necessary to recognize that the space program works alongside other social initiatives; the existence of a space program does not mean that resources for poverty-reduction are lacking.

This mentality is inaccurate because of the utility of many projects run by the agency. ISRO satellites report weather — floods, droughts, cyclones and landslides. They collect information on natural resources; information that is essential to agricultural and conservation efforts. With remote-sensing technology, researchers have even been able to map out prospective groundwater sites.

As to the mission itself, the strongest defense has been anecdotal. When America reached the moon, 13.8 percent of Americans were below the poverty line. When Russia put Sputnik in orbit, the nation was recovering from Stalinist policies. When China sent the first woman into space, 100 million Chinese were living in poverty.

Yes, the money could have been spent elsewhere, but should it have been? Supporters of the mission argue that the presence of poverty should not stop scientists and researchers from making their own mark on their field.

– Olivia Kostreva

Sources: Thomas Reuters Foundation, Exim Guru, The Economic Times
Photo: The Times

food_security
A new disagreement has cropped up that is threatening progress made by the World Trade Organization (WTO) last year.

This past week, India rejected the United States’s proposal to debate further the issue of food security—a rejection related to India’s earlier threat to block the WTO’s Trade Facilitation Agreement. Indian officials interpreted the proposal as a design to place their concerns in the periphery as the Trade Facilitation Agreement’s deadline of  July 31 quickly approaches.

By Aug. 1, WTO members must reach a consensus in order to approve a short protocol for the implementation of the trade agreement to continue. Some experts have argued that the agreement could pump as much as $1 trillion into the global economy by facilitating a streamlined trading process across national borders. Others, like Jayati Ghosh, a professor of economics at Jawaharlal Nehru University, have argued that prediction is based on “spurious empirical exercises.”

During a December 2013 meeting in Bali, WTO members agreed to a three-part work program. The trade facilitation agreement was one element. Another was the opening up of markets in developed countries to the Least Developed Countries. The final part — and the point of contention — proposed that developing countries could continue implementing their food security programs for the next four years. The WTO plans to have found a permanent solution to the food security issue by 2017.

India’s representatives took issue with the four-year postponement of action. “You’ve given yourself until 2017, but that doesn’t mean you have to wait to start,” said Nirmala Sitharaman, India’s Commerce Minister, in an interview with the Financial Times. She continued, “We want some very quick, substantive movement on this.”

However, other sources have reported that Indian Commerce Department officials have been demanding a “permanent solution” by the end of the month. These contradictory demands have left the rest of the WTO confused about India’s position. What is clear is that India has felt marginalized and ignored in WTO’s negotiations thus far.

And the country has cause for concern when it comes to agriculture. The agricultural sector employs more than one-half of the country’s workforce, a force that the democratic government must appease to stay in power. When rice prices skyrocketed in 2007-08, India responded with the National Food Security Act of 2013. As a result of this act, India stores grains so that price spikes can be managed by introducing stockpiled supplies into the market. Farmers receive a minimum price for their products, thereby remaining appeased, and the Indian government pays for the difference.

These are controversial methods both within India and abroad. In India, citizens criticize the subsidizing of farmers because the money could be benefiting the development and education of children, or improving the health care system.

Abroad, countries like Thailand and Uruguay have expressed concerns that India distorts the global market and hinders these countries’ own rice markets. Developed countries like the United States have deemed India’s practices contrary to the spirit of a liberalized global market. Many in India have responded by pointing to the subsidy programs of developed countries as evidence of these countries’ hypocrisy.

Joshua Meltzer, a fellow in Global Economy and Development at the Brookings Institution, has argued India misconstrued food security to equal food sovereignty—complete “self-sufficiency in food production.” He suggests this isolationism from international trade will engender greater food insecurity.

Indian officials disagree, and until the WTO finds a solution, the country will continue with its food security policy. Moreover, despite the popular rhetoric praising them, global markets have not always benefited developing countries as they are supposed to in theory. India, like many other developing countries, does not trust these markets. Inevitably, these countries turn inward.

In the long run though, most experts would agree that India cannot improve on its poor Global Hunger Index ranking (65 out of 79) through isolationism from international markets. The country has chosen a critical moment for the WTO in which to voice its concerns, but by doing so, India has threatened the well-being of the same tool — international trade—that might be capable of solving the country’s food insecurity problem.

– Ryan Yanke

Sources: The Guardian 1, The Guardian 2, Times of India, United States Senate Foreign Relations Committee, Financial Times, Brookings,,
Photo: Agriculture Information

africa summit
On August 4, President Obama will welcome leaders from across the African continent to Washington, D.C. for a U.S.-Africa summit. The intercontinental meeting will run until the 6th and will feature a series of events that highlight America’s commitment to trade with new African democracies.

The summit will feature a theme of investment in the next generation.

Obama invited all heads of states in good standing with the United States. Egypt was extended a late invitation. An invitation was also extended to the African Union Chairperson, Mohamed Ould Abdel Aziz.

The summit will begin on Monday with five Signature Events:

Civil Society Forum Signature Event:
The Civil Society Forum is to be hosted by Secretary of State John Kerry and will unite governmental leaders from the U.S. and all over Africa, as well as members of respective civil societies. The event will be split into three separate sections: an intercontinental dialogue, a keynote address and a Global Town Hall, which Kerry himself will moderate.

Investing in Women, Peace and Prosperity:
The Investing in Women, Peace and Prosperity event will highlight current women in African leadership roles, and discuss ways to ensure that future generations can continue this legacy.

Investing in Health: Investing in Africa’s Future:
This signature event will unite government officials from both continents, as well as Ministers of Health and senior health policy makers to envision a future of interrelated U.S. and African health policies.

Resilience and Food Security in a Changing Climate:
U.S. and African leaders will focus on food security and climate change. They will discuss ways in which poorer African countries can negate the impact of the global climate crisis.

Combating Wildlife Trafficking:
This signature event will unite leaders and see them strategize ways in which they can involve the youth in curbing poaching.

Day two will have the U.S. Department of Commerce and the Bloomberg Philanthropies co-host a U.S.-African Business forum. The purpose of the forum is to strengthen financial ties between the continents. As the name suggests, it places a special importance on engaging the American private sector with the African private sector.

On the final day, President Obama will meet with a number of African leaders in events all aimed at attracting youth to African politics.

Andrew John

Sources: Star Africa, Brookings, Whitehouse
Photo: AlJazeera

hunger
The world currently produces enough food to sustain the entire global population, yet nearly a billion people around the world still suffer every day from hunger. The U.S. alone could end global hunger with only $30 billion a year — a mere fraction of the $530 billion the U.S. spends annually on the military.

If we have the power to feed the world, it begs the question — why is hunger still such a monumental problem?

The primary and most obvious cause of hunger is poverty. While enough food exists to feed the world, a significant portion of the population still live in such abject poverty that they cannot afford even the most basic food items.

This creates an incessant poverty trap. The global poor can’t feed themselves or their families, so they become weak and malnourished which makes them unable to work. In turn, they fall deeper into poverty. This phenomenon is affecting millions of people around the world. Any solution to hunger must also be in part a solution to poverty.

Another major cause of hunger is natural disasters and climate change. Storms and droughts — both of which are on the rise — damage crops and lead to massive food shortages. Often, the poorest countries are the ones least equipped to deal with these disasters, and the greenhouse gases that lead to climate change originate from the richest countries.

One way to remedy this problem is to increase foreign investment in agriculture. By establishing adequate infrastructure, cultivating the land properly, managing water usage and ensuring storage facilities are used effectively, the fallout from natural disasters can be handled much more easily.

Unfortunately, most poor countries lack the resources and the knowledge to shore up their agricultural sector by themselves. However, foreign investment in the agricultural sector of developing countries would go a long way towards helping them becoming self-sustainable. A U.N. study found that investments in agriculture reduce hunger five times more than investments in any other sector.

Finally, war represents another major cause of hunger. The most war-torn areas in the world also tend to suffer the most from hunger. In war, food is often used as a weapon. Farms and livestock are ravaged in an effort to starve the opposition into submission. In Africa, countries with the most conflict — like Somalia and the Democratic Republic of Congo — are often the hungriest. On the other hand, in more peaceful countries — like Ghana and Rwanda — hunger is on the decline.

There are a number of insidious causes to the problem of global hunger, but the good news is that all of them are preventable. First and foremost, the problem of hunger must be tackled by facing poverty head-on. From there, we should turn our attention away from feeding impoverished peoples through aid, and towards helping them become self-sustainable.

– Samuel Hillestad

Sources: WFP, Global Concerns Classroom, DoSomething, FAO
Photo: OoCities

chinese_investment_africa
Earlier this month, Chinese Premier Li Keqiang attended the Annual World Economic Forum on Africa; on the same trip, he visited Nigeria, Kenya, Angola and Ethiopia. Kegiang’s trip was yet another illustration of China’s deepening economic integration and development throughout Africa.

In recent years, Chinese investment in Africa has increased dramatically. China has invested large amounts of credit and aid to Africa out of economic interest in the nation, primarily exploitation of the continent’s many natural resources as well as energy development, among others.

In 2012, China donated $200 million to construct the sleek new African Union headquarters building in Ethiopia, creating a very literal illustration of favorable Chinese-African relations. As of this month, the Chinese investment in Africa has reached $30 billion in the continent in credit, as well as $5 billion in development funding assistance. Additionally, trade between the two entities has reached a whopping $150 billion.

This intimate economic integration and political entwinement alarms many across the globe, as China’s development in Africa has been (and will likely continue to be be) accompanied by concerns regarding labor ethics and environmental consequences. Others have expressed worries about terrorism and its potential spread as African leaders turn away from American diplomacy and instead focus on Chinese economic integration. Three primary consequences of this relationship are of concern:

 

1. Environmental Concerns

China has a notoriously unfavorable reputation when it comes to unethical labor standards and a disregard for environmental pollution and emissions. With exponential growth and thousands of laborers in newly developed African factories, how will the latter concerns be addressed, if at all? Will they pay closer attention to human rights concerns in foreign turf?

 

2. Potential spread of terrorist growth

U.S. diplomacy with Africa has included much counter-terrorism rhetoric and initiative. Secretary of State John Kerry has performed multinational tours of the continent on several occasions, explicitly asserting a counter-terrorist agenda. If African leaders embrace Chinese diplomacy and turn a blind eye toward U.S. efforts, experts predict that such efforts will result in more leniency in counter-terrorism efforts.

 

3. Human rights regression

In an Al-Jazeera article, some consider U.S.-Africa relations to be quite critical. Writer Abdullahi Halakhe states “African leaders’ uncritical embrace of China to spite unequal relations with the West could roll back the modest progress toward democracy, good governance and improvement in human rights.” In other words, some believe that China’s policies of “noninterference” in foreign nations’ domestic affairs is more appealing to African leaders and might result in backwards progress in the human rights arena, against the efforts the U.S. has concerted in conditional policies with leaders.

Arielle Swett

Sources: Aljazeera America, Reuters
Photo: The Chine Africa Project

investments_in_Kenya
In January of this year, USAID announced a new poverty reduction initiative in Kenya. In partnership with Kenya Commercial Bank (KCB) and General Electric (GE), USAID promotes investments in Kenya between the KCB and medical institutions that need financial assistance to offer appropriate medical care.

To provide this assistance, banks will grant loans to hospitals and other health centers. These investments in Kenya would have previously been considered unsafe and unlikely to be returned, but under the agreement with USAID, they are guaranteed reimbursement. If a full return cannot be made, USAID will pay back 50 percent of the loan.

The KCB, according to the deal, is obliged to divvy $1 million for medical equipment like MRIs, incubators and other standard-increasing machinery to be used in local health centers. GE has left $660,000 dollars for USAID to use as potential reimbursement funds, though only $500,000 (50 percent) should be used. In return, the Kenyan health services will purchase GE equipment, expanding GE’s global market.

There are some, however, such as Monica Onyango of Boston University, who are afraid this may lead to an overstated importance of imported goods, when in fact, locally manufactured equipment is better for local economic development.

Michael Metzler, director of Development Credit Authority (which is the tool used by USAID to promote loans, as in the initiative in Kenya,) reassures skeptics like Onyango that local business and manufacturing will still have the power Kenya needs it to have to grow. Quoted recently in a Global Post article, Metzler said that “we’d be very sensitive to a deal in which that was the case.”

Aside from the deal’s economic influence, clearer effects of the enhanced medical treatment new loans insure will be seen in public health. This expedites poverty reduction in Kenya by reducing the number of deaths caused by preventable diseases thriving in impoverished communities. These include diseases such as HIV, diarrhea, tuberculosis and malaria.

Illness and poverty go hand in hand, and until one is dealt with, the other is likely to expand. This new USAID initiative incorporates this idea and acts accordingly.

Adam Kaminski

Sources: Health Poverty Action, Global Post, Federal News Radio
Photo: USAID