Africa is one of the continents in the world that has experienced economic growth in the recent past. This contradicts the traditional view that Africa is a dark continent. Emerging markets in Africa have attracted investors from all over the world due to increasing demand for goods and services. Some of the African states that are on the rise includes the following states: Ghana, Mali, Mozambique, Lesotho, Mauritius, Ethiopia, Zambia, south Africa, Uganda, Tanzania, Seychelles, Botswana, Namibia, Rwanda, Burkina Faso, Sao tome and cape Verde. Sub Saharan Africa experienced a lot of challenges that hindered economic growth. Most of the African countries crippled with this state of economy until the early 1990’s. These states have developed democracy, good economic policies; good leadership polices and embraces new technology (Coughlan, 2012). According to the IMF (International Monetary Fund), Africa has a long way to go to improve its output, which is at two percent to that of the world. The growth of African economy is triggered by the increasing demand for raw material by china and Asia.
Local Business Environment
Business environment has experienced significant boost from political goodwill in the recent past. It has been faced with a lot of challenges due to political instability and lack of political goodwill in the past. Dictatorship in Africa has affected and locked the economic potentials that are endowed in Africa. Africa is naturally endowed with resources that up to today are not fully utilized. Business environment is concerned with legal and regulatory frameworks, policies governing business enterprises, governance issues, economic and social infrastructure, organizational frameworks and political goodwill.
In Africa, the state of business environment has experienced drastic support from policies, political goodwill, good governance, economic and social infrastructure and legal and regulatory frameworks. However, some of the African countries struggle with poor public governance, inconsistent legal and policy frameworks, weak infrastructure and unpredictable and unstable business environment.
Sub Saharan Africa is an agricultural continent that is due to the favorable climatic conditions found in it. It is well known with the production of coffee, cocoa, mining, tea, textile, agro processing and oil deposits. However, Africa has experienced challenges to develop its industrial sector thus it has been exporting its raw materials to the developed countries to be manufactured. This contributed to underdevelopment and unemployment in sub-Saharan Africa. Africa has the largest oil deposit in the world but it is yet to be fully exploited. In the recent past there has been increased industrial development and reforms that have seen through the growth of the economy.
Manufacturing industries have pop up in Africa to exploit the natural resources endowed in it, especially in the energy sector. The manufacturing of raw materials to finished products has enabled to add value to the agricultural products that are exported to other continents (Plaza and Ratha, 2011). However, the sector of industrial production is not fully utilized to generate optimum productivity. There have been efforts to encourage large scale farming so as to increase productivity.
Trends of Business and Available Opportunities
Emerging market in Africa represents a growing opportunity of technology. Technology is being employed in different areas of economy. In the manufacturing sector computer technology is being applied in the production of goods that meets the standards and needs of the customers (Murray, 2007). Most of the countries in the sub-Saharan Africa are low developed countries thus they rely on the developed countries for economic growth through exports and imports. There is slow economic growth due to poor infrastructure and poor governance of resources. However, in the recent past, efforts to harmonize the business environment have seen through the utilization of the natural resources. Sub-Saharan Africa has plenty of opportunities in form of available market and industrial growth potentials. Foreign direct investments and increased demand for resources from Africa presents an opportunity for Africa.
Banking in Africa sector has seen tremendous growth and improvement in the recent past. Banking sector managed to acquire assets of $669billion in the year 2008. An example of financial reform is Nigeria banking reforms, it enabled swift consolidation to penetrate and unlock economic potentials in Nigeria (Egendorf, 2009). It also enhanced transparency and accountability that hindered economic growth.
New entrants on the banking sector have brought in competition in the sector hence huge population in Africa access banking services at low cost. Due to the favorable business environment, Africa has seen major banks operate in their countries. Financial sector has enabled growth in other sectors such as agricultural and industrial sector in the economy. African financial markets have continually grown. Below is a diagram that represents a growing financial market.
Figure 1: represents the growth of African financial market within a period of ten years.
The x-axis represents the numbers of years while the y-axis represents the total flow of capital into African economy. From the year 2000, there was growth in the financial market. This growth declined in the year 2002. It started recapturing up to the year 2008. From 2009 and above the growth increased due to the introduction of new banks in the financial markets.
Globalization and International Trade
Sub Saharan Africa has opened up to the rest of the world inform of market and technology. Having embraced technology, it has created a lot of opportunities for investors and job seekers who have increased the population. Below is a graph of that shows the performance growth of African emerging markets. The growth has been attributed by the increasing demand for African resources by the Asian countries
Figure 2: represents an International Monetary Fund, economic growth trend for African emerging market for a period of ten years.
From the above graph, it is clear that there has been random growth due to the increased demand for the African resources. From the year 2002, there has been continuous growth up to the year 2008. In the year 2008, the world suffered an economic recess that affected the African emerging markets. This decline in economic growth continued to the year 2009. From the year 2009, the economy started recapturing its growth.
Key Trading Partners
African resources are in continued demand from the Asian countries. Europe is the biggest partner of African countries. Asian and china have increased their economic and development partnership with African countries. This has led to greater development of infrastructure and economic ties between African countries. Below is a graph of world report on export and imports statistics in the year 2009.
Figure 3: Represents exports statistics by African markets to its key partners in percentage.
From the above diagram, it is clear that Europe remain the largest destination for African exports. This implies that African development is largely dependent on Europe market. Asian countries have increased demand for African resources thus they have created an opportunity for African countries.
There have been several trade agreements between African countries with the European Union and china that guide the trade between them. The following are some of the trade agreements between African countries, European Union, Caribbean and pacific. One is the economic partnership Agreement (EPAs) which sort to improve trade development, poverty reduction and economic growth. It was signed between the EU (European Union) and Caribbean, pacific and Africa. The second agreement is the signing of Cotonou agreement in the year 2000. This agreement aimed at opening the European market to ACP (Africa, Caribbean and pacific).
There has been development in the economic policies to address and control economic development. This has seen through economic development inform of foreign direct investment and liberalization of the region. China has been more concerned with infrastructure development in Africa; this has led to trade ties between the African countries and china.
Sub Saharan African has not fully developed its industries. They also try to protect the local industries from international industries. This is done through imposing higher taxes on the imports and lowering the taxes on exports. However the African markets have been dominated by the big industries product from the developed countries. To curb the menace, African governments have entered into trade agreements to control economic activities between the countries.
The increase in democratic nation in sub-Saharan Africa has brought about a more efficient form of governance, which has adopted policies that favors economic growth. There are a total of 22 states in the region presently. The domestic legal requirements are becoming less invasive on matters of business (Cerami, 2013). The investors who have an eye on this developing economy are required to fulfill certain legal requirements such as business registration, property titling and labor regulations. There have been major reforms in many of the sub-Saharan Africa economies in matters of business registration and labor regulations (Coughlan, 2012). Most of the sub-Saharan countries have eased the process of acquiring license by the business people in order to stimulate growth. The region has managed to maintain a growth rate of 5 percent in the year 2012-2013.
Most of the sub-Saharan African countries have experienced major challenges such as tribal crashes and political instability. Some of the nations suffering from political instability includes; Mali and Guinea Bissau. Other regions such as Sahel have suffered severe draught slowing down the growth rate. It is challenging for most foreign investor to venture into most sub-Saharan African economies since most companies are family owned thus making it hard to obtain outright control. The local partner plays a vital role in helping the foreign investor in understanding the business environment and also in fulfilling the ownership legal requirements (Egendorf, 2009). The economic instability that is common in many of the sub-Saharan African states, makes it hard to raise the required capital for investment as local shareholder do not have enough capital to invest and thus the foreign investors are forced to seek other sources of capital.
Crime Rate in Sub-Saharan Africa
In most of the sub-Saharan African countries, there has been rapid expansion in urban centers. The governments have heavily invested in development programs in urban centers such as construction of roads and houses, which has lead to an increase in rural to urban migration. The number of people migrating to the urban centers does not match the available resources to satisfy them leading to the development of slums. The development of slums has lead to an increase in urban poverty. Slum life is characterized by poor sanitation facilities, congested housing and high levels of insecurity. Accessibility of basic services such as health, education and food is also limited. This has brought about to increase in crime rate in the urban centers as people strive to satisfy their basic needs.
The high crime rate is unfavorable for business operation as businesses are prone to vandalism (Frisch and Boidin, 2008). This has also lead to the division of the sub-Saharan African economy into informal and formal sector mainly due to the high rates of unemployment. The production level of the informal sector is quite low as compared to the formal sector. This has lead to increased crime rates as people struggle to satisfy their daily needs. The sub-Saharan African governments have however invested in the security sector, which has seen a great improvement that is evidenced by the sustained economic growth in these states.
Corruption Rate in Sub-Saharan Africa
Africa is the world’s most corrupt region. Corruptions have slowed down the rate of development in most of the sub-Saharan African states. In the year 2012, the sub-Saharan Africa as a whole received foreign Aid amounting to $22.5billion. In the same year, the region lost $150bilion to corruption. It is for this reason that there has been a concerted effort in the fight against corruption by the government and private institutions. Corruption in the sub-Saharan African states ranges from political grafts to small bribes usually associated to custom officials and police officers (House-Soremekun and Falola, 2011). Corruption has corroded major institution leading to poor service delivery. Most of the citizens in these regions have lost trust in their government due to the high corruption cases. Political grafts have the effect of raising the cost of business activities (Mafeje, 2013).
The African governments have joined hands in the fight against corruption and are also adopting transparent and accountable forms of governance. Most of the sub-Saharan African countries are also empowering their anticorruption agencies to be free of political influence. These structures have seen the region become one of the world’s emerging economic markets.
The fight against corruption has been accelerated by the rise in democracy, realistic economic policies, reduction in debt crisis, application of new technology and the rise of a new generation of leaders who are more committed to the development of the region. This has led to the maintained growth rate from the 1980s to the year 2014 in the region as indicated in the figure 4 below (International Monetary Fund 2014).
Figure 4 shows the maintained growth rate in the sub-Saharan Africa region in comparison with the growth rate of the Asian countries.
Human Rights in Sub-Saharan Africa
There is a significant deficit in the protection of human rights in sub-Saharan Africa. Most of the sub-Saharan African states are yet to attain the universal human rights standards. Some of the existing human rights limitation includes; women underrepresentation, women and youth marginalization, sexual violence and violation of the rights of women in matters of economic opportunities, health and access to education (Mu, Phelps and Stotsky, 2013). The traditional cultures has been a major hindrance towards the attainment of human right as they uphold practices that amount to human rights violation such as female genital mutation. Most of the sub-Saharan African states have laws that prohibit human rights violation but despite these statutes, cases of human rights violation are still rampant (McIntyre, 2009).
Child labor is also common in most of the sub-Saharan African states mainly due to high poverty level prompting the young children to seek paid labor to be able to satisfy their basic needs. The tribal crashes prevalent in these regions have lead to the rising cases of child soldiers. Most of the African children who came from the war prone zone survive through traumatize, drug addiction, girls sexual slavery, looting and acting as spies. The region has however seen great advancement in the fight for the restoration of human dignity.
The education standards and accessibility has continued to rise and there are also major initiatives that are geared at empowering the girl child. The security of the region is also improving through the efforts of the African Union to make Africa attractive to investors and also in their efforts of selling Africa as a tourist destination. The non-governmental organizations are also at the forefront in the fight against oppressive systems. The civil society groups in the region are also advocating for political reforms, democracy and the upholding of the human rights.
The Cultural and Social Environment in Sub-Saharan Africa
The sub-Saharan Africa is a region with diverse cultures. The cultural practices of the inhabitants of the region have however been heavily degraded by the western cultures. Most of the sub-Saharan states adopted the culture of their colonizers in terms of education curriculum, religion and cultural practices. The traditional African culture is associated to art and crafts creativity which is expressed in wood carvings, leather arts and brass (Pozuelo-Monfort, 2010).
The inhabitants of the region are also popular for their paintings, pottery and sculptures and the traditional African dress (kanga) present today. Most of the traditional African cultures laid great emphasis on the beauty which is evident from the wide jewelry varieties and decorated masks made from cowry shells (Meekers, 2012). The masks were used in the various ceremonies including circumcision ceremony and childbirth ceremony. The cultures of the Sub-Saharan African inhabitants present a huge opportunity of business people willing to invest in the beauty industry.
Values and Norms
The values and norms of the tradition African people have heavily been neutralized by modernization. The traditional family institution that safeguarded the traditional norms has been corrupted through the introduction of modern values. The sub-Saharan African has presently been listed as one of the regions experiencing high population growth annually characterized by increased urbanization. The competition between the ancient values and the modern values has resulted to a drift from traditional family patterns to modern family pattern. The modern family pattern is characterized by a situation where mother are giving birth to less number of children.
The sub-Saharan African communities recognizes the role played by the ancestors and the elders and lives as a community and not as an individual which is evident from the tribalism nature of these societies despite the level of modernization attained (Mehler, Melber and Walraven, 2009). The shift from large family size to small family size is due to improvement in health care services which has brought about a reduction in infant mortality. The inhabitants of this region are becoming more aware of the birth control methods which the governments are encouraging with an aim of controlling the increase in population rates. The fertility rate has declined from six to five kids per woman in the region.
Societal Characteristics, Customs and Ethics
The African society values the unity of a community as it is referred to as a sacred and is evidenced from the different societal symbols and religions. The members of family living in urban centers usually join their families during national holidays to show the sense of togetherness. The communities are organized into clan who holds on to a common myth of origin. Individuals from a community shares common values and interest which is evident in the manner in which they carry out their economic activities. The increase in the number of literate people and urbanization has brought about the integration of different cultures through intermarriage between people from different communities which was initially prohibited in many communities. It is therefore advisable that any investor first acquaints himself or herself to the culture of the community in which he or she plan operate from.
Environment and Ecological Issues
The seventeen countries in sub-Saharan Africa mainly rely on the natural sources for the social and economic requirements. Approximately two thirds of the sub-Saharan African inhabitants reside in rural areas whose main economic activity is agriculture including some other naturally occurring resources. The sub-Saharan African region is however suffering from environmental challenges such as water and air pollution, soil erosion, deforestation and reduction in the region’s biodiversity. The number of people living in poverty in the region is very high due to poor management of the available resources. The region is experiencing high population growth rate approximated to be 2.2 percent annually (Mehler, Melber and Walraven, 2009). The United States government has supported the efforts by the countries benefiting from the Congo forest to preserve the forest resources. The European Union has also initiated programs aimed at attaining constant water supply for the inhabitants and also provision of sanitation services. The sub-Saharan African region is the one of the least emitter of greenhouse gases due the low levels of industrialization. The region has however suffered from the impact of climatic change.
Stewardship of Natural Resources
The increase in population rates in the region has lead to the continued depletion of the natural resources. Some of the forested areas are being converted to residential and industrial areas. There is an increased demand for firewood, food and water to sustain the population. The local communities have adopted programs that are aimed at preserving the natural resources such as forests, grasslands and water way such as tree planting. Most of the sub-Saharan governments have adopted legislation geared at regulating deforestation and also empowering farmers though the provision of seedling (Musa, Domatob and Hamelink, 2011). The leaders in the regions are thus seeking the means of integrating environmental planning and economic development plans.
The Sub-Saharan African region presents a great opportunity for the investors due to it increasing global competitiveness. The challenges that the region is facing includes insecurity, high unemployment rate, environmental degradation and corruption. There has been extensive collaboration by the region leaders in the fight for the region economic stability. The region has many untapped resources including oil deposits, iron ore and gold. It is therefore for this reason that international investor continues to base their operations in these regions due to the increased security, internet accessibility, transport services and availability of raw materials. Countries such as Angola, Nigeria and Chad have oil deposits, which is a major source of government revenue. The availability of untapped resources in the region has lead to a recent scrabble for the region resources some of the nations that are heavily investing in the region includes; china, United Kingdom, India and the United States of America.
The regional leaders should focus on seeking means of bringing the cost of power down so that they can raise their global competitiveness. Security is vital for the development of any nation and thus, the inhabitants of these regions should limit the constant tribal crashes and also the government should focus on bringing the crime rate down. The regional leader should join hands in the fight against corruption as it limits the development of the region.
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Figure 1: United Nations Conference on Trade and Development, 2010, African economic growth….………………………………………………………………….…………. 5
Figure 2: International Monetary Fund, world economic outlook, 2011, economic growth statistics………..…………………………………………………………………………………6
Figure 3: Coventry economic school, 2009, exports statistics…………………………..…7
Figure 4: International Monetary Fund, the economic, 2014, gross domestic product …11