Category Archives: Tanzania

Chart of the Day: Sub-Saharan Africa’s Mobile Phone Market

Lots of room to run here. What this doesn’t give us a clear view of though is undersubscription relative to absolute market size. Nigeria would obviously be the winner on that front.

2013.03.18.Sub-Saharan Africa Mobile

How Oil Divides The Economies Of Africa Into Winners And Losers

I can’t get this article from the FT’s William Wallis out of my head. The headline is “Currencies pressed by trade imbalances” but this really only captures a small slice of the picture. Check it out:

With import demand outstripping export growth in some of the continent’s fastest expanding economies, rising trade imbalances are putting pressure on currencies. African and international investors hedge against this by spreading risk – one factor that is driving African banks and businesses across borders.

But even an expansive footprint is not always enough. MTN, the continent’s leading telecoms provider with a presence in 21 African countries, announced that currency swings had weighed heavily on its earnings.

More broadly says Razia Khan, head of Africa research at Standard Chartered Bank, widening current account deficits are the result of an investment and consumption boom, new resource exploration activity and “the scaling up of output”. Ghana fits into this category. It is also on the risk radar this year as heavy investment in oil and gas infrastructure continues, with only modest increases forecast for oil output.

A weak currency does not help those African countries with limited capacity to ramp up exports in response. Kenya cannot for example suddenly double tea production. So, it is forced to defend its currency to avert importing inflation.

Loose monetary policy in major developed economies has driven a rush of short-term funds into African markets. David Cowan, Africa economist at Citibank, says the way in which central banks defend their currencies and the margins that foreign investors earn will be one determining factor in how long the appetite endures.

I don’t disagree with any of this but would point out that this is all just the tip of the iceberg and there are a lot of ways to slice this.

One is that just six of Africa’s 53 countries account for two-thirds of the entirety of Africa’s $2.0 trillion economy. In descending order of nominal GDP: South Africa, Nigeria, Egypt, Algeria, Angola and Morocco. I think a pie chart best demonstrates this relationship:

2013.03.20.Africa 2013 GDP composition

Another is to think about how much of Africa’s total economy is driven by oil exports. Let’s try the following table to demonstrate this:

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“Zambia is an Argentina without a Christina Kirchner”

Everything here I consider of equal importance but the fact of how we digest information is that something must come first. So let’s start with that headline quote, which came from Michael Power of Investec Asset Management in this 12 minute interview. Lest you don’t have 12 minutes to watch it (which is what I’m here for), the short version of what Mr. Power has to say is that Investec rejects the broad categorization wrought by the terms “emerging markets” and “frontier markets” for something Investec has taken to calling “horizon markets”.

Yes, you read that correctly. Pardon me if I’m late to this party, but this is the first I’ve heard of this. Horizon markets apparently includes “second tier” emerging markets, which consists of a handful of countries less prominent than the BRICS but with investable entry and exit points far ahead of any failed state. Here’s a chart Investec included in London-based Clear Path Analysis’ recently released overview of Frontier Markets investing:

Also noteworthy from the video interview, Investec likes the following when it comes to investing in Africa:
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What Higher Oil Prices Mean for Sub-Saharan Africa

I just finished reading Alterio Research’s new Frontier Africa report, “Surging oil prices – gift or curse?” which frankly could quite easily be renamed, “Dutch Disease by any other name”. The report (available for free here) attempts to measure the impact of rising oil prices on inflation, fiscal stability and economic growth on the following countries: Angola, Botswana, Ghana, Kenya, Namibia, Nigeria, Tanzania and Zambia.

The essential takeaways here that I see are the following:
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