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David Stafford
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Student of markets, enjoys following their course.
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Around the World in Several Pieces
  • Around Africa in Several Pieces Part 1; The Ivory Coast, Ghana, and Nigeria 0 comments
    May 22, 2010 6:39 PM
     
             One could argue that the 3 major players in Sub-Saharan Africa are the Ivory Coast( Le Cote D’Ivoire), Ghana, and Nigeria.  All three of these countries as the descriptor ‘sub Saharan’ would suggest are located just below the Sahara desert.  They are located in a region that is apt to be the northern hot zone for African growth.  With the Lower pole being South Africa, and north Africa in many ways involving very different economic factors and ethnic groups.  Northern Africa could quickly be summed up by relating the importance of its agricultural exports to Europe(see Tunisia), and its dependence on European Tourism,(See Tunisia and Morocco.)  To just give a quick primer for the paradigm I’m working with, this is the way I’d describe North Africa(similar to Spain in many regards).  South of that we get to the Sahara Desert.  Countless miles and dunes of sand later, we’re in the region discussed in this article.  This region is beset by conflict(see Angola, the Congo(s), etc.)  but there are beacons of hope and pseudo-stability in the visages of The Ivory Coast, Ghana, and Nigeria.  South of this we have more conflict(see Zimbabwe), and other countries most people have only noticed for the sake of their interesting flags(see Botswana and Namibia).  South of here  of course, we have the aptly named South Africa, with a wealth of resources and know how that is practically unmatched throughout the rest of Africa.  To the West of the Sahara we of course have more conflict, or potential conflict(see Eritrea  and Ethiopia), and of course Somali pirates, which says a lot, and of course Kenyan coffee, and the location of a gem of financial complexity in the form of the somewhat automated and modernized Kenyan Coffee Exchange.
     
    Now that that is out of the way, I’d like to thank the reader for bearing with me, and would like to turn to the subject of this article.  This subject being an important look for any investor, and macro strategist into a key demographic element, as well as a fundamental yet often unknown(in relation to this region) economic indicator.  These two factors being the rate of adult infection with the HIV Virus/Aids, and the respective nations GDP figure.  There’s an old saying that goes ‘you have to learn to walk before you can fly’, and although this may not be true for birds, it is most certainly true for a truly savvy investor.  Thus it is with this adage in mind that I present to you these two factors which will arguably heavily effect the foreseeable future of these three countries consumers, as well as perhaps shed some light on these ‘frontier’ economies relative to other economies of their same ilk.
     
    As far as GDP is concerned a look at the basic GDP of these three countries will give you some insight into the growth rate of this region, which essentially is located at the continent-of-Africa’s core.  Africa is unique in that often each region deals with different sets of foreign players, however, neighboring countries economies and political climates often affect one another’s.  Thus, though the remnants of colonialism still remain in their vaguest sense since, French speaking countries will often have more to do with France, etc.  Local players with different colonial affiliations will undoubtedly affect one another in a panoply of ways simply due to their proximity to one another(aka their neighbors).  Thus, though Nigeria and Ghana are more British, than the French Ivory coast, economic and political disruptions will still often effect countries that share borders.  Hence it is perhaps profitable to approach understanding African economies according to the aforementioned zones, since in odd ways, their trade and governmental support regimes often follow patterns that were established in the days of colonialism.  
     
    Nigeria’s GDP has been arduously trending downward since 2004.  Since 2004 its respective GDP figures have been; 7.1% for 2004, 6.20% for 2005, 6.9% for 2006, 5.3% for 2007, 6.4% for 2008, 5.3% for 2009, and 3.8 % for this year so far.  Thus, though we are seeing growth in several countries in Africa, most notably South Africa, we are seeing a shrinking of the Nigerian economy, even if its only occurring at a slow and drawn out pace.  Perhaps serving as somewhat of a remedy for this problem could be the search for oil that’s going on off the coast of this region, and its worth noting that though the countries economy is stagnating and slowly but surely finding its self in a mire of sorts, it still has 2/3rds of the proven oil reserves for the region so this is perhaps worth noting(for more insights into the regions oil reserves please refer to previous ‘Insta-blogs’).
     
    Another English speaking country that could serve as somewhat of a prospect for future growth is Ghana.  Ghana’s GDP has a sort of inverse skewness relative to Nigeria one could say in that its been gradually increasing since 2004; with a rate of 4.7% for 2004, 5.4% for 2005, 5.9% for 2006, 6.0% for 2007, 5.5% for 2008, 7.3% for 2009, and 4.7% for 2010 so far.  Thus, we have a more stable, and somewhat more positive situation as far as GDP is concerned for Ghana.
     
    For the Ivory Coast we have the case of a seeming return from death, reminiscent of the animist traditions of the region(not to sound like some kind of a stereotypical schmuck, but animism is still a big deal in some corners of the region, not necessarily ‘Call of Cthulhu’ style animism, but some peculiar stories none the less).  For the breakdown for the Ivory Coast we have the following; -1.9% growth for 2004, -1.0% growth for 2005, 1.0% growth for 2006, a 1.2% growth for 2007, a 1.6% growth for 2008, and a 2.3% growth for 2009.  So far this year, we have a growth rate of 3.2%.  Hence the Ivory Coast is a solid prospect.  There isn’t the same sort of volatility to this nations GDP and hence it seems like somewhat of the pick of the litter, even though it’s a relative upstart to a much greater extent than the other countries discussed.
     
    For a quick break down of each country’s GDP we have the following.  For Ghana, 37% of the GDP is agriculture related, 25.3% is industrial in nature, and 37.5% is service related.  For Nigeria, we have somewhat similar breakdown, with the economy seemingly reminiscent of some sort of totalitarian utopia(if that were possible) with 1/3rd of GDP being agriculture related, 1/3rd of GDP being industry related, and 1/3rd of GDP being service related.  Last but not least of course, for Ivory Coast we have the following GDP break down; 28% agriculture, 21% industry, and 50% service related.  Thus we have Ivory Coast as a somewhat more US model, none the less, it also has the worst GDP progression of the three countries listed(cough), so I guess that’s life, and that’s also the GDP breakdown for these three countries.
     
    If you don’t want to darken your day per se, you might want to skip the following section in that you’ll probably  be reminded of the fact that the human cost of AIDS is an issue in Africa, and thus I would be somewhat remiss if I didn’t address it as such in this quick look at these countries’ economies.  One need only ask Napoleon, Alexander the great, or Atahualpa what happens when the majority of one’s worker/soldiers gets sick, and thus I will quickly give you these figures as well.  The Ivory Coast’s adult AIDS prevalence has gone from 7% in 2004 to a relatively stable 3.9% for the past few years, just to give you some perspective on this data, these values are often repeated for several years at a time, given the nature of the disease, presumably, so this measurement is often seen repeating its self for period of 4 years at a time.  For Ghana we had a 3.1% AIDS prevalence in 2004, dropping to a 1.9% rate for this year.  For Nigeria we have a drop as well, with a 5.4% rate being the status quo in 2004, with a rate of 3.1% being the current plateau.  Thus, though it may not be all fairies and unicorns there is an overall positive theme to be garnered from this data in that slowly but surely the rate of AIDS transmission must slowly be dropping in Africa.  All the more reason to look at this region for 20-25 year investment opportunities n’est ce pas?
     
    As the world as we currently know it begins to dramatically shift, I believe Africa is worth looking at.  It is one of the few regions of the world that hasn’t been ‘pumped and dumped’ by investors and speculators.  It doesn’t have the problem and distinction of dragging down European Central banks(as well as getting the short end of the stick for shrinking European consumption) as does Eastern Europe, it isn’t as unknown as the -Stan’s. Africa also has resources and tremendous potential that has been dragged down by corruption and ‘political instability’ for generations.  It’s latest hurdle is hopefully AIDS, however, the world is developing in ways that are bringing Africa onto the main stage.  The way in which regions rise to prosperity always has occurred in a gestalt like way.  Perhaps the vanguard of this new shift in focus in embodied by the way in which Africans have been in more and more prominent and upper level positions over the years, from Koffi Annan being the head of the UN, to Tidjan Thiam, the CEO of Prudential, who happens to be Ivorian by birth, and also one of the 100 Global Leaders for Tomorrow as determined by the World Economic Forum.  Africa is past its age where it was defined by authors like Chinua Achebe reflecting on the footprints of colonialism.  Africa is within the next 50 years, as technology advances, and as the continent as a whole modernizes, going to be a very different place.  While the 'house of cards' nature of our own European and American economies is becoming more and more glaring by the day, its time to broaden one’s scope of analysis at least in so far as prospecting for growth is concerned.  Thus with global trends shifting as they are, with the third world rising form its post-colonial reforms, and with the developed world being wrung out on an accelerating and regular basis its time to start giving Africa more attention.  Thus, with the articles and posts I make here you may learn more about Africa as I do. As I, and We, explore the intricacies of the current state of the region.
     
    For a longer discussion of the ‘Third World’s’ potential; please refer to the discussion of the subject, as took place at the last World Economic Forum meeting in Davos, which can be found by following the link below.
     
     


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