Tag Archives: economy
African cities are the next big markets for investors thanks to the rising consumer spending and massive infrastructure investments.
According to a new report by the Economist Intelligence Unit, eight of the world’s 20 fastest growing economies will be African.
Tanzania not in the list.
“A recent survey conducted by The Economist Group of 217 global companies based in 45 countries revealed that expansion in Africa is a priority for two thirds of them within the next decade,” notes the report released last week.
The report notes that although Africa’s growth story has revolved around commodities, Africa’s growth is now becoming more diverse because of the “peace dividend” being realised after years of armed conflict and military rule that has given way to democracy.
There is also rapid urbanisation as half of all Africans are under 20 and are rapidly moving to cities. According to the Habitat, more than 40 per cent of Africans now live in urban areas.
Other growth drivers include improved governance because of greater accountability that comes hand-in-hand with democracy, and the slow strengthening of institutions; growing trade that is replacing aid, thanks to the growing trade relations with China.They also include the rise of technology exemplified by the rise in the number of mobile subscribers in Africa that exceeded the 0.5 billion mark in 2010, allowing companies greater access to consumers.
The infrastructure investment largely by Chinese companies is improving the state of roads, airports, and railway lines, fixing critical infrastructure component that is attracting foreign investors and sparking more domestic investment.
MasterCard African Cities Growth Index 2013 indicates that Accra, Lusaka and Luanda, the capital cities of Ghana, Zambia and Angola respectively, as the Sub-Saharan African cities that have the highest potential for growth over the next five years.
The index was developed in the final quarter of last year and analysed 19 cities across Sub-Saharan Africa ranking them according to their growth potential between last year and 2017.
“Growing urbanisation, combined with the fact that the center of global economic gravity is shifting to dynamic emerging markets such as those found in Africa, means that the continent’s cities will play a much bigger role in driving the economic growth of their respective countries,” said Michael Miebach, president, MasterCard Middle East and Africa.
Among the 25 cities that the Economist Intelligence Unit’s report identifies as being the growth frontiers include Cape Town, Durban, Johannesburg, Nairobi, Tunis, Dakar, Cairo, Tripoli, Addis Ababa and Casablanca among others.
And as for Dar ES Salaam. Let us hope for the best. I would love to see it on the list.
Skimping or Cheating on Insurance
Buying Cheap Items
Cheap clothes, cheap shoes, cheap hardware items and cheap electronics are all readily available, but if you find yourself replacing them often you may end up spending more money than if you had bought a good quality item in the first place. Your better choice is to look for good quality items on sale. Chinese items are playing a big part into this category! selling good looking bad quality items at a lower price!
IMF says it expects the world economy to expand 3.5% in 2012 down slightly from its previous estimate of 3.6% in April. In a quarterly update to its World Economic Outlook issued Monday, the IMF also cut its forecast to 3.9% in 2013, from 4.1% three months ago.
The Fund cut its US growth forecast to 2% this year from its previous estimate in April of 2.1% and kept Eurozone performance in 2012 unchanged at a contraction of 0.3% and down from a growth of 0.9% in 2013 to 0.7%. For 2013, it expects US growth of 2.3%, down from 2.4%.
An already sluggish global recovery shows signs of further weakness, mainly because of continuing financial problems in Europe and slower-than-expected growth in emerging economies, the IMF said in a regular update to its World Economic Outlook (WEO).
Two other IMF reports were also released July 16. The update to theGlobal Financial Stability Report (GFSR) said that risks to financial stability increased in the second quarter of 2012 because of the continued slow global recovery and fears about the quality of bank assets in Europe.
An update to the IMF’sFiscal Monitor said that fiscal adjustment in both advanced and emerging economies is proceeding as expected.
The latest World Economic Outlookprojects that the global economy will grow 3.5% this year, down 0.1%age points from the April forecast, and 3.9% in 2012, 0.2%age points lower (see table).
“More worrisome than these revisions to the baseline forecast is the increase in downside risks,” said Olivier Blanchard, the IMF chief economist and director of the IMF’s Research Department, which prepares the WEO. The IMF emphasised that the relatively minor setback to the global outlook under its baseline projections is based on three important assumptions:
- that there will be enough policy action for financial conditions in the so-called euro area periphery, which includes Greece and Spain, to ease gradually through 2013;
- that US fiscal policy does not tighten sharply in 2013; and
- that steps by some major emerging markets to stimulate growth gain traction.
The IMF said the most immediate risk to the global recovery is that delayed or insufficient policy action will further escalate the euro area crisis. “Simply put, the Eurozone periphery countries have to succeed,” said Blanchard.
The report cited agreements at the June 28 eurozone summit as a step in the right direction. It said the summit actions should help break the “adverse links between sovereigns and banks and create a banking union. ”
But the recent deterioration in sovereign debt markets demonstrates that timely implementation of these measures, together with further progress on banking and fiscal unions, must be a priority.
The WEO update also cited the possibility that growth in the United States would stall because of excessive fiscal tightening caused by political gridlock. “In the extreme, if policymakers fail to reach consensus on extending some temporary tax cuts and reversing deep automatic spending cuts,” the US economy could face a steep decline of more than 4% of GDP in its fiscal deficit in 2013.
That so-called fiscal cliff would cause a severe decline in US growth, with “significant spillovers to the rest of the world.” Moreover, if the United States does not act promptly to raise its federal debt ceiling, there will be increased risk of financial market disruption and loss in consumer and business confidence.
Growth has slowed in a number of major emerging economies, especially Brazil, China, and India. This was due both to a weaker external environment and a sharp deceleration in domestic demand in response to capacity constraints and policy tightening.
Overall, though, emerging markets have weathered the crisis well. In contrast to the broad trends in the rest of the world, growth in the Middle East and North Africa will be stronger, as key oil exporters continue to boost oil production and drive up domestic demand, while activity in Libya rebounds after the 2011 unrest. Sub-Saharan Africa, which has been insulated from external financial shocks, is also expected to enjoy relatively robust growth in 2012–13.
Bad debts in the eurozone are a “ticking time bomb” for the continent’s economy, with the worst effects expected to be felt next year, a report has warned.
Sitting in his traditional tent, Khaidav, a retired teacher, dreams of the wooden house he will build after one million tughrik ($760) lands in his bank account this summer.
More than a million Mongolians like Khaidav, who goes by one name, will become tughrik millionaires as they sell shares in Tavan Tolgoi – the world’s third-biggest coking coal deposit which is helping fuel the country’s resources boom – to the government.
Mongolia, a resource-rich country of 3m people with a per capita gross domestic product of less than $5,000, has introduced policies to share its growing mineral wealth with its citizens.
One measure involved spreading 20 per cent of the shares in Tavan Tolgoi among the entire population. Until recently, people were unable to cash in because the planned public listing of the mine has been delayed.
But in May, ahead of parliamentary elections slated for next week, the government offered citizens a choice: sell their stake back to the state for one million tugrik or keep the shares and wait for the public listing.
More than half of the country opted for the cash, handing the government a bill of roughly $1bn, or a tenth of the country’s GDP. However, many Mongolian elites criticise the handouts as premature because the mine, which is barely developed, has yet to produce the revenues that are expected.
Politicians have defended the buyback programme, saying they are just giving Mongolians a chance to participate in the mineral wealth.
“That was our biggest election campaign [promise] in 2008, and we fulfilled it,” said Chimed Saikhanbileg, a candidate for the Democratic party. “Every citizen in Mongolia now owns 1,072 shares of Tavan Tolgoi, the equivalent of one million tugrik.”
The Democratic party will next week face off against the Mongolian People’s party in parliamentary elections that will determine who governs the country for the next four years.
The two centre-left parties who are campaigning on similar platforms, including using mining revenues to benefit ordinary citizens, have ruled together in a coalition for most of the past four years.
Tavan Tolgoi was supposed to set the standard for how the country would handle its mineral resources. Instead, it has become a cautionary tale, as the project has been delayed by politics in Ulan Bator and by geopolitical wrangling between China, Russia and other countries that want to play a part in its development.
The listing has also been delayed by uncertain global markets and the slow progress producing a new Mongolian securities law that will create the legal framework necessary for the three-city listing.
Mongolia is trying to wean itself off of the handout culture that flourished in previous elections, in which campaigns competed for who could promise the most cash to voters. After passage of a new election law, candidates are now barred from making election promises about money or employment.
Tavan Tolgoi is a good example of how election promises can lead to mismanagement. As the government buys the Tavan Tolgoi shares back, it will resell some to Mongolian companies for the same price to reduce its bill.
“The 2008 campaigns were about who will give more cash. It cost us quite dear in the last four years because there was no money to implement this,” says Oyun Sanjaasuren, head of the Civil Will Green party, which opposes cash handouts.
“Tavan Tolgoi is quite a big, complicated equation, with a lot of unknowns still, like how do we deal with geopolitics, neighbours, and strategic investors.”
Other critics say the buyback scheme is taking badly needed cash away from the mine, which is very short of cash, mainly because it still produces only a small fraction – 4m tonnes a year – of its potential output.
Fears of a global economic slowdown have come sharply back into focus, and expectations of decisive action by policy makers have grown, according to the BofA Merrill Lynch Survey of Fund Managers for June.
A net 11% of the global panel believes that the global economy will deteriorate in the coming 12 months – the weakest reading since December 2011.
Last month, a net 15% believed the economy would strengthen and the negative swing of 26%age points is the biggest since July-August 2011 as the sovereign crisis built. The outlook for corporate profits has suffered a similarly negative swing. A net 19% of the panel believes that corporate profits will fall in the coming 12 months. Last month, a net 1% predicted improving corporate profits.
Investors have adopted aggressively “risk off” positions. Average cash balances are at their highest level since the depth of the credit crisis in January 2009 at 5.3% of portfolios, up from 4.7% in May. The Risk & Liquidity Composite Indicator fell to 30 points, versus an average of 40.
Asset allocators have moved to a net underweight position in global equities and increased bond allocations. Support for policy stimulus has grown. The majority of the panel now believes that global monetary policy is “too restrictive.” A net 6% take that view, the highest since December 2008. A net 15% said policy was “too stimulative” in May. The proportion of global investors saying global fiscal policy is “too restrictive” has continued to rise to a net 28% from a net 23% in May. “Investors have taken extreme ‘risk off’ positions and equities are oversold, but we have yet to see full capitulation.
Low allocations in Europe are in line with perceptions of growing risk levels in the Eurozone,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. “Hopes expressed last month of a policy response have now become expectations. Markets are keenly anticipating decisive action from key policy meetings in June,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.