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Africa: Look beyond preconceptions

When most of us consider new investment opportunities and hot export markets, sub-Saharan Africa probably isn''t the first region that comes to mind. There are a number of legitimate reasons for this oversight. But lending too much weight to preconceived notions can allow opportunity to pass you by.

It seems, unfortunately, that when Africa makes the news, the story is of a given nation mired in a troubling range of social, economic, or political problems; the reports are echoed by the region''s alarmingly slow economic growth, averaging just .8% annually from 1960 to 2000, compared to 2.3% for the rest of the developing world.

Attention tends to focus on the dramatic, however, and often fails to note the more positive and mundane attributes of several countries in the region. In reality, the African market, like any other, has both good and bad investment opportunities—the right strategy can make selling or investing in these countries a rewarding experience.

Key countries

For simplicity''s sake, let''s divide the sub-Saharan region into several geographical blocks, as does the IMF: the Horn of Africa; the Great Lakes; Southern Africa; West and Central Africa; the Franc Zone; and the nation of South Africa.

The Horn of Africa

  • Ethiopia: The Ethiopian economy is expected to rebound in 2004, following the damaging effects of last year''s famine. The country does sustain a healthy demand for plastics-related imports, like molds, GI pipes, dies, packaging, kitchen products, pipes, and fittings.

    Leading markets include aircraft and aviation parts and equipment, road construction equipment, telecommunications, and hydroelectric equipment.

    The Great Lakes

  • Kenya: According to PlastPack Africa, the consumer demand for plastics in Kenya has been growing at a rate of 10% to 20% annually. This has no doubt been propelled by the country''s improved economic performance, a trend the IMF predicts will continue at least through 2005.

  • Tanzania: PlastPack Africa reports that Tanzanian primary plastics imports include consumer items, writing instruments, rope and twines, plastic and metal spectacle frames, strainers, laminated and non-laminated packaging material, biomedical products, kitchenware, woven sacks and bags, PET preforms, gifts, and novelties.

    With real GDP growth projected to exceed 6% through 2005 and inflation under control, increased consumer spending should help drive the market in the coming years.

  • Uganda: Uganda managed to achieve consistently high levels of growth throughout the 1990s and early 2000s, a trend predicted to continue. The country''s success is generally attributed to the macroeconomic market reforms adopted during this period, which have, among other things, significantly lowered tariffs, eliminated import quotas, and encouraged foreign investment.

    Uganda''s major plastics imports include molded furniture, housewares, sacks, bags, ropes, plastic shoes, PVC pipes/fittings/electrical, plumbing and drainage systems, building materials, toothbrushes, and household products.

    Southern Africa

  • Botswana: Like its more recognizable neighbor to the south, Botswana has become one of the most dynamic economies in Africa, winning it a per capita GDP roughly equivalent to that of South Africa. Its economic success has been accompanied by four decades of uninterrupted civilian rule, and by strong and effective social, economic, and political institutions.

    Key industries for exporters and their suppliers include mining equipment, hospital equipment and pharmaceuticals, telecom, computers, and solar energy.

  • Mozambique: An end to its damaging civil war and the introduction of important macroeconomic reforms in the 1990s has helped this economy record significant economic improvements, often achieving real GDP growth above 10%. Such growth is projected to continue through 2004 and 2005.

    The country has high imports of plastics production machinery and resins, continuing a trend that accelerated following the privatization of the county''s plastics factories in 1995 and 1996.

  • Angola: Another country prospering following a peaceful settlement of a destructive civil conflict. Like Mozambique, peace and the implementation of significant market reforms in the 1990s helped Angola average impressive growth throughout the period, a trend the IMF projects to continue, soaring into double digits through 2005.

    West and Central Africa

  • Ghana: Despite remaining heavily dependent on foreign aid and the export of primary commodities, especially gold, Ghana has managed to sustain per capita GDP levels about double most other African countries.

    These higher income levels should continue to sustain the consumer market in the near future, especially now that inflation has been better contained. Processors should look for greater government investment in physical infrastructure projects over the coming years.

  • Nigeria: Nigeria''s great oil revenues have helped it to obtain above average yet often sporadic GDP growth throughout this last decade. While it can be argued that Nigeria has to some extent fallen victim to the "natural resource curse," it suffers more from its unwillingness to follow through with necessary market reforms.

  • Equatorial Guinea: Like Nigeria, Equatorial Guinea''s oil wealth has driven the country''s economic growth, and this wealth has given it the means to avoid implementing the market changes necessary to achieve more sustainable and diverse long-term growth.

    Regardless, oil income should help sustain relatively high levels of imports and economic growth over the short to medium term.

    Franc Zone

  • Cameroon: While not suffering from the same degree of structural economic problems as Nigeria and Equatorial Guinea, Cameroon has been reluctant to continue implementing liberal market reforms recommended by the IMF. The country''s economy has also suffered from the frequent fluctuations commonly associated with primary commodity markets. However, Cameroon''s agricultural lands and oil resources should ensure the continual flow of imports.

  • Senegal: Implementing liberal market reforms in the mid-''90s, Senegal has enjoyed significant growth and attracted much foreign investment. Look to telecom; airport and ground support equipment; mining equipment; computers and peripherals; cosmetics and toiletries; air conditioning, refrigeration, and ice machines; and electrical power systems.

    South Africa

    By far the largest market in sub-Saharan Africa, PlastPack Africa lists the current value of South Africa''s entire plastics market at around R25 billion, accounting for .7% of the world market. The association estimates that per capita consumption of plastic is about 22 kg.

    South Africa''s market is also characterized by a high utilization of conversion technologies and is noted for its consumption of large quantities of products like film, sheet, packaging, kitchenware, furniture, pipes, footwear, and industrial parts. Plastics recycling and environmentally friendly plastics are considered important for the industry.

    The sub-Saharan market may not be as glamorous as its booming Asian counterpart, but opportunities exist for processors willing to look beyond somewhat distorted conceptions.

    Agostino von Hassell and Mark Bella, of the Repton Group LLC (New York). Contact von Hassell at [email protected]; Bella, at [email protected].

  • TAGS: Materials
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