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AFRICA as we know it is being recolonised.
Steeped in historic irony - the once all too familiar strategy of colonial powers extracting Africa’s resources only to load them on a ship bound for the motherland is no more – we are witness to colonial has-beens exploiting their cultural affinity with African nations in an effort to deposit resources from the motherland back into African soil.
Far from an act of benevolence, developed countries starved for economic growth are exploiting historic ties for a glimmer of economic gain.
This phenomenon is not restricted to Africa; Latin America is experiencing it too, welcoming boatloads of Portuguese and Spanish professionals seeking refuge from sagging economies back home.
As Africa’s sons and daughters know well, the continent is as about as homogeneous as Time Square in tourist season, so a strategy of leveraging cultural similarities like language and religion can go a long way towards accessing investment opportunities.
As a continent, however the pie is far too large for the appetites of the former colonials alone and anyway, the suitors are aggregating from newer ‘colonial’ powers such as China and India who are without a comparable cultural fulcrum.
From stars to dogs
In an effort to focus investor sentiment where it should logically be directed, there are various strategies for investors.
Regional strategies are popular with the continent being carved up into north, south, east and west; this fits well with various regional trade blocs which operate along similar lines.
Language is also a popular strategy, with Francophone Africa being a natural hunting ground for France; likewise, Angola and Mozambique are targeted by their Iberian forebears.
The problem with these strategies is that they are not focused on opportunities per se; they focus on countries where investors have the greatest chance for successfully investing, rather than the greatest chance for investing successfully.
I would like to propose a matrix modelled on the eponymous BCG matrix with its defined quadrants of dogs, stars, cash cows and question marks.
The matrix has become a default prism through which business units are viewed and reviewed with stars having high growth and high market share, cash cows having low growth but high market share, question marks having high growth but low market share and dogs having low growth coupled with low market share.
This segmentation allows one to evaluate businesses across opportunity lines and to determine investment or divestment strategies accordingly.
In an effort to construct a similar prism for evaluating African countries, I propose country segmentation along opportunity lines rather than cultural ones.
As a proxy for future prospects I have selected gross domestic product (GDP) growth rates, a natural candidate.
However, this alone is inadequate since a mighty nation like South Africa growing at a glacial European pace would still obscure a leaping Ghanaian gazelle in monetary terms.
For this reason I have selected debt outstanding and disbursed as a percentage of GDP as a partner metric. This is not as scientific as molecular physics, but it delivers a rough and ready prototype adequate for discussion purposes.
Notwithstanding the Reinhart-Rogoff brouhaha in the media of late, most economists - save for some fundamentalist Nobel laureate-toting Keynesians - will acknowledge that debt levels do in fact restrict future growth prospects, as common sense dictates.
After all someone, someday has to actually pay back today's loans and this will come at the expense of future economic stimulus; exactly what that percentage is, will remain the territory of future Nobel laureates.
My findings were interesting. After capturing enough data for 41 sub-Saharan nations, I roughly divided the matrix into quadrants with a cut-off for aggressive growth being 4% or more, and a cut-off for healthy debt levels at 40% of GDP or below.
Once again this is naked econometrics at best, but the results were intriguing.
That Guinea is a dog and not a pig comes as no surprise - but take a look at Sierra Leone, Lesotho and Cape Verde which emerge as cash cows.
Both Congos also achieve cash cow status based on their strong growth rates; Zimbabwe is possibly the exception that proves the rule with scant evidence of a local cow to run the government, let alone be milked.
But it is after the question marks that frontier investors will be hunting and there lie some obvious and not so obvious choices.
South Africa as we know has a hovering question mark above it but Cameroon, Senegal, Angola and the Central African Republic have sizeable populations. If they can accelerate their growth, they will undoubtedly become the stars of the future.
What is also fascinating is the distribution of these 41 states.
The map above clearly indicates some sparkling corridors of investment supporting established regional Africa strategies.
The intent of this data journalism expedition however is to stimulate the not so obvious Pan-African investment strategies ignored until now.
Business as unusual
What if, for example, Nigeria - which is a star of note - could stimulate growth in neighbouring Niger, Chad, Benin and Cameroon and create a West African power cluster?
Or what if an eastern seaboard were created ranging from Ethiopia through Kenya, Tanzania and down into Mozambique which could coordinate a port distribution system to move minerals and resources onto ships and return with payloads of consumer goods to the hinterland?
The second scramble for Africa is upon us. However, this is not a conventional gold rush - in fact, it’s a bit more like a Goldman rush with investment banking serving as pick and strategy consulting as shovel.
In this race for the efficient frontier, prospectors had best fill their satchels with the requisite tools of innovation, audacity, and a large appetite for business as unusual if they are to have any chance of discovering hidden African treasures.
- Fin24
*Jarred Myers is a resources strategist and can be followed on Twitter on @JarredMyers. Opinions expressed are his own.
Steeped in historic irony - the once all too familiar strategy of colonial powers extracting Africa’s resources only to load them on a ship bound for the motherland is no more – we are witness to colonial has-beens exploiting their cultural affinity with African nations in an effort to deposit resources from the motherland back into African soil.
Far from an act of benevolence, developed countries starved for economic growth are exploiting historic ties for a glimmer of economic gain.
This phenomenon is not restricted to Africa; Latin America is experiencing it too, welcoming boatloads of Portuguese and Spanish professionals seeking refuge from sagging economies back home.
As Africa’s sons and daughters know well, the continent is as about as homogeneous as Time Square in tourist season, so a strategy of leveraging cultural similarities like language and religion can go a long way towards accessing investment opportunities.
As a continent, however the pie is far too large for the appetites of the former colonials alone and anyway, the suitors are aggregating from newer ‘colonial’ powers such as China and India who are without a comparable cultural fulcrum.
From stars to dogs
In an effort to focus investor sentiment where it should logically be directed, there are various strategies for investors.
Regional strategies are popular with the continent being carved up into north, south, east and west; this fits well with various regional trade blocs which operate along similar lines.
Language is also a popular strategy, with Francophone Africa being a natural hunting ground for France; likewise, Angola and Mozambique are targeted by their Iberian forebears.
The problem with these strategies is that they are not focused on opportunities per se; they focus on countries where investors have the greatest chance for successfully investing, rather than the greatest chance for investing successfully.
I would like to propose a matrix modelled on the eponymous BCG matrix with its defined quadrants of dogs, stars, cash cows and question marks.
The matrix has become a default prism through which business units are viewed and reviewed with stars having high growth and high market share, cash cows having low growth but high market share, question marks having high growth but low market share and dogs having low growth coupled with low market share.
This segmentation allows one to evaluate businesses across opportunity lines and to determine investment or divestment strategies accordingly.
In an effort to construct a similar prism for evaluating African countries, I propose country segmentation along opportunity lines rather than cultural ones.
As a proxy for future prospects I have selected gross domestic product (GDP) growth rates, a natural candidate.
However, this alone is inadequate since a mighty nation like South Africa growing at a glacial European pace would still obscure a leaping Ghanaian gazelle in monetary terms.
For this reason I have selected debt outstanding and disbursed as a percentage of GDP as a partner metric. This is not as scientific as molecular physics, but it delivers a rough and ready prototype adequate for discussion purposes.
Notwithstanding the Reinhart-Rogoff brouhaha in the media of late, most economists - save for some fundamentalist Nobel laureate-toting Keynesians - will acknowledge that debt levels do in fact restrict future growth prospects, as common sense dictates.
After all someone, someday has to actually pay back today's loans and this will come at the expense of future economic stimulus; exactly what that percentage is, will remain the territory of future Nobel laureates.
My findings were interesting. After capturing enough data for 41 sub-Saharan nations, I roughly divided the matrix into quadrants with a cut-off for aggressive growth being 4% or more, and a cut-off for healthy debt levels at 40% of GDP or below.
Once again this is naked econometrics at best, but the results were intriguing.
Africa Investment Matrix | Create infographics
Most of the data reveal common wisdom like the upward trajectory of Nigeria and Ghana but Sudan, Mozambique and Tanzania were pleasant surprises in the star category.
Most of the data reveal common wisdom like the upward trajectory of Nigeria and Ghana but Sudan, Mozambique and Tanzania were pleasant surprises in the star category.
That Guinea is a dog and not a pig comes as no surprise - but take a look at Sierra Leone, Lesotho and Cape Verde which emerge as cash cows.
Both Congos also achieve cash cow status based on their strong growth rates; Zimbabwe is possibly the exception that proves the rule with scant evidence of a local cow to run the government, let alone be milked.
But it is after the question marks that frontier investors will be hunting and there lie some obvious and not so obvious choices.
South Africa as we know has a hovering question mark above it but Cameroon, Senegal, Angola and the Central African Republic have sizeable populations. If they can accelerate their growth, they will undoubtedly become the stars of the future.
What is also fascinating is the distribution of these 41 states.
The map above clearly indicates some sparkling corridors of investment supporting established regional Africa strategies.
The intent of this data journalism expedition however is to stimulate the not so obvious Pan-African investment strategies ignored until now.
Business as unusual
What if, for example, Nigeria - which is a star of note - could stimulate growth in neighbouring Niger, Chad, Benin and Cameroon and create a West African power cluster?
Or what if an eastern seaboard were created ranging from Ethiopia through Kenya, Tanzania and down into Mozambique which could coordinate a port distribution system to move minerals and resources onto ships and return with payloads of consumer goods to the hinterland?
The second scramble for Africa is upon us. However, this is not a conventional gold rush - in fact, it’s a bit more like a Goldman rush with investment banking serving as pick and strategy consulting as shovel.
In this race for the efficient frontier, prospectors had best fill their satchels with the requisite tools of innovation, audacity, and a large appetite for business as unusual if they are to have any chance of discovering hidden African treasures.
- Fin24
*Jarred Myers is a resources strategist and can be followed on Twitter on @JarredMyers. Opinions expressed are his own.
