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Doing Business in Africa: Insightful Evening Event

When it comes to international business, Africa is often neglected. The continent’s share of global trade value is barely above 2%. However, there are many positive developments that deserve a closer look: On 3 December, students from Angola shared encouraging facts about the economic development on the continent with our International Management students at an event organized by the Department International Business.

Doing Business in Africa

The auditorium at Volkart Building was packed with around 250 students and faculty members. Senior lecturer Khaldoun Dia-Eddine opened the event with a warm welcome. After an overview of some historical facts (colonialism), he highlighted more recent, positive developments such as improvements in democratic governance and a GDP that has increased fivefold since 2000. A huge task lying ahead is the diversification of economies like Algeria, Angola, or Nigeria, which heavily depend on oil exports. However, due to their large deposits of minerals and other natural resources, commodities will remain crucial for economic development in the region. Institutional conditions like infrastructure, literacy, rule of law and access to water have to be tackled in order to foster further development. As for business opportunities, electricity (photovoltaic), telecommunications, and financial services (cashless payment) are some of the business opportunities mentioned by Khaldoun Dia-Eddine. The question is whether African economies will continue to grow in the years ahead. Recent drops in the price and demand for oil and other commodities may cripple the economic development of several nations in the near future. However, the general outlook is positive. African countries like Mozambique (+ 16%) are among those with the biggest annual growth rates worldwide, and substantial foreign investments (especially from China and the US) are expected to be made in the next years. With an entertaining short film, the focus of the evening changed from the African continent to a single country, Angola.

The Angolan Perspective
Next, six exchange students from Angola presented their views on certain economic aspects of their homeland and of Africa as a whole. These students are participants in a program entitled “Future Leaders of Angola”, a customized continuing education course the SML developed on behalf of the country’s sovereign wealth fund. Ivan Njinga started his presentation by pointing out that in the Western world the image of Africa has significantly improved in recent years, and for good reasons: In the case of Angola, inflation has steadily dropped. Between 2000 and 2010, the GDP grew by 11.1% on average. And for 2015, the IMF still expects a growth in GDP of 5.9%. However, the GDP does not measure happiness, which is why Ivan Njinga also mentioned social progress and well-being as important factors for development. Considering the Social Progress Index (lead by New Zealand and Switzerland), it is evident that African countries still have a long way to go to ensure the well-being of their citizens. Economic growth alone will not be enough.

The Angolan financial sector was the subject of the next presentation, given by Valdmiro Massibo, Mário Godinho and José dos Santos. Firstly, they introduced its structure, size, and major players. The financial industry is highly centralized in the capital, Luanda, which is also the seat of the Angola Debt and Securities Exchange (BODIVA) due to start operating shortly. The much anticipated opening of the stock market is expected to contribute as much as 10% to the GDP – a huge change to the economy, as Ivan Nijnga pointed out. The financial sector has shown considerable growth since the end of the Angolan Civil War (a conflict lasting for 27 years) in 2002, as a result of the increasing macro-economic stability that followed, and ongoing liberalization. To underline the growing interest of investors in Africa, Mário Godinho played an interview with Bob Diamond, CEO of Atlas Mara. The graduates of the ”Future Leaders of Angola” program are expected to take over important positions in the Angolan business world, and especially in the financial sector, which is why financial subjects are an important pillar of the program.

The nature of the relations between Africa and China was the next topic. Symbiosis or exploitation – that was the central question raised by Manuel Tacanho in his witty presentation. The incentives are great: While Africa needs growth, infrastructure, and industrialization, China is in need of raw materials (95% of African exports go to China) as well as energy security and new export markets for its products. In 2009, China overtook the US in trade volume with Africa. While US figures are stagnating, the Chinese volume is skyrocketing and has more than doubled in the past five years. As a result, China is Africa’s biggest trading partner by far (projected volume almost USD 400 billion in 2015). However, there is also some skepticism regarding their relationship: Is Africa at risk of becoming too dependent on China economically and politically? Is it on the verge of falling victim to a new form of colonialism? Manuel Tacanho believes that the presence of China in Africa may take away some of the incentive in countries’ efforts to encourage more market-driven development. Nevertheless, he is convinced that the future belongs to Africa.

The final speaker, Alberto Almeida, brought up the subject of “agribusiness”. Although more than 60% of the world’s arable land is located in Africa, many countries rely heavily on food imports (80% in Angola). Lack of infrastructure and an insufficient irrigation system are among the biggest obstacles in this sector. Others are the difficulty of converting land for agricultural development and of distributing agricultural products, as well as the fragmentation of the sector (small farmers represent 99.6% of production), with unskilled workers and inadequate technology. To boost productivity and profitability, the Angolan government will have to continue investing, and small farmers will have to be encouraged to work together.

Contact: Florian Keller, Department International Business

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