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Five Sectors On The Rise In Africa (Ventures Africa August 4, 2014)

Five Sectors On The Rise In Africa (Ventures Africa August 4, 2014)

 

VENTURES AFRICA – For many Westerners, a word-association response to the word “Africa” would probably not elicit much in the way of economic sectors, especially given the widespread unrest and pandemic disease that so dominate media reports about the continent. Africa, however, is a very large continent, with a broad spectrum of cultures and governments. In some of the countries on the continent, there exist numerous thriving economic and cultural sectors.

Below are a few of the many sectors that are attracting positive attention from the outside world (not necessarily in order of predominance).

 

1) Energy resources

The African continent has long been an important source of oil and gas, which has been the core element in the continent’s economic growth over the last century. Over the last twenty years or so, oil and gas production have increased in Africa at a higher rate than anywhere outside the Middle East, a pace that has only been interrupted by internal conflicts of the last couple of years. It is reasonable to assume that as these conflicts die down, the pace of production will again pick up, and commodities traders and investors are watching closely.

 

2) Financial sector

Africa’s financial sector has experienced phenomenal growth in the last 15 years or so, in no small part due tobanking reforms that took place in Nigeria in 2005, 2006, and 2009. By consolidating the country’s 89 main banks into a more easily monitored and regulated 25 between 2004 and 2006, more standardized and less corruptible practices were implemented, and the banks’ assets and profitability increased dramatically. Similar reforms in South Africa, which had originally been promised by the African National Congress (ANC) twenty years ago, are only now beginning to appear feasible in the foreseeable future. They are dependent upon the South African Constitution being amended to facilitate the creation of a State Bank, and the implementation of common standards and practices throughout thefinancial system. The task promises to be a daunting one, but it has widespread international and internal support.

 

3) Mining

According to South Africa’s main information website, the country’s mineral reserves are estimated to be worth roughly $2.5 trillion, which equates to the world’s fifth highest percentage of Gross Domestic Product (GDP). The Chamber of Mines claims that the mining industry provides roughly a million jobs, as well as approximately 50% of traffic through the country’s railways and ports, and draws in more than 50% of investment dollars from outside sources. Coal mining in South Africa also provides about 37% of the country’s liquid fuels, and a full 94% of the country’s electric power generation.

 

4) Infrastructure

It is well-known that Africa as a continent suffers from a profound lack of infrastructure. Outside of urban centers, roadways are sparse and often not even paved, much less maintained. Significant areas of the country lack sources of fresh water, sewage treatment facilities, or electricity. The pace of progress on the continent will be determined by how quickly and efficiently these infrastructure elements are put into place. The first major effort will likely be the expansion of the electric grid, since any other efforts of any scale will require a reliable source of power. One of the most challenging obstacles to building a workable infrastructure will be political, as convincing the disparate political entities in the region to agree to a standard approach to virtually anything has proved to be frustrating to date. It is encouraging, however, that the African countries have at least agreed to consider implementing some of the suggestions in the Africa Competitiveness Report, a joint publication of the World Economic Forum, the African Development Bank, and the World Bank.

 

While most African countries have focused solely upon sales and shipments to markets outside of the continent, there is increased emphasis upon better enabling shipments within the African continent itself. In order to achieve this objective, a more robust network of roadways will be necessary. As with the electrical power generation and grid, a network of roads will require not only physical construction of the roadways themselves, but a universal agreement on how to regulate and administer shipments across the network.

At the same time, it will be necessary to improve the physical well-being of citizens who live nearby, and will be parties to building and maintaining the roadways and power grid. Readily accessible water, proper sanitation facilities, and other services that urban dwellers take for granted will eventually be provided even to remote areas, if the hoped-for progress is to be realized.

 

5) Telecommunications

More highly developed nations have also grown accustomed to almost universal access to telecommunication services, and if the African continent is to experience the kind of growth for which so many hope, a reliable and accessible telecommunications grid will be essential. Fortunately, the cost of building such a grid continues to decrease, with breakthroughs in wireless, cellular, and satellite communications all but eliminating the requirement for running many thousands of miles of physical wires. South Africa has led the way in establishing a broadly accessible digital network, with telecommunications revenues in that country approaching $22 billion in 2011, and the industry has become one of the fastest growing sectors in that country’s economy. Egypt and Nigeria are also expanding their networks, and other countries are beginning to realize the benefits of network expansion, as well.

 

Africa, which covers 11,608,000 Square Miles (30,065,000 Square Kilometers), is the world’s second largest continent, behind only Asia. As such, providing the prerequisites for modernization and development is a daunting task, to say the least. But with the growing commitment of African countries, as well as that of international investors who recognize the potential that development on the continent represents, Africans in every country can look forward to a more prosperous future, once the various heads of state and other officials release their attachment to a past that has prevented the continent from becoming the emerging powerhouse it should rightly be.

 

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