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Published: June 29, 2009
When most people
think of Africa, images of business and commerce don't usually
spring to mind -- more like wildlife, safaris and famine. But
those perceptions are beginning to change. Customer service call
centers are popping up in Kenya, oil production facilities are
coming online in Angola, and wind energy farms are under
construction in Ethiopia. Morocco aims to be a major electronics
manufacturing hub, and Zambia boasts a thriving tourist
destination.
Of course, there's still much work to be done. According to Van
Eck Global, Africa accounts for 15% of the world's population,
but just a scant 2% of its economic output. But that will
present a wealth of investment opportunities as these countries
continue to industrialize. And at the vanguard of this
transformation is South Africa.
Known as the "rainbow nation" for its rich diversity and
multiculturalism, the country has made tremendous socioeconomic
advancements since the days of apartheid. Today, South Africa is
a constitutional democracy with a bicameral parliament and
national elections.
But the political landscape isn't all that's changed. Fifteen
years ago the government began an aggressive overhaul of South
Africa's economy. Taxes were cut, tariffs were reduced, and
pro-business reforms were put in place to create jobs, promote
free trade and attract foreign capital. These moves effectively
ended a long era of anti-competitive behavior and protectionist
policies and opened South Africa to the global markets. Since
then, inflation has fallen, budget deficits have been reined in,
and the country's sovereign government debt has been upgraded to
investment-grade status -- lowering borrowing costs for both
public and private sector investments.
Along the way, South Africa has also developed a sound
regulatory framework and well-capitalized banking system. And
unlike many of the thinly-traded markets in neighboring
countries, the Johannesburg Stock Exchange is highly liquid and
home to dozens of world-class companies.
Set your Goals
High
Meanwhile, it's no accident that South Africa has also become
one of the world's foreign direct investment hotspots and a
popular destination for outside capital. Auto makers such as
Ford (NYSE: F), Nissan (Nasdaq: NSANY), and BMW have all set up
shop in South Africa. The country is also attracting strong
interest from pharmaceutical firms, thanks in part to stringent
patent and intellectual property rights. And global leaders like
Barclays (NYSE: BCS) and Vodafone (NYSE: VOD) have recently
spent billions to acquire large stakes in South African
counterparts.
All of this investment will help grow South Africa from the
ground up -- not to mention create jobs and boost domestic
spending. Of course, while investors will find opportunities in
sectors ranging from manufacturing to retail to construction,
South Africa's fortunes are still most closely tied to the
mining industry. Remarkably, about half of all the gold ever
mined on the planet was dug up in South Africa. The country also
has the world's second largest coal deposit, and an abundant
supply of platinum, uranium, diamonds and iron ore. And then
there are agricultural products like sugarcane.
With heavy demand from China and other trading partners, South
Africa exports nearly $90 billion worth of these commodities
every year -- putting piles of cash in the coffers of top
producers such as Anglo Platinum.
Overall, the South African economy has been expanding at an
impressive 4% - 5% annualized clip in recent years -- with GDP
reaching about $280 billion last year. That's hands-down
Africa's largest economy, easily surpassing the production of
oil-soaked runner-up Nigeria.
But South Africa is about to take a big leap forward.
Just as China benefited from the Beijing Olympics, South Africa
is poised to see a major influx from the 2010 FIFA World Cup.
The upcoming soccer championship is far and away the world's
most visible sporting event, watched by over 700 million avid
fans.
Already, the government has moved into overdrive in preparation
for the big event -- constructing rapid transit rail systems,
adding hotel capacity, upgrading telecommunications
infrastructure and building stadiums to seat over half a million
boisterous spectators. It's worth noting that the hospitality
sector alone has already swelled by 80,000 new jobs.
Good Investing!
-- Nathan Slaughter
Editor
StreetAuthority Market Advisor |
