The global economy is trending towards recuperation after a long hiatus of slack years. According to the IMF forecast, however, the GDP growth rate is 3.5 percent, which is lower than 4.5 percent, the average growth rate before recession. Even self-sustained countries like the U.K, and U.S seem to be struggling for stability during the post-crisis period.
What are the factors affecting global economy:
Several external factors conflate, and adversely affect business, and hence, it is imperative for the entrepreneurs to assess the situation with somewhat alacrity. The aim should be to prognosticate the possible risks, and avoid the pitfalls. Some common factors, which have corralling consequences upon business are political, economic, social and technological, also cumulatively known as PEST analysis. Of course, there are other factors like demographic, legal, and environmental forces too, which have long lasting effects upon the economy.
Why to do business in Africa:
Africa has become the cynosure among investors over the last few years, especially in a situation where most of the countries have been grappling with their rivals to imprint their footholds in the global market. Gifted with bountiful natural resources, Africa has always been a land of opportunities and promises. It managed to survive against the onslaughts of the two World Wars, and the Great Depression in the previous century.
The current scenario in Africa offers a bag full of promises to the potential investors. With swathes of rich wildlife spanning across the continent, and spotless beaches dotted along the coast line, there is a vast scope to expand the tourism industry. This would, in turn, boost the hospitality industry.
Many African countries are in need of the necessary infrastructure like proper airports, roads, railways, banks, super-markets, telecom,schools and hospitals. The giant concerns have a lot of scope in bagging developmental projects by collaborating with the governments of those countries.
The tropical climate, and rich soil across the Nile basin are ideal for the growth of crops apart from rice and cotton. Hence, there is ample scope for setting up food processing, food packaging, and textile industries in this area.
Besides, Africa is rich in crude oil and natural gas reserves. While oil could be cheaply availed from here for fuel purpose, it could be used for manufacturing petroleum products. The natural gas reserves could be positively used for generating power, which is the basic requirement of all the African nations.
Moreover, the democratic governments across the expansive continent have positive outlook towards entrepreneurship, investment and economic development, thereby attracting foreign investments. In fact, Africa witnessed a growth rate of 6 percent since 2001, and managed to sustain a steady growth rate of 2 percent since 2012, in spite of the global down sliding trends.
This is due to comparatively steady exchange rates, small debt burdens and steady inflation. Countries like Mauritius, Tunisia, Ghana, and South Africa currently outperform the bigwigs like Brazil, China and Russia. With culmination of such promising factors, Africa appears to offer a kind of respite to the rest of the resuscitating world! Sounds cool, right?
Challenges in Africa:
Everything has a dark side, and Africa is not an exception. Despite offering a potpourri of promises, this place, once dubbed by The Economist as a “hopeless land” poses as a formidable challenge to those looking for investment opportunities:
- Infrastructure Crisis: Many entrepreneurs in Africa feel hamstrung in their endeavors due to lopsided electricity and transportation facilities. For instance, Nigeria, which has population of approximately 150 million reels under severe power shortage. Countries like Swaizland, and Zambia have paucity of airports, rail penetration, energy and water resources. Such defalcations eventually dissuade business owners from investing money in these laid back regions. Moreover, Africa needs a behemoth investment of US$93bn in the power sector alone. Unless, a giant concern takes a lead in this matter, the rest of ventures seem to be a far cry in this “dark continent”!
- Weak Demographic Front: The existing educational institutions, and hospitals are not able to accommodate the ever-increasing population due to unplanned urbanization. Consequently, a large number of shanty towns have mushroomed in the last few decades, where living conditions are absolutely pathetic. With downgraded municipalities unable to implement proper town planning, crime is on the rise. The future of business development in such places, undoubtedly remains bleak.
- Socio-Political Waltz: The late “Arab Spring” testifies a great deal of autocratization, corruption, discontentment, inequalities, and apathy prevailing along the northern stretches of African continent. While there have been exemplar dictators in the other African counties as well, the repressive regimes in Libya, and Egypt have shown the world some of the worst examples of human rights violations. People in the neighboring countries like Algeria, Tunisia, and Morocco have also rebelled against their ruthless Arab rulers. The recent years have witnessed executions, and gore in galore. Such unsavory climate is not at all feasible for investors to plan out something lucrative in Africa.
- Lawlessness: While the socio-political climate remains in doldrums, poverty has instilled apprehension among the locals. People cannot trust their governments anymore as far as integrity, and security are concerned. Consequently, terrorist groups like Boko Haram find a safe haven in Nigeria, and play havoc with people’s lives. The Al-Qaida finds enough protégé in countries ravaged by Civil Wars to wage Jihad against the infidels. On the other hand, The ISIS, the most outrageous terror outfit on earth is determined enough to establish its stranglehold on the war ravaged zones, and spread its tentacles further across the continent by means of indiscriminate brutalities and mass executions. Moreover, the rising instances of piracy off the Somalian coast have been causing grave threats to the shipping companies, and the international organizations overall.
- Health Hazards: Frequent outbreaks of droughts, AIDS, and malarial epidemics in the African countries have exposed their weak healthcare systems. Besides, Ebola, the most dreaded epidemic has spread across these regions like wild fire, and has taken a heavy toll of lives. The fatal virus, which was first discovered in Sudan, and Zaire soon spread to the neighboring countries as well. The governments in these nations have failed to be proactive in containing the outbreak so far. The little known disease resulted in a number of casualties, and deaths in the year 2015. Consequently, quite a number of foreign nationals working in these countries are keen to resign from their existing jobs, and return to their own countries. This has compelled some potential organizations in thinking twice before making investments in the African nations, where health safety has become a prime concern.
Will Africa sustain itself in the business world:
Despite being torpedoed by certain hostile factors, Africa shows buoyancy in growth and development. With the erstwhile dictators put to rest, there seems to be very little possibility of future reprisals. Peace would steer the strife-torn countries towards stability. Besides, economic growth, and investments would eventually mitigate poverty, and crimes in the long run. Giant organizations could collaborate with the governments in these countries, in order to make huge investments in mammoth developmental projects.