Investment in African Ag
Gross Domestic Product (GDP) is a number to look at when figuring if countries have the businesses and consumers that are able to purchase imports from the U.S. or elsewhere. Euler
Hermes’ Goutard notes that the African nominal GDP doubled between 2005 and 2012, a growing economic path which was similar to Asia. In 2012, the African regional GDP, as estimated by Euler Hermes, will be $2 trillion, which will be 2.8 percent of the world GDP. A closer look shows that 15 nations account for 85 percent of Africa’s GDP. The leaders are South Africa, Nigeria, Egypt and Algeria.
INVESTMENT ACTIVITY OUTLOOK
Source: Euler Hermes Goutard explained the investment activity occurring during the last few years. “To a large extent, the agriculture sector has raised the interest of investors over the last few years due to a couple of factors. First, soaring commodity prices fueled by a global increase in demand primarily from emerging countries (growing middle class, change in consumption habits, etc.) and biofuels production (and therefore land values) have enticed investments by private companies. Those companies have sought to expand their production capacities or to follow a pattern of vertical integration. In addition, there is increased interest from financial investors, which have expectations of financial returns generated by the mounting prices of arable lands in this sector.”
Euler Hermes also provided a visual descriptor of the annual change in investments in African agriculture along with projections through 2015. The numbers aren’t indicating a rush to invest in African agriculture. Although Goutard reported that “more than 60 percent of the local (African) investment promotion agencies see agriculture as the most promising sector to attract foreign direct investments in their own country during the 2013-2015 period, ahead of the mining, quarrying and petroleum sectors, according to the United Nations Conference on Trade and Development.”
Source: Euler Hermes
Goutard said, “The trade prospects appear to be buoyant for commodity-rich and coastal economies.” He provided an analysis that shows estimates for export gains and import gains by selected countries during the next 10 years in billions of dollars. (See the country map of Export and Import Gains.)
Euler Hermes provided another graph that shows the total investments estimated for 2012 in a number of African countries (i.e. the percentage of the investment in the country as it relates to the country’s total GDP).
Source: Euler Hermes “Being fueled by financial inflows generated by booming commodities’ markets,” Goutard said, “most African countries have enjoyed continuous economic growth that has spurred and will spur domestic investments. We forecast that these investments will be crucial growth drivers in Africa in the coming years and will provide benefit to a large spectrum of sectors not related to commodity markets.”