Trade

Brazil looks to Africa for economic expansion

Brazil, a growing nation in importance in foreign policy circles and world capitals is increasingly eyeing Africa in expanding its influence and businesses.

Brazil is launching a top-level drive to expand its economic ties with Africa, a sign of how crises in the rich world are pushing faster-growing emerging economies to trade and invest among themselves.The new initiative, ordered by President Dilma Rousseff after her three-country trip to Africa last month, comes as nervousness grows in Brazil over the impact in the coming months of Europe’s debt crisis and lurch toward recession.Europe’s woes, combined with anemic growth in the United States, are already dampening demand for Brazilian exports and will make it more difficult for Brazil to rebound from disappointing growth of around 3-4 percent this year.In contrast, the eight most promising emerging economies in sub-Saharan Africa, not including South Africa, have grown by an average of 6.6 percent per year over the past decade, according to Deutsche Bank. That is about the same rate as the BRIC group of big emerging countries Brazil, Russia, India and China and faster than emerging Asian economies.Africa’s total share of Brazil’s trade remains small at just over 5 percent but Brazil has rapidly grown its footprint in the region in recent years as it tries to catch up with China’s burgeoning investments and influence there.

Brazilian President President Dilma Rousseff with South African President Jacob Zuma.

“The crisis has accelerated this strategy,” Pimentel told Reuters. “There will be a dispute for economic space in Africa, and Brazil has to be positioned there.” Pimentel will lead government officials and business executives this month on a 10-day mission to explore opportunities in the three countries that Rousseff recently visited – Angola, Mozambique, and South Africa. The new thrust builds on progress made under former President Luiz Inacio Lula da Silva, who visited at least 25 African countries and doubled the number of embassies in the region as he looked to establish Brazil as a leader of the developing world. Brazil’s overall trade with Africa has quadrupled since 2002 to $20.6 billion last year, compared to its $82 billion trade with the European Union. The fast-growing ties are overwhelmingly based on the exploitation of commodities as Africa taps Brazilian firms’ expertise in mining, oil exploration and tropical agriculture. Mining giant Vale (VALE.N) opened a $1.7 billion coal mine in Mozambique in May that Pimentel said would give a $1 billion boost to Mozambique’s trade balance next year. Brazilian construction firm Odebrecht is the largest private employer in Angola, with activities including food and ethanol production, factories and supermarkets. Petrobras(PETR4.SA), Brazil’s state-controlled oil company, is active in Angola in deep-water drilling. Brazil sees a growing market for its services and goods related to such investments. BRAZIL’S TRUMP CARD – BEING NICE Almost half of sub-Saharan African exports now go to emerging and developing markets compared with less than a quarter in 1990, according to the International Monetary Fund. China alone accounts for about 17 percent of the region’s trade, with India and Brazil accounting for 6 percent and 3 percent respectively. Skeptics say Africa’s low level of business diversity and its relatively small economic output limits its potential to become a major trade and investment partner for Brazil. “It’s still a very small market, income is very concentrated and the space for advance is small,” said Bruno Lavieri, an economist at Sao Paulo consultancy Tendencias. “Even in the long term it will take decades for Africa to be really an important player in Brazil’s trade.” Brazil has also struggled to match China’s financial clout in the region as Beijing backs its companies with generous subsidized loans. Jinchuan Group, China’s dominant nickel producer, outbid Vale this year when it bought South African mining firm Metorex for more than $1.3 billion. Pimentel said his group would be looking at creating new financing mechanisms to support Brazilian projects. But Brazil believes it has a trump card against China that it intends to play in its new economic push — put simply, that it treats Africans better. Chinese firms have been accused of flouting worker safety laws in some African nations and have also been criticized for importing Chinese workers rather than hiring locally. “This is our big selling point – that we are arriving in these countries doing more than just selling products and services,” said Pimentel. “Brazilian companies have a good image in Africa. This compensates for our fragility in financing compared to China.” Brazil’s shared Portuguese language with countries like Angola and Mozambique, ethnic ties, a common history of colonialism and Brazil’s success in alleviating poverty and hunger at home also help its brand on the continent. Embrapa, Brazil’s agriculture research agency, has operations in four African countries where it is transferring its technology and expertise in raising crop yields that helped turn Brazil into a tropical farming powerhouse. Rousseff said during her trip that a pharmaceutical plant being financed and assisted scientifically by Brazil should start next year making cheap anti-retroviral drugs to help Mozambique’s fight against AIDS. Even with competition from China, Africa’s rich and largely untapped resources mean Brazil still has huge potential to expand its presence, said Jorge Heine, the CIGI chair in global governance at Canada’s Balsillie School of International Affairs. “Given Brazilian needs and the abundance of natural resources in Africa, it is by no means evident that we are near the limit of the volume of trade between Africa and Brazil,” he said.

Brazil is interested in looking for new markets to diversify it’s economy, which is oriented towards the U.S., Europe and China. As a BRIC nation as well, it is strategically trying to position itself as a player on the international scene. Hence it following in the foot steps of follow BRIC nations Russia, India and China.

Advertisements

Australia-Africa trade rebounds.

Trade between Australia and Africa rebounded according to report by Australian government.

Australian trade with Africa rebounded in 2010, increasing nearly a third over the year to total $8.5 billion. Education services exports to Africa were up over 80 per cent since 2005, to $449 million in 2010. Education is now Australia’s second largest export to Africa, behind only aluminium ores and concentrates.

Australia’s top trading partners in Africa in 2010 were South Africa and Nigeria.

These figures come from a new report, Australia’s Trade with Africa and the Middle East, produced by the Department of Foreign Affairs and Trade.

In the Middle East – where Australia’s merchandise trade is valued at $10.9 billion – education services are also an important contributor to Australia’s export performance, as the fourth highest export behind aluminium ore and concentrates, passenger motor vehicles and wheat.

Australia’s key trading partners in the Middle East in 2010 were the United Arab Emirates and Saudi Arabia. Manufactured products are a key component of Australia’s exports to both Africa and the Middle East.

Exports of manufactures to Africa totalled $1.1 billion in 2010, which is more than a third of all merchandise exports to Africa. These manufactures included pharmaceuticals, civil engineering equipment and specialised machinery.

Exports of manufactures to the Middle East were valued at $2.4 billion and comprised more than a third of the total merchandise exports in 2010. The majority of these manufactured exports were elaborately transformed manufactures (ETMs), underpinned by exports of motor vehicles and vehicle parts and accessories.

Australia is behind in trade volume compared to its Asian neighbors like China, South Korea, Japan and a few others. Australian resource companies are now spending tens of billions of dollars on exploration and development, and ngineering and service companies are clinching billions of dollars of contracts, across Africa. There are already strong mining and resource links between Australia and Africa. More than 150 Australian minerals and petroleum resources companies, around 40 percent have interests in more than 40 African countries, with current and prospective investment estimated at $20 billion. Australia’s minerals and resources companies have more projects in Africa than in any other region of the world.

Australian companies are active in delivering a wide range of world-class mining services – including engineering, consulting and analysis. They enjoy a well-earned reputation for excellent safety records and high environmental standards. They have experience working in diverse multicultural environments, and they apply that expertise all around the world. Australia is an example of how resource development used wisely can deliver wealth for the entire nation.

African nations have an important and growing influence in multilateral fora. They comprise more than a quarter of the membership of the World Trade Organization, the United Nations and the Commonwealth.  For Australia it makes strategic sense to engage with Africa bilaterally, regionally and through the African Union. Whether you look to Europe, the United States, India, Japan or China, the world sees opportunity in Africa and opportunities for Africa in the world.  Australia’s re-engagement is part of this long-term common sense, wider trend. Australia now has diplomatic relations with 51 of Africa’s 53 countries, excluding Guinea Bissau and the Democratic Republic of Congo.  This is compared with 41 in 2007.

U.S. to support small businesses in Ghana through EXIM Bank

The U.S. will invest more in Ghana through the EXIM Bank.  The investments will be focused on small businesses and medium scale enterprises.

The Vice Chairman of the bank, Wanda Felton, at a discussion with Ghana’s President John Evans Atta Mills at the Castle, Osu in Accra on Tuesday, said the extension of the bank’s operation was as a result of the West African nation’s freindly business environment. It was also part of the bank’s long term plan for more economic co-operation with Africa announced by US President Barack Obama in 2009, she added. Felton pledged to woo US investors to support the Ghanaian economy by letting them know the enormous potentials that exist in the country. The vice chairperson of the Export and Import Bank further said the bank would support American business interests in the country through which it sought to expand its business co-operation with Ghana. Ghana’s President John Atta-Mills welcomed the move, saying Ghana was ready to partner genuine investors for mutual benefit. Mills stressed the need to take advantage of positive opportunities and cooperation to address the challenges of doing business among the nations The bank supported the construction of the country’s hydro electric power, the Akosombo Dam and had was supporting the energy sector for the last decade, through rural electrification and the Self Help Electrification Programme. About US$575 million has been invested into the energy sector, small and medium enterprises in the last decade. Other areas of target interest are agribusiness, trade and commerce.

U.S.-Ghana relations have really taken off since Barack Obama became President of the U.S. From his first visit to Ghana in 2009, using it as an example of African democracy, good governance and competency, relations continue on an upward positive track.  This has paid off as both nations come closer economically through trade and business as this is shown through this new agreement.

Bookmark and Share

Ghana seeking to increase trade with Sweden

Ghana is looking to increase trade with Sweden.

Swedish Minister for Trade Ewa Björling received a trade delegation from Ghana, headed by Minister for Trade and Industry Hanna Tetteh. Their meeting focused on potential ways of increasing trade between Sweden and Ghana.

Ghana is Sweden’s third largest trading partner in sub-Saharan Africa. In 2010, exports to Ghana were worth over SEK 1.3 billion (1 Swedish krona = 0.14713 U.S. dollars). At present, Swedish business interests are mainly concentrated on ICT and mining, but smaller companies in other industries have also set up operations in the country. One such example is Viasat, which is attempting to break into the Ghanaian television market.

Over 20 Swedish companies currently have offices in the country. There is a great deal of interest in Swedish environmental expertise, as is evident, for example, in the project that the Raw Materials Group is running together with Ghana s Environmental Protection Agency on recycling of electronic waste.

Ghana is Sweden’s third largest trading partner in sub-Saharan Africa. Currently Swedish business interests are mainly concentrated on ICT and mining, but smaller companies in other industries have also set up operations in the country. One such example is Viasat, which is attempting to break into the Ghanaian television market. Over 20 Swedish companies currently have offices in the country. There is a great deal of interest in Swedish environmental expertise, as is evident, for example, in the project that the Raw Materials Group is running together with Ghanas Environmental Protection Agency on recycling of electronic waste.

The business climate in Ghana is good for a developing country, and very good compared with most African countries. Over the past decade, Ghanaian governments have maintained a consistently high level of ambition and pace of reforms with regard to industrial policy. Ghanas political stability is probably the factor that is most appealing, particularly in a region that has been known for its turbulence but where many companies want to set up operations to take advantage of good business opportunities.

Bookmark and Share

Burger King looking to expand presence in Africa

Following the lead of it’s competitors Like McDonalds, KFC, Burger King will try to set up shop in throughout Africa.
South Africans could soon be snacking on a Big Whopper. Burger King said yesterday it was assessing opportunities in SA as sluggish economic growth in its US home market continues to hamper sales, making emerging markets look more attractive.Yum Brands, which owns Taco Bell and Pizza Hut, have also been enthusiastic about SA, New York- based Sanford C Bernstein analyst Sara Senatore said yesterday. “We are currently assessing the opportunity in SA for the Burger King brand,” the Florida- based company said. Burger King said it continuously reviews its “worldwide restaurant portfolio in the course of business. We make strategic decisions based on many factors, including development opportunities, market conditions and restaurant profitability.” Ms Senatore said growth in emerging markets had outpaced growth in developed markets. “There are difficulties when entering developing markets such as infrastructure and regulatory differences, but what any company is looking for is market depth and market growth and SA has that. They are looking for markets which will provide fast growth and are rapidly developing. Any company that can partake in these types of economies will want to, despite these challenges.” Founded in 1954, Burger King is the second-largest fast-food hamburger chain in the world, after McDonald’s, with about 12000 outlets in 73 countries. About 90% of Burger King restaurants are owned and operated by independent franchisees with 665 of these outlets based in the US. How the company licenses its franchisees varies depending on the region, with some regional franchises, known as master franchises, responsible for selling franchise sub-licences on the company’s behalf. Absa Securities analyst Chris Gilmour said the burger market in SA was saturated. “I am very surprised they would consider this, unless they are using SA as a springboard into Africa.” But Vestact fund manager Sasha Naryshkine said there was room for a new competitor in SA. “The fast-food sector has done astonishingly well over the past few years, and there is still potential for growth. Burger King is a well- known international brand and could compete with Famous Brands ’ Steers division. “But its fame would not guarantee its success. Subway is a well- recognised brand and it has not managed to capture the imagination of South Africans.” Famous Brands would be a formidable competitor with its 520 Steers outlets across the country. Steers grew sales 6,5% in the year to February, and said it planned to open a further 20 stores this year. McDonald’s opened its first restaurant in SA in November 1995 and operates 132 restaurants around the country. Justin Divaris, CEO of the Daytona Group that brought the Aston Martin brand to SA, is rumoured to be involved in the deal. He declined to comment.
Investing in Africa and opening up franchises will help drive growth for Burger King. When one looks at the demographics and growing middle class, the opportunity to invest ,establish a customer base would be a worthwhile investment. Pepsi, and KFC have clearly seen the great opportunity of doing business in Africa, it would be wise for Burger King to follow suit.
Bookmark and Share

Malaysia seeks to tap African market

Malaysia following the foot steps of other Asian nations, seeks to increase its economic presence in Africa.

Malaysia is the latest nation seeking to tap into the African continent’s massive economic potential – following the success of countries such as China and India. Speaking prior to the launch of the Langkawi International Dialogue (LID) on 19th June 2011, Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin, described Malaysia and Africa as “natural partners” due to their abundance of natural resources and their relatively young population. “It is thus only natural that we work together to build on the opportunities and potential available,” he said. In 2010, trade between Malaysia and Africa stood at US$8.2 billion, a 39 percent increase from the previous year. However, trade and investment levels between the two regions remain relatively “untapped” with further partnerships and bilateral cooperation required. “There are tremendous opportunities for Malaysia. We need to explore the various opportunities” said Malaysia’s Deputy Foreign Minister Kohilan Pillay. Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin also expressed his disappointment at the present lack of economic activity between Malaysia and Africa while emphasising the enormous potential that Malaysia could potentially tap into with the African market, “Contrast this with the US$12 billion trade Malaysia had with Germany last year, a country one per cent the size of Africa. These figures speak for themselves. As such I urge you (Malaysian investors) to be proactive.” Former Malaysian Prime Minister Dr. Mahatir Mohamad believes that the LID will open up new avenues for Malaysia in Africa. “After the dialogue, Malaysia would have a higher visibility in the African market and Malaysian businesses could expect to do better there.” The LID was the brainchild of Dr. Mahatir and aims to bring together leaders of developing economies from Africa and the Caribbean in order to discuss and promote economic collaboration. More than 500 delegates from 15 African and Caribbean countries are attending the event that is seen as an important outreach program for Malaysia to Africa. According to Malaysian Deputy Prime Minister Tan Sri Muhyiddin Yassin, the move would help build sustainable economic prosperity by synergising Malaysia-Africa business partnerships. However, the event has also met up with criticism over the attendance of Zimbabwean President Robert Mugabe as well as Malaysia’s invitations to other controversial African leaders such as Sudan’s Omar al-Bashir. Malaysia’s Prime Minister Datuk Seri Najib Tun Razak has deflected the criticism by citing that Malaysia was not yet a member of the Rome Statute of the International Criminal Court (ICC) and therefore did not break any international laws by inviting Omar Al-Bashir.

Africa is prime opportunity for Malaysia to look for growth. South Korea, India, Japan and of course China have made moves to tap the growing and expanding African market.

Bookmark and Share

Asian and African development banks sign trade finance deal

In looking to help and sustain growing trade ties between both continents, the Asian Development Bank and African Development Bank have both agreed to deepen ties.

Under the agreement, the Asian Development Bank will share legal document templates, operation manuals and information technology related to its trade finance programme with the African Development Bank. The Asian Development Bank (ADB) and the African Development Bank (AfDB) have signed a trade finance agreement to help the latter set up a trade finance programme to boost African trade. AfDB is looking to expand its trade finance activities to support companies across Africa, similar to ADB’s trade finance programme in developing countries in Asia. “Partnerships are key to promoting economic growth and using the trade finance programme framework developed by ADB will help AfDB achieve in Africa the success ADB has achieved in Asia, but much faster and at a fraction of the start-up cost,” said Philip Erquiaga, director general of ADB’s private sector operations department. “In time, we would expect the relationships between developing Africa and developing Asia to expand, resulting in much greater South-South trade which could help ease global economic balances.” According to ADB, its trade finance programme provides guarantees and loans in support of trade in developing countries in Asia through more than 200 partner banks. Under the agreement, ADB will share legal document templates, operation manuals and information technology related to its trade finance programme with AfDB. Both banks expect to expand their partnership and share access to both programmes to link banks in both regions. “By scaling up its trade finance activities, the AfDB is supporting an important growth-enabling activity, which has been affected by the recent global financial crisis,” said Tim Turner, director of AfDB’s private sector department. “By leveraging the experience of strategic partners, such as ADB, AfDB will not only be reducing the financial commitment necessary to ramp up its activities but also facilitate the expansion of African trade with Asia.” ADB’s trade finance programme provided $1.9 billion worth of support in 2009 and $2.8 billion in 2010 in developing countries in Asia. According to ADB, the five more active users of the programme in 2010 were banks in Bangladesh, Nepal, Pakistan, Sri Lanka and Vietnam. The programme aims to help small businesses that are unable to access trade finance services and to promote trade between developing countries. More than 34% of deals supported by ADB’s trade finance programme in 2010 involved small and medium-size enterprises and around 50% were between two developing countries.

This will boost trade and investments on both sides since it helps with financing and access to markets.  Common regulation and rules will smoothen trade.  Partnerships are key to promoting economic growth.  By transferring all tools and knowledge of the Trade Finance Program, the two development banks will reduce duplication of effort and cost and will share best practices, as encouraged under the 2005 Paris Declaration on Aid Effectiveness and the framework to achieve the Millennium Development Goals.

Bookmark and Share