Tag Archives | foreign investment
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A well-worn argument postulates that infrastructure spending in Africa is focussed on resources due to […]
Very few Africans make use of formal financial services. In fact, only 24% of adult Sub-Saharan Africans had a bank account in 2012, while the global average was 50%, says the Global Findex Database. In the following countries less than 10% had an account that year: Sudan, Senegal, DRC, Central African Republic, Chad, Niger, Madagascar and Mali.
The adoption of mobile money is driven by multiple factors ranging from banking regulations, establishment of a new sales channel in comparison to traditional distribution channel and readiness of consumers to use handheld devices beyond traditional voice and SMS services. After a slow start in the rest of Africa, mobile money seems to be finally picking up beyond East Africa.
Several African countries are expected to see substantial expansion in their agricultural sectors over the medium to the long term because of an abundance of unexploited arable land, government reform programmes, political stability, public and private investment, and/or improved infrastructure. The East African Community (EAC) has a good share of the top ranking nations in this regard; while Uganda’s expansion is not expected to be so strong over the next five years, Kenya, Mozambique, Rwanda and Tanzania however are all countries with promising prospects in the nearer future.
Africa has vast agricultural potential, but there is a large leap from the current system, dominated by small-scale and subsistence farming, to commercial farming where the benefits of economies of scale can be reaped. Nevertheless, the answer lies not only with commercial farming, but also in reducing the potential that goes to waste with small-scale farmers’ lack of access to stable markets, technology and finance.
“A growing body of evidence suggests that financial institutions and financial markets exert a powerful influence on economic development, poverty alleviation, and economic stability,” says Martin Čihák, lead economist at the World Bank. Financial sectors on the African continent remain largely underdeveloped, while banking industries continue to dominate the landscape in terms of total assets and services. Nonetheless, financial sector development has been on the agenda of African policymakers for some time.
As the leaders of today’s finance functions continue to work hard to boost their relevance and value to the business, they are shifting their focus outward to those financial management activities that contribute the most to better business decisions that improve the bottom line. Their biggest challenges lie in creating the efficiencies needed to gather and process basic financial data and continue to deliver traditional finance outputs while at the same time redeploying their limited resources to enable higher value business decision support activities.
Inclusive economic growth is growth that leads to job-creation, causing a ripple effect on the purchasing power of the majority of the populace. The private sector, and in particular SMEs, are the drivers of an economy. SMEs are also the largest providers of direct employment and inclusive growth can be achieved through promotion of policies that would drive their development. According to the Central Bank of Nigeria, 96% of Nigerian businesses are SMEs (uS = 53%, Eu = 65%). Inclusive growth can be achieved by positioning these SMEs to take advantage of the opportunities in the economy.
At the credit application and processing stage, banks need to invest in systems that allow more efficient and tailored risk profiling. Such a system rewards diligent entrepreneurs with lower lending rates and greater access to capital. Post-disbursement, the establishment of dedicated advisory/support teams can help minimise credit risk and improve credit management by educating and advising SMEs on day-to-day financial management, record-keeping and corporate governance. The incremental cost of this will be easily offset by the increased patronage and lower default rates.
The truth about Africa Rising is that it is real. The economy is growing and potential for huge and sustained growth is enormous. According to the British newspaper The Independent, 31 million households in Africa have moved up from poverty into the consuming class, and in only 20 years Africa will have the largest labour force in the world. The spending power of this demographic will further fuel the economy.