Big Picture, East Africa, economics, Kenya

Which economy is growing 2-3% above global average…?

… Africa’s

AAT the big picture

According to a recent article in Polity, “Africa’s economy is projected to continue growing at between 2% and 3% above the global average over the next five years, helping it retain its position as one of the key emerging markets for 2015.

It quotes a GIBS (Gordon Institute of Business Science) study showing that sub-Saharan Africa’s growth “outstripped global growth for the past 15 years,” which has “slowed down somewhat, owing to a number of challenges, including the drop in commodity prices.”  The GIBS study is the result of an assessment of countries’ institutional evolution, measuring how countries were performing in terms of developing competitive business and living environments across political, social and economic spheres.

Kenya was highlighted, with the authors noting that “Kenya, in terms of perceptions, is a very important country on the continent; it has, since 2007, put in place a number of reforms to build competitiveness. However, it doesn’t come out very well when you look at the data behind industry and comes out poorly in [the DMI], but what you find on the ground is that there is [an entirely] different sentiment.”

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Ghana, mergers, no antitrust regime

Positive outlook for Ghana M&A activity

ghana
Future of Ghanaian M&A deals promising, according to bankers

The Benso Oil Palm Plantation and FanMilk International deals (both involving foreign investment in the country) over the past year are merely an indication of an upward mergers & acquisitions trend, according to a GhanaWeb report.

Usually, with increased merger activity comes heightened competition scrutiny, of course — not so in Ghana, however, as the West-African country still lacks an antitrust and merger-review law.  AAT noted in December:

[Ret. Ghanaian Supreme Court] Justice Date-Bah, who has held visiting academic positions at Oxford and Yale Law School, deplored the legislature’s previously failed attempts of enacting a comprehensive competition law, calling for the country to do so to ensure proper market dynamics.

The most recent economic report quotes Randolph Rodrigues, sr. investment banker at Stanbic Bank Ghana, as predicting “a rise in M&A activity in the country given the increasing emphasis on local content across sectors in the country.”

“The renewed quest for the institution of local content requirements across industries is expected to drive a wave of M&A activity, with larger foreign-owned enterprises seeking partnership opportunities with indigenous operations to continue to grow within the legal framework of their respective industries. Banks are well placed to lead the way in advisory services.”

In AAT’s view, four factors may contribute to the anticipated deal volume and influx of foreign investment, of which one is competition-law based: (1) the absence of antitrust hurdles, as noted above, (2) the relatively open Ghanaian economy, (3) stable political climate (unlike its distant neighbor at the moment, Nigeria), and (4) high intrinsic growth rate of Ghana’s GDP:

ghana gdp growth

Ghana’s GDP growth (blue line) compared to Kenya and Cameroon

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AAT, BRICS, collusion, COMESA, criminal AT, economics, fraud/corruption, full article, mergers, Nigeria, politics, South Africa

Investment in Africa: Changing landscape, new hurdles

Questioning African antitrust growth prospects: Slowdown in economic investment (both organic and outside investment) may affect functioning of competition law on the continent

Recent developments in Africa have many scratching their heads and wondering whether the formerly wondrous economic-growth engine of the vastly resource-rich and otherwise economically still undervalued continent will soon experience a slowdown, if not come to a halt altogether.

For one, in April 2014, Nigeria surpassed South Africa as the continent’s largest economy (see Economist Apr. 12, 2014: “Africa’s New Number One“).  This is a significant milestone for the former, and a setback for the latter — an economy that was 8 times the size of the Nigerian economy only 20 years ago, yet is now suffering from stagnating GDP, reeling from corruption allegations amongst its current leadership, undergoing a closely-watched presidential election process, and whose ruling ANC party is facing a heretofore unprecedented backlash and torrent of criticism.

Source: The Economist

Not only South Africa has weakened, politically and economically, however.  Events such as the Northern Nigerian wave of violence – with sectarian Boko Haram forcefully displaying the impotence of the central Nigerian government of a weakened president Goodluck Jonathan – fuel the fire of outside investors’ mistrust of African stability and their concomitant reluctance to make good on prior investment promises.  As The Economist notes in the article quoted above: “it is not a place for the faint-hearted” to invest, even though it highlights the successful Nigerian business ventures of outsiders such as Shoprite, SABMiller, and Nestlé.  Bloomberg BusinessWeek quotes Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying: “It does slow down the plans that we have, it does put out the projections that we have by a year or two.”

http://www.stanlib.com/EconomicFocus/Pages/InterestingChart112SouthAfricaneconomyvsNigerianeconomy.aspx

Nigerian vs. RSA GDP
Source: http://www.stanlib.com

Likewise, multi-national organisations such as COMESA and its competition enforcement body, are undergoing significant changes (such as, currently, an opaque process of raising the heretofore insufficient merger-filing thresholds), shockingly successful web attacks on their data, and a resulting dearth of transactions being notified.  Elsewhere in developing economies, recent political turmoil has likewise led observes to comment on the negative spillover effect from political & social spheres into the economy (e.g., Financial Times, May 8, 2014: “Political crisis further dents prospects for Thai economy“).

Impact on antitrust practice

The upshot for competition-law practitioners and enforcers alike is rather straightforward, AAT predicts: more hesitation around African deals being done means fewer notifications, less enforcement, and overall lower billings for firms.

The flip side of the coin – as is usually the case in the economic sine curve of growth and slowdowns – is the commonly-observed inverse relationship of M&A and criminal antitrust: while we may see fewer transactions in the short term, the incidence of cartel behaviour and commercial bribery & government-contract fraud cases will likely increase.

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