swedish firms in africa

Fabrice VEYSSE

Africa : Investment Opportunities for Swedish

Companies ?

EXECUTIVE SUMMARY

GENERAL OVERVIEW OF FOREIGN DIRECT INVESTMENTS IN AFRICA

ECONOMIC GROWTH EXPECTATIONS IN FRANCOPHONE AFRICA

MAIN SECTORS TO INVEST

CONCLUSION

BIBLIOGRAPHY

CONTENT

EXECUTIVE SUMMARY

The Francophone Africa represents 31 African countries with more than 120 millions French speakers and these digits are increasing fast. It is the most French-speaking part of the world and it includes countries that have French as 1st or 2nd official language.

If we have a look at the 20th fastest growing GDP in the World, 4 of them are located in the Francophone Africa region (Guinea, Republic of Congo, Ivory Coast and Rwanda). All these countries have a common point ; the value of their Compound Annual Growth Rate (CAGR) is very high from 2013 to 2017. It means that it is nowadays time to invest in these countries for a long term profit.

The presence of Swedish firms is still quite seldom in Africa while the macro-economic environment seem to be optimal in this region. Some sectors are obviously more flourishing than others.The main sectors where FDI outflows could be the most profitable are the Oild and Gas one, the Mining, the Infrastructure, the Consumer Goods, the Banking and the Agriculture ones.However, industrialized countries are sometimes reluctant to invest in these countries where corruption is still too much present in the mindset.

GENERAL OVERVIEW OF FOREIGN DIRECT INVESTMENTS (FDI) IN AFRICA

Countries with low and fast growing GDP should be prioritized for the initial investments.Among the industrialized countries, Sweden is ranked as 12th for the Global FDI outflows,but only ranked 17th in Africa. Nowadays, there are about 100 swedish firms which already set up a subsidiary in Africa. However, most of them are based in South Africa and the Francophone countries are often disregarded.

List of Francophone Countries in Africa :- Mali- Niger- Algeria- Morrocco- Tunisia- Mauritania- Chad- Burkina Faso- Ivory Coast- Guinea- Senegal- Benin- Togo- Gabon- Republic of Congo- Democratic Republic of Congo- Cameroon - Central African Republic- Rwanda- Burundi- Djibouti- Comoros- Equatorial Guinea- Madagascar- Seychelles-Mauritius

GENERAL OVERVIEW OF FOREIGN DIRECT INVESTMENTS (FDI) IN AFRICA

Digits about the Swedish Economy :

Population: 9.5 millionGDP (PPP): $393.0 billionGDP growth : + 1.2% 1.0% 5-year compound annual growthGDP per capita : $41,191Unemployment rate: 7.9%Inflation (CPI): 0.9%FDI Inflow: $13.7 billion

Swedish Index of Economic Freedom Swedish FDI outflows decreased a lot from 6,3% of its GDP to 1,9% between 2009 and 2013.This is mainly due to the latest economic crisis. However, the FDI outflows jumpstart should occur in 2014, based on the OECD statistics.

GUINEA

Guinea is ranked 3rd among the fastest growing GDP (CAGR) in the World. From 2012 to 2013 its GDP rose of +5.01%

Estimation from 2013 to 2017 → GDP CAGR: +16.27%

Economy: Guinea is considered among the world’s richest country in natural resources, possessing half of available bauxite reserves. It is similar with iron ore, gold, and diamonds. As many African States, corruption is the nation’s primary barrier to economic growth. Access to international aid and foreign investment is contingent upon addressing this issue.

Republic of Congo is ranked 11th among the fastest growing GDP (CAGR) in the World.

From 2012 to 2013, its GDP grew by +5.29%


Economy: Congo mainly relies on oil exports and their projected growth is linked to rising oil prices. Unfortunately, decades of chronic civil war contribute to an unstable business environment that keep posing a threat to economic growth. Serving the nation’s debt obligation is also proving a challenge, and the Republic of Congo received nearly $2 billion in debt relief via the International Monetarian Fund in 2010.

REPUBLIC OF CONGO

Ivory Coast is ranked 17th among the fastest growing GDP (CAGR) in the World.

From 2012 to 2013, its GDP increased by +6.99%


Economy: The Ivory Coast is the world’s largest producer and exporter of cocoa beans, and also produces and exports an important amount of other commodities, such as coffee, palm oil, and gold. Foreign investment has been reduced due to political instability and civil war that still occur nowadays, which threaten the nation’s economic growth.

IVORY COAST

Rwanda is ranked 20th among the fastest growing GDP (CAGR) in the World.

From 2012 to 2013, its GDP increased by +7.50%

Estimation from 2013 to 2017GDP CAGR: +8.23%

Economy: Rwanda's GDP started from a very low level. It is thus easier to obtain a fast-growing economy in pourcentage, compare to developed European economies or the United States. However, over 90% of the workforce is engaged in subsistence farming. The Rwandan government has decided to invest in information technology (I.T) as well as education in order to promote sustainable economic growth.

RWANDA


Telecommunications : (Africa's mobile Market) → + 43% each year

Banking :Africa’s banking sector has grown rapidly in the last decade. Sub-Saharan Africa has become a substantial player in emerging-market banking, with total 2008 assets of $669 billion, while North Africa’s asset base has grown substantially, to $497 billion.


Agriculture : Agriculture represents 15% of the total African GDP.Its production is highly fragmented compare to industrialized countries and there is a lack of transportation infrastructure to well establish a strong supply chain in this field. To make it better, experts think that $50 billion would be enough. Mining : Africa is full of natural ressources such as minerals. However, these ressources have not been well exploited lately and the potential remains really exceptional.

Infrastructure :The transportation network is still quite inefficient. However, this sector has a rise in average of 17% each year in this part of the World. The Infrastructure growth is primordial to develop other sectors. Consumer Goods :Many consumers have moved from the destitute level of income (less than $1,000 a year) to the basic-needs ($1,000 to $5,000) or middle-income (up to $25,000) levels.They are thus able to spend more money in consumer goods. Oil and Gas :African oil and gas have become important components of the world’s hydrocarbon supply–demand balance. By 2015, 13 percent of global oil production will take place in Africa. The continent is really cost competitive compare to other countries.

To be a more competitive country in the globalisation context, Sweden should seriously consider investing in the Francophone African countries.The country uses to be present abroad to develop its economy since the Swedish market is narrow. Sweden is thus really interdependent to its neighbour countries and should take the opportunity to invest in the fast-growing economies.

To set up subsidiaries in this World region, it is necessary to employ French speaking workers, specially in the strategic departments such as the financial, supply chain and marketing ones. Swedish companies need links between their headquarters and subsidiaries to implement meticulously their strategies abroad and control carefully the daily activities. The prioritized sectors must be the ones where Swedish companies are known all around the world to be competitive, such as consumer goods, infrastructure, banking and telecommunication.

The main issue for Western countries to invest in Francophone African countries remains their image regarding corruption, which contrasts totally with the Swedish mindset. Some efforts have to be done in these countries to relieve the Western countries concerns.

CONCLUSION

Fabrice VeysseÉcole Supérieure du Commerce Extérieur

[email protected]://www.linkedin.com/in/fabriceveysse

mailto:[email protected]

Business Insider : The 20 Fastest Growing Economies In The World, October 24 th 2012, from Lucas Kawa

Swedish FDI in Africa, May 5th 2012 Uppsala University, from Martin Boman & Christian Hellqvist

2014 Index of Economic Freedom

CNUCED : Economic Development in Africa, Annal Report 2013

Africa’s path to growth: Sector by sector, Mc Kinsey & Company

World Bank Datas

OECD Foreign Direct Investment (FDI) Statistics, 2013

BIBLIOGRAPHY

swedish firms in africa

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