Archive for the 'Commodities' Category

Computers quieter,faster than open outcry

Another floor of shouting traders has just closed in New York, after CME Group (named after Chicago Mercantile Exchange) closed its open outcry trading pits. The trading floor still continues in pits on various commodities in the Chicago building that houses the Chicago Board of Trade, in an approach that dates back to when the building opened in 1930, writes The Economist magazine this week.
The Chicago exchange only has 9 pits, down from 32 in 2007, and closed one trading floor in 2015 that used to be very crowded and busy. Like the rest of the hyperactive world securities and commodities markets that used to heave with life, emotion, despair, greed, fear, ambition, deception and many other human conditions, gradually the computers have taken over.
The magazine writes: “In the end it was not scandal or terrorism that undermined open outcry; it was efficiency. Computers turned out to be quicker, cheaper and more precise than humans”.
It notes that CME Group was quick to understand that most business was in interest rates, stockmarket indices and currencies, not in traditional commodities. It picked up good volumes and made economies of scale in trading and clearing and then bought up other exchanges that ran into problems. Volumes continue to climb and a tumultuous year of surprising votes in UK and US have seen a big spike in activity and volatility. It provided US and UK traders with a record December and record-breaking volumes on exchanges such as the CME.
The Chicago Board of Trade was formed in 1848 and moved in 1856 to make space for 122 new members.

Chicago Board of Trade building, the figure on top is the goddess Ceres (photo Wikipedia)

New bourse for African beef commodities

THIS STORY WAS PUBLISHED ON 1 APRIL MORNING FOLLOWING THE JOURNALIST TRADITION FOR THAT MORNING. IT SHOULD NOT BE TAKEN SERIOUSLY

As securities exchanges seek new products to boost liquidity and trading, a team of market experts announced backing for an exchange to trade southern and eastern Africa’s agricultural commodities. African Beef Exchange, headquartered in Gaborone, Botswana, launches today and brings together trading of a wide range of cattle and cattle products.
“We address the full range of this commodity – from savannah to sirloin” said CEO Bea Feater. “We offer cash trading and speedy T+2 international standard clearing and settlement and we will move towards futures trading along a 6 month exchange rollout roadmap.”
The ABE offers southern and eastern African countries the chance to quash arguments about which country produces the best beef. “We all know Botswana’s beef is the best in the world, except for the colleagues in Namibia, Zimbabwe and a few others. Now traders can put their money where their mouths are”, said Feater.
Key innovation is the settlement and clearing of physical commodity, enabled by a high-speed Chinese rail network currently under construction across the region. This will enable herders to “demat” the herds into specially padded train wagons for speedy T+2 settlement at kraals across the region.
The ABE is aiming to create a first in terms of sustainable energy usage and health, reversing the trend in which stockbrokers worry about their growing waistlines as they gaze at slow-moving trading screens: “We are creating a virtual trading room using advanced movement sensors and interactive technology. Traders will once again be able to trade better by rushing about, waving their arms and shouting, which will be better for their physical movement during trading hours. Our advanced system will capture the energy generated in order to provide energy for the order routing system. If you don’t move, the screen will gradually go to sleep.”
The full range of beef commodities will be traded, including futures (semen samples and calves) to post-trade in the form of ready-to-cook steaks. Interest is soaring as Africa’s top beef solutions continue to lead the cattle-loving world.

Trade confirmation will be exciting on African Beef Exchange

Trade confirmation will be exciting on African Beef Exchange

Cattle rushing to meet T+2 settlement deadlines

Cattle rushing to meet T+2 settlement deadlines

World-beating trade confirmation systems

World-beating trade confirmation systems

Ethiopian Commodity Exchange gets online trading platform

ECX buyers and sellers make deals. (Photo credit - John Humphrey. From www.globalisationanddevelopment.com)

ECX buyers and sellers make deals. (Photo credit – John Humphrey. From www.globalisationanddevelopment.com)


The Ethiopian Commodity Exchange (ECX) has unveiled an online trading platform that has capacity for nearly 5,000 times more transactions than its current “open outcry”. Since the ECX was started in 2008 trading has been done on a trading floor in its Addis Ababa headquarters by dealers trading directly with each other, and about 200 transactions a day could be done.
Initially, dealers using the eTRADE Platform would be based at the ECX HQ’s trading centre. However, eventually market players will be able to trade electronically from anywhere. The platform will be gradually rolled out to newly built ECX trading centres in regional cities Hawassa, Humera, Nekemte and, in the near future, an additional 4 centres. The ECX has trained and certified more than 445 ECX trading members and representatives who are qualified to trade on the platform.
The trading platform has been under construction for the past 2 years and was developed in-house at the ECX. It was unveiled on 8 October and, on launch day, a record $400,000 of coffee was traded according to this news release.
A test run was done on 20 July with trading in local washed and unwashed byproduct coffee. ECX says 2,390 metric tonnes of farm produce has been traded on the platform so far with a trade value of ETB 120 million (about $5.7m).
ECX chief executive officer Ermias Eshetu said: “The inauguration of this eTRADE platform sets a new course for Ethiopia and brings with it unparalleled economic and social benefits. The platform inevitably breaks the physical and time barrier of the current open-outcry trading platform and provides the ECX with vital economies-of-scale to trade a number of additional new commodities.”

Transforming life for small farmers
The Investment Climate Facility for Africa (ICF) and other partners have been supporting the programme, according to this news release. William Asiko, CEO of ICF, said the platform would bring a revolution to Ethiopia’s agriculture sector: “The modernization of ECX will help to improve the business environment for stakeholders involved in the commodities sector and give Ethiopian agricultural products a competitive advantage.
“But for farmers, this modernization will be life-changing. It will enable farmers to get better pricing for their produce, thereby creating a more equitable distribution of wealth that has far-reaching social implications.”
The ECX was founded with the aim of improving agricultural marketing – a large part of its success is due to the large network of warehouses, quality controls and logistics up and down the country, and its main aim is to empower smallholder farmers, including through better information about prices. The current Government 5-year Growth and Transformation Plan II, launched from July 2015, sees state-run ECX serving 24 “agro-centres” with increased storage and warehousing facilities and better transport links.
Ermias, who became CEO in January after coming from Zemen Bank, said in April that the Government is establishing an enterprise to oversee the upgrading of warehousing, which will rely on a mixture of public and private capital. Donors including the World Bank and Bill & Melinda Gates Foundation are considering supporting what will require “huge investment,” he said.
One key tool for ECX has been its short message service (SMS) and interactive voice response (IVR) notifications of market data to farmers and others. This was introduced in 2011 in Amharic and English and gives real-time access to commodity prices. The SMS service processes 800,000 transactions a month and the IVR handles 1m calls a month, according to the news release. An upgrade was unveiled on 8 October which expands to Oromiffa and Tigrinya languages and introduces menu-based services (USSD) and new interfaces.

ECX mulls trading securities
Earlier this year it was also considering whether it could trade securities, including stocks and bonds, as part of its 5-year expansion plan. Ermias told Bloomberg in April: “We want to be a marketplace for any kind of stock, be it derivatives, agricultural commodities, financial instruments. That’s the ultimate vision.” He added that formal discussions have not yet begun on trading securities.
“With the two components, logistics and scalability, we will be able to introduce multiple commodities to the market,” he said. “ECX must offer the truly transparent marketplace for anything that’s going on in the Ethiopian economy.”
He said the market could move from coffee and sesame seeds, which account for more than 90% of volumes and are the two biggest generators of foreign exchange in Ethiopia, to sugar and grains such as corn and then add equities, government debt, power and metals.
Bloomberg cites Yohannes Assefa, the director of Stalwart Management Consultancy, a Dubai-based group working on Kenyan and Tanzanian exchanges, saying that ECX has capacity to expand beyond agricultural commodities within 12 months: “The existing platform is robust and the regulatory system is mature and well managed.”
The main problem would be changing government regulations, and Yohannes warned this “may require serious internal consultation before a change of policy.”

Exporters want futures
Bloomberg adds that coffee exporters such as Fekade Mamo, general manager of Addis Ababa-based Mochaland Import and Export, criticize the ECX for not allowing futures trading to hedge positions in a volatile global market. Ermias said it would take more than a year to build necessary steps for this, including insurance options for farmers in case they can’t deliver, better access to credit and the strengthening of the legal system.
Donors including USAID and the United Nations have supported the ECX when it was launched in order to boost efficiency of food markets in a nation where millions regularly went hungry. It had strong support from the Government, which decreed that exporters of coffee – Ethiopia is Africa’s biggest producer – must buy from traders on the bourse before they can export and within a year the ECX was the main route for coffee exports.
In 2014 it traded ETB 26.2 billion birr ($1.3bn) worth of goods.

ETB 1.6m for trading seat
In May the 17th trading seat was auctioned and won by an individual, Abayneh Zerfu, who bid ETB 1.6m ($76,000), according to this story in Addis Fortune newspaper, which said there were 4 bids. The ECX manages the bid if a member sells his or her seat and they are only allowed to do this after trading for 3 years and meeting requirements. Yohannes Hamereselassie, member development specialist at the ECX, said the original price for a seat was ETB301,000.

The new e-trade facility (credit ICF Africa)

The new e-TRADE facility (credit ICF Africa)


The ECX developers of the eTRADE platform (credit ICF Africa)

The ECX developers of the eTRADE platform (credit ICF Africa)

Africa should be in your 2015 portfolio, including gold

[Contributed article] Africa is currently the second most-attractive investment behind the U.S. for a number of reasons. Seven countries – Ethiopia, Tanzania, Rwanda, Chad, Mozambique, South Sudan and Sierra Leone – have forecast growth rates over 7% a year for 2014-2016, according to the World Bank.

These are the 3 major drivers of Africa’s economic growth.

Rich in natural resources

Africa is very rich in natural gas, minerals, food and oil, and has some giant water resources. Its land mass is bigger than the U.S., India, China, and Europe combined. While oil is the major driver of Africa’s economy, other industries such as mining and technology are thriving and renewable sources of energy are being built throughout the region.

Expanding economy

Many of the economies are among the fastest growing in the world. In addition, many countries have lower debt to GDP levels than most developed countries. Yahoo! Finance reports that UK has a debt level of 77% of GDP compared to 16% in Nigeria.

Thanks to Africa’s young demographic, a lot of international companies are currently investing in the region. Because of its thriving economy, the middle class are growing, giving people more purchasing powers to keep Africa’s economy running.

Africa’s gold-mining industry

The gold-mining industry is huge in Africa. One country, South Africa, is the world’s 6th gold producer as of 2014, according to Investment site BullionVault.

Gold-mining output is declining all over the world. However, precious metal experts are confident that there are still many unmined gold resources in Africa. To take only one country from the aforementioned huge land mass, Nigeria still has a lot of underdeveloped land. With promising technology that makes it easier for miners to extract more gold from Earth, Africa can become the world’s number-one producer again in the future. Two of the deepest gold mines can be found in South Africa, including the TauTona mine in Carletonville and East Rand Mine in Boksburg. Gold demand is huge in China, which bodes well for Africa’s mining industry

Africa’s soaring growth seems set to continue for many years to come, and there are many good reasons why investors should add the region to their portfolio.

New commodity exchange to transform Ghana’s agriculture

Photo credit: Government of Ghana

Photo credit: Government of Ghana

Investors aim to finalize fund-raising for a new Ghana Commodity Exchange (GCX) during the coming month. A private-public consortium has been put together to create a regional hub for trading commodities, including Ghanaian institutions Data Bank Agrifund Manager Ltd, Ecobank Ghana Ltd, UT Bank Ghana Ltd and a minority shareholding by the Government of Ghana, and international investors such as the International Finance Corporation (IFC, part of the World Bank Group), the private-equity 8 Miles Fund, and eleni, a company which describes itself as Africa’s “premier commodity exchange promoter”.
According to an announcement by eleni, the consortium partners and the Government of Ghana have jointly signed a Letter of Intent with the aim of completing the investment process by April 2014 and launching the GCX over the coming 12 months.
Dr. Eleni Gabre-Madhin, chief executive officer of eleni, is noted for the successful creation of the Ethiopian Commodity Exchange (ECX) as we saw in this story last year. Her model is different from many consultancy models as she is primarily an agricultural economist interested in helping farmers and production while making markets more efficient. She does not see the commodity exchange as only a trading screen, but as a key part of modernizing the whole agricultural marketing system. Successfully improving warehousing, storage, logistics, crop quality and farmer financing are all critical to the success of the venture, in her view.
According to yesterday’s announcement (13 Mar): “A second consortium is also in formation for a large-scale investment in warehouse and logistics infrastructure and equipment in 8 delivery sites around Ghana, as a strategic eco-system partner to the GCX.”
Ghana’s President John Dramani Mahama had announced the GCX on 25 Feb in his second State of the Nation address: “As part of efforts to create an orderly, transparent and efficient marketing system for Ghana’s key agricultural commodities to promote agricultural investment and enhance productivity, the Government has committed itself to the establishment of a Ghana Commodity Exchange (GCX) and associated Warehouse Receipt System (WRS).
“This move is to encourage market access and fair returns for smallholder farmers and to facilitate the formalization of informal agricultural trading activities. It is expected that the establishment of the Ghana Commodity Exchange will position it as a West Africa regional hub for commodity trading activities.”
Agriculture accounts for 22.7% of Ghana’s fast-growing $73 billion GDP and employs 41.5% of the 29m population, according to statistics website Quandl.
The GCX will start with spot and futures trading of agricultural commodities, including maize, soybeans, paddy rice, palm oil and groundnuts. Once these and the related deliveries of actual crops are settled, the GCX aims to introduce other key agricultural and
non-agricultural commodities and to position itself as a future regional trading platform.
According to Gabre-Madhin: “We can think of no better time and no better place than Ghana today to start a new thrust of developing an efficient and transparent price discovery platform. Ghana’s exchange has every potential to become a leading West African hub for globally traded commodities and we are excited to partner with the consortium to bring this idea to reality. The African commodity exchange momentum is real.”
Robert Dowuona Owoo, former head of policy, research and IT at Ghana’s Securities and Exchange Commission, is the GCX Project Coordinator. The SEC had commissioned a feasibility study on a commodity exchange in 2010 and set up a technical committee.
According to Samuel Ashitey Adjei, MD of Ecobank Ghana Ltd: “This exchange will undoubtedly have a transformative impact on our economy and we are very pleased to
be backing it.”

IFC and Soros invest in feeding data to farmers

IFC and the Soros Economic Development Fund have both invested $1.25 million of equity in Esoko, a Ghanaian technology firm, to help provide small holder African farmers and businesses with timely crop information that can be shared via text messaging. According to its website, Esoko can also transmit weather data and farmer helplines to agricultural experts.
Esoko CEO Mark Davies said: ““Our platform was developed by African software engineers here in Accra, Ghana, and has been a totally local, market-driven initiative” said. “IFC and SEDF have a strong track record of helping local companies get the funding and advice needed to expand into new regions and markets. With their support we hope to export this African technology all around the world.”
Current market information and efficient markets will help farmers to make educated, cost-effective decisions when buying and selling their crops, to farm more efficiently and to get better value for their crops. Transforming the warehousing and logistics across the economy, as was done in Ethiopia, transforms the economics of agriculture and is likely to result in increased food production and better livelihoods for farmers without increasing consumer prices.

Nigeria’s Abuja Commodity Exchange set for privatization

The Nigerian Government is planning to privatize the Abuja Securities and Commodities Exchange (www.abujacomex.com) by mid-2014, according to Arunma Oteh, Director General of Nigeria’s Securities and Exchange Commission (SEC). According to an interview on Bloomberg, the aim is to revive trading.
Oteh said: “The Government wants to privatize the only commodity exchange and it had committed to doing it by the end of last year. It didn’t meet that deadline, but it’s planning to do something by the middle of 2014.
“We have a number of both domestic players and international players who are very interested. They’d rather acquire the privatized exchange, so they’re trying to see how far the government is going with this initiative and if not they’re prepared to seek a registration for a new commodity exchange.”
One of the key investors interested is local firm Heirs Holdings Ltd, based in Lagos but with interests across Africa in banking, energy, real estate and agriculture. Chairman Tony Elumelu said in an interview in December the company wants to acquire the Abuja exchange when it is sold or else it will apply to the SEC to set one up.
Heirs Holdings is an investor with Berggruen Holdings and 50 Ventures in African Exchange Holdings Ltd (AFEX www.africaexchange.com). This facilitates an exchange using NASDAQ OMX technology which can be accessed anywhere in the world through the X-Stream electronic trading platform. Other key figures in AFEX include managing partner Jendayi Frazer, who was key in U.S.-Africa policy for nearly 10 years and U.S. Assistant Secretary of State for African Affairs (2005-2009) and Nicholas Berggruen whose charitable trust funds the investment arm to take “a long-term, patient capital value-oriented approach”.
AFEX has set up the East African Exchange (EAX www.ea-africaexchange.com) in Kigali, with the first node launched in Jan 2013 and the first regional auction – 50 metric tons of maize at $398 per metric ton – between a Ugandan seller and Rwandan buyer in November 2013. Expansion is planned for Kenya and Uganda to build a regional exchange.
AFEX also set up an electronic warehouse receipt system in Nigeria last November, working with the Nigerian Grain Reserve Agency and the Agriculture Ministry. This links farmers and traders as part of the groundwork to set up a commodities exchange, according to Bloomberg.
According to AFEX website: “Warehouse storage is critical complementary infrastructure to any commodity exchange. Properly managed warehouse facilities allow farmers to safely store their harvest without worrying about loss of value until market prices are favorable. An electronic warehouse receipt (e-WR) is issued by the warehouse and represents the stored commodity and is the security instrument that is traded on the exchange. It is only transferable through the electronic system, avoiding issues such as side selling, theft, forgery, etc.
“Berggruen Holdings signed a Memorandum of Understanding establishing a strategic partnership with the East African Community (EAC) Secretariat to support the goals of regional economic and financial integration. With this strategic partnership, AFEX will seek to share its strengths, expertise, experience, technologies, methodologies, and resources in order to advance the goal of regional integration of capital markets.”
“Our vision is to create lasting institutions that will capitalize on Africa’s agricultural potential, support African farmers, achieve food security, provide energy security, and improve Africa’s overall global trade competitiveness.”
Nigeria has a fast-growing population which is already 170 million people. It produced Africa’s third-biggest cocoa harvest in 2013 and produces cotton, sugar and other crops.
The ASCE website says it was originally set up as a stock exchange in 1998 and started electronic trading in 2001 and was converted into a commodity exchange 3 months later and brought under the supervision of the Federal Ministry of Commerce. The website does not appear to have been updated recently.

New laws pave route to Angolan securities exchange

Laws have been approved in Angola to regulate the future securities exchange for equity and debt. The Capital Markets Commission or Commissao do Mercado de Capitais (CMC) says that it plans to open a secondary debt market next year and this will pave the way for a securities exchange in 2016.
The regulator announced the new laws on 18 October. According to news story by Reuters, Archer Mangueira, head of the CMC, said the laws were published by presidential decree: “With these laws, Angola creates the conditions for the securities markets to be able to operate. The first securities market operations in Angola will be done with public debt paper, an instrument which help satisfy the State’s financing needs and also remunerates people and companies that invest in it.”
The securities exchange has been in the pipeline for more than a decade and most recently Bloomberg news reported after an interview on 28 June with Mangueira that the launch which in April had been had been announced as 2015, would now be only in 2016. The regulator is also working on plans for trading futures and commodities, including standardized contracts for certain financial products.
Treasury bills already bought and sold among financial institutions. Mangueira said in June that a public market for trading Angolan fixed-income notes had been planned to start by the end of September, using electronic trading. The aim is to help develop a yield curve. However, the secondary market for bonds was delayed to the first quarter of 2014, and Mangueira cautioned: “We might make some adjustments based on whether the legal instruments are fully developed and implemented, technological infrastructure is in place, and employees are trained.”
The CMC has signed an agreement with the London Stock Exchange to train staff.
In August 2012 Angola sold $1 billion of USD-denominated Eurobonds to selected investors maturing in 2019 at a yield of 7%, according to Bloomberg. Earlier this year ACMN reported that it would issue another $1bn-$bn but in October the Africa Report said the issue was postponed until 2014.

Fast-growing economy fuelled by oil
Angola is a major African economy, the second-largest oil producer after Nigeria and endowed with massive agricultural and mineral wealth, including diamonds that fuelled civil war which lasted from 1975-2002. Since peace in 2002 it has moved rapidly to rebuild but still has a poor record on transparency and this has held back some investment and business growth. Reuters describes it as “one of Africa’s fastest-growing, but most impenetrable economies”. Growth was forecast at 7.1% in 2013, down from 7.4% in 2012 with three quarters of budget revenue coming from crude oil.
Suitable listings have been identified including banks, telecoms and retail businesses in private ownership. Bloomberg said that in April Mangueira had expected that the stock exchange would have a market value of 10% of gross domestic product within 18 months of its start up. Expected listings would include the largest banks including Banco Angolano de Investimentos SA and Banco de Poupanca e Credito SA, as well as mobile-phone companies Unitel SA and Movicel Telecomunicacoes Lda.
Leading Angolan companies dominate many key sectors, often linked to senior political and other leaders, and Reuters says “investors and analysts have questioned whether the Angolan companies that dominate their sectors are in a position to fulfil international standard criteria on ownership disclosure, auditing and reporting of accounts, and corporate governance”. According to Bloomberg Angola is ranked 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.

Ethiopian Commodity Exchange trades over USD1bn in year to July

According to an Ethiopian Government press release, Traders on the Ethiopian Commodity Exchange (www.ecx.com.et) transacted some Birr 20 billion ($1.05 bn) worth of commodities on the trading floor during the 2012/13 Ethiopian state budget year, which is until 7 July 2013.
Anteneh Assefa, Chief Executive Officer of the ECX, said that a total of 552,000 metric tons of traded commodities, which included coffee, sesame and haricot white beans, were involved. Coffee made up 45% of the total volume of trade, sesame 40% and haricot white beans 15%. The Exchange’s revenue from its services, including warehousing, was reported to have reached Birr 193 million The ECX has 358 members and 12,000 customers. Since starting in 2008 the value of trade has risen from Birr 2.7 bn.

JSE adds derivatives: grain specific to silos and more silver and platinum futures

South Africa’s JSE Ltd (www.jse.co.za) continues to expand its commodity derivatives range. It has added silver and platinum “quanto futures” to its existing gold, copper and Brent crude quanto futures launched earlier this year. It is also helping develop the South African grain market by allowing Safex silo receipts to complete a futures contract, so that producers and buyers can trade grain with a bid or offered premium depending on location, for instance if a buyer wants grain in a particular location.
The JSE has partnered with Rand Merchant Bank, which is the initial market maker. The commodities are referenced as part of the JSE’s existing licensing agreement with the CME Group.

Commodity gain, without currency pain
According to a JSE press release on 1 Nov, a quanto future is a derivative instrument which, on the JSE, is a ZAR-denominated commodity investment product which delivers the same payoff as a pure USD-denominated commodity investment. This lets investors gain exposure to the foreign underlying commodity without being exposed to the USD-ZAR exchange rate. It simplifies decisions and allows investors to focus only on the returns of the underlying commodity.
Chris Sturgess, Director of the JSE’s Commodities Division, says: “We have seen keen interest expressed in the new Quanto Futures we offer and by adding silver and platinum to the product offering, we continue to provide derivative market participates with opportunities to easily access the international commodities markets.”

Growing grain markets
Trading in grain silo receipts to settle grain futures contracts is likely to benefit both producers and buyers, according to another JSE press release. Producers can negotiate a better price for stock in the specific silo represented in the receipt by placing an “offer” onto the system for a premium over and above the Safex price. Buyers such as millers and processors will benefit through access to bid at all registered delivery points at a premium per ton, regardless of whether or not physical grain is on offer. Buyers will be able to bid for preferred delivery locations. Previously no bids were permitted without available stock on offer.
There are more than 200 registered delivery points. The silo owner continues to guarantee the quality and quantity of the physical stock on the Safex silo receipt. However, the JSE guarantees the cash-flow process and settlement, so there is no risk of counterparty default. Settlement will take place over a 2-day cycle, meaning a trade is settled the next business day after trade, eliminating the delayed payments generally associated with cash market transactions.
The price when making physical delivery is a function of Safex’s mark-to-market price on the day, less the location differential (indicative transport cost) to the registered delivery point. With this new functionality the value of grain at each delivery point can be negotiated transparently between buyer and seller and included in the final settlement price.
The JSE says it offers a first-world trading environment, with world-class technology, surveillance and settlement, in an emerging market context. It is among the world’s top 20 largest equities exchanges by market capitalisation.

World Bank says 4.8% growth for sub-Saharan Africa in 2012, cuts earlier forecast

The World Bank has cut its growth forecast for sub-Saharan Africa. Earlier in the year it forecast 5.2% growth overall for SSA economies in 2012, but yesterday (4 Oct) it cut this to 4.8%. World Bank said in its bi-annual Africa’s Pulse report that Africa is still vulnerable to a fragile global economy and a slowdown in China, although high commodity prices and an increase in exports from countries that have made mineral discoveries are likely to underpin growth for the rest of 2012.

Africa achieved 4.9% growth in 2011. According to the study, excluding South Africa, the continent’s biggest economy, growth is likely to hit 6% in 2012. Strong performers are expected to include countries such as Mozambique, home to some of the world’s biggest untapped natural gas reserves, and Sierra Leone which has started exporting iron ore, according to a story on Reuters. Foreign direct investment (FDI) is projected to rise to $48.7 billion by 2014 from $31bn in 2012, as investor interest in Africa soars. African exports rebounded in the first quarter of 2012, growing at an annual pace of 32%, up from the -11% pace recorded in the last quarter of 2011.

World Bank Vice-President for Africa, Makhtar Diop, said in a press release: “A third of African countries will grow at or above 6%, with some of the fastest growing ones buoyed by new mineral exports and by factors such as the return to peace in Côte d’Ivoire, as well as strong growth in countries such as Ethiopia. An important indicator of how Africa is on the move is that investor interest in the region remains strong.. despite difficult global conditions.”

Most of SSA “middle income” by 2025
The majority of sub-Saharan Africa’s 48 countries could also achieve middle-income status by 2025 though their dependency on natural resources is likely to continue in the medium term, it added. Shantayanan Devarajan, the World Bank’s chief Africa economist, said that this highlights the need for governments to spend their resource wealth wisely and focus on public investment: “Resource-rich African countries have to make the conscious choice to invest in better health, education and jobs, and less poverty for their people because it will not happen automatically when countries strike it rich,” he said.

Diop said there was an opportunity for “strengthening economic transparency and financial controls around the new discoveries, to leverage their full potential through development policies that increase economic growth, create jobs, reduce poverty, and improve health and education especially for young people and future generations, while balancing the immediate needs.”

The World Bank said that after 10 years of economic advancement, 22 of Africa’s 48 countries have officially achieved middle-income status and another 10 could reach middle-income status by 2025 if current growth trends continue. It warned that recent soaring prices for wheat and corn were a concern, after the worst U.S. drought in 50 years. Africa’s Sahel region is already suffering from higher food prices, high rates of malnutrition and recurring crisis and insecurity. Furthermore, swarms of desert locusts and the ongoing conflict in The Sahel also undermine the region’s food security, including Mali and Niger.

Development gains – poverty and child mortality down
Child mortality has also been declining. Between 2005 and 2008, for the first time the absolute number of people living on $1.25 a day fell, as poverty rates on the continent have been falling faster than one percentage point a year. With fast population growth Africa is urbanizing rapidly and 41% of Africans live in cities, with an additional 1% every 2 years. By 2033, Africa – like the rest of the world – will be a majority urban continent. The bank says this has deep implications for social and economic opportunities as urbanization and development go together and it claims that no country has ever reached high income with low urbanization.