International Business Africa #115 Africa – Instead of a post, a map to think about Apfel ⋅ August 23, 2015 Like 0 Thanks! You've already liked this 9 comments « #114 Every Day Low Price becomes Best Price … in India » #116 China, not so Yum-my anymore 9 Comments María Gandía Vizcaíno November 29, 2015 @ 1:54 pm As we can see, Africa is as big as North America, Western Europe, China, Argentina and India, however Africa is a underdeveloped continent, and the most important continent in the third world: ten of the poorest countries are in Africa. Africans live a paradoxical relationship with the wealth of their continent which enriches the large corporations that exploit them, but is not reflected in improvements in their life quality. As a continent, Africa is still enslaved because of their enormous natural wealth. Mining and extraction of precious materials-oil, natural gas, coltan and cobalt enrich businesses, but extend a shadow of poverty across the continent. Africa’s economy is based on trade, industry, and natural resources. Approximately 1,111 billion people live in 54 different countries made by the Occidental countries with no respect for the cultures and traditions of the different tribes that were living there, which causes many battles between them for territorial issues. Africa is the richest continent that is exploited and poor managed by the West. According to Hofstede and power distance, in Africa we can see a good example of how in this continent there is a high degree of power distance. All the power in the continent is managed by a few people that most of the time are not even African indigenous. The rest of the society merely follow orders and work according to the guidelines that the higher authorities order them, in most of the cases threatened by their governments. For this reason, these leaders are able to get the benefits without the workers getting even a quarter of these. For this reason the African population is the poorest in the world even though they could be a company with a good economy based on the available resources. There is also a significant gap in masculinity, African women have no value in the labor market, and they are simply valued to have children, do housework and look after her husband and children. These differences are very pronounced in all African countries, some even with very strict cultures and that leave women in the lowest place in society. Africa is managed mainly by Western Europe and the US, because of this, they might be able to improve the situation in Africa, and above all improve the situation of African employees, improving their living conditions and establishing chords to the situation of the continent fair wages. However, they prefer to continue exploiting the resources that Africa has, raw materials, etc., and keep the profits, enriching a few of them. Many of the countries that we can see in the picture are much smaller than the continent, but they hold more power than Africa itself. I think that this situation cannot be changed by us; only few of the most important people in the world can change the situation in Africa and make it better for all. In this article we can see how Africa lost competitiveness regarding rest of the world: http://economy.blogs.ie.edu/archives/2009/10/africa-pierde-competitividad-con-respecto-al-resto-del-mundo.php References: http://www.afrik-news.com/article13716.html https://www.usaid.gov/where-we-work/africa http://news.bbc.co.uk/2/hi/africa/7093912.stm http://www.afdb.org/en/ Michael D. March 26, 2016 @ 6:29 pm What a great map of Africa. It is an excellent possibility to provide an overview of the sheer size of the continent, in comparison to some selected countries. It is indeed larger than most of us would imagine. I would be very interested to see the comparison with other continents, such as all Europe or North America, or countries like Russia or Canada. But to be honest I believe that this is mostly it, what you can learn from the map. The biggest problem is that simply the size has no influence on a continents success or failure, measured in political and economic terms. And those countries shown inside Africa, such as U.S., China or India, have very little in common with the diverse continent of Africa. The authors of the book “why nations fail” Daron Acemoglu & James Robinson argue, that not even climate, culture or history can explain a country’s prosperity or poverty, even though one might think that countries with favorable agricultural conditions have a natural advantage among others. But it isn’t so. One of the best examples can be found on the Mexican / USA border, where some cities (Nogales or El Paso / Ciudad Juarez) are divided in the middle by a national border. Besides climate, those cities also share a similar culture and a largely common history. And fact is those cities could not be more different. The authors argue that only inclusive & centralized political and economic institutions, of pluralistic nature (with participation of the population), determine the degree of prosperity of a country. Africa is rich in natural resources and in my opinion all of them, can be seen similar to the agricultural, historical or cultural conditions, for a country’s success. If the country (or continent) has largely extractive economic and political institutions, such as a dictatorship like government, the population has no benefit from value added to the economy from natural resources, as the income generated will be extracted, and not reinvested. A country would need inclusive centralized economic institutions, thus an economic growth can be sustained. Such institutions also foster innovation, as the individual property rights are secured, and reinvest the profit of economic growth into the country. I think that the institutions of most African countries are very similar to countries such as Russia, Saudi Arabia, Cuba or North Korea. Due to the lack of incentives for investment, extractive government of non-pluralistic behavior (which need to protect their own interest first), an escape of this vicious circle seems like a major and challenging step. So, the country or continent can have as much resources as possible, but the type of institutions determines its success. A good example are the so called “blood diamonds”, where the local population is abused for the mining of the raw material under terrible conditions, and the profit is created abroad and the indigenous population has no benefit from it, and economy has no value added. Artina M. March 27, 2016 @ 5:41 pm Considering all the topics available for discussion, the map of Africa caught my attention as it not only provides a sheer comparison of the size of the continent in comparison to other countries as China, Western Europe and the United States but also for me, addresses the matter of global land grabbing to some extent. Although the map does not transcend beyond a simple comparison, it would be intriguing to see a comparison with other continents or larger countries, as Michael has already mentioned in the post above. In the recent years, more and more countries as Saudi Arabia, the Emirates and China have started to acquire land in Africa to use as farmland. Saudi Arabia’s population for example has outrun its land and water resources, and will soon be totally dependent on imports from the world market or overseas farming projects for its grain. But also private investors from the US and Europe are becoming more interested in this area due to rising costs for food and lack of agricultural land in many highly populated states. The process at which land is obtained is referred to as global land grabbing, which by definition is the global rush to buy up or lease farmlands abroad as a strategy to secure basic food supplies or simply for profit. There is a consensus in Africa, that agriculture is one of the keys to achieving sustainable and inclusive growth, as most of its population, especially the poorer areas, depend on agriculture. In 2012, Indeed, Arezki, Denininger, and Selod found that a countries attractiveness to foreign investors correlates directly to large amounts of uncultivated land with the potential to generate significant output. With Africa accounting for 60 percent of the world’s arable land, most of the countries achieve only 25 percent of their potential yield, resulting in large-scale investments in agriculture, especially by countries as China. To date, Africa has not been able to obtain and maintain a green revolution, but assuming that the region can achieve a self-feeding state, will it then be able to feed China? Whether Africa intends to feed itself and/or China, a crucial question remains how the region will address the serious underinvestment in agriculture to date. References: http://www.keepeek.com/Digital-Asset-Management/oecd/development/african-economic-outlook-2015_aeo-2015-en#page20 http://www.wfs.org/futurist/january-february-2013-vol-47-no-1/food-fuel-and-global-land-grab http://www.sourcewatch.org/index.php/Global_Land_Grab https://warisdirie.wordpress.com/2010/09/09/foreign-investments-in-african-agriculture-pros-and-cons-auslandische-investitionen-in-afrikanische-landwirtschaft-ausbeuterei-oder-chance/ http://www.brookings.edu/blogs/africa-in-focus/posts/2015/11/05-chinese-land-grab-africa-sy http://www.globallandproject.org/arquivos/GLP_report_01.pdf Kara Rogers July 6, 2016 @ 5:51 am A United States Geography professor showed me this map about a month ago when I was on my honeymoon in South Africa. He was showing us the vastness of the continent and said that most of his students had no frame of reference for how large the continent was. I can understand why these students underestimated Africa; In the United States you don’t hear a lot about Africa, especially as it relates not only to geography but in business. In my experience, when you think international business as a United States citizen you think about China, India, Europe, Japan, Canada or Mexico. They are the ones similar in GDP and/or represent potential target markets for International Business Expansion and are current trade partners. Despite its geological size, I would have argued that Africa is too small to worry about from a business point of view. In 2014 the nominal GDP of the countries/continents showed in the map are: United States GDP 17,410,000 Million China GDP 10,354,831.73 Million Western Europe GDP 9,324,100 Million India GDP 2,048,517.44 Million Argentina GDP 537,659.97 Million Totaling over 39,000,000 Million combined while Africa’s GDP in 2014 was 2,449,661 Million, which is only about 6% of what the other countries produced. Thus, Africa seems like a small player that wouldn’t make much of an impact in the international market place. However this could change in the future and is why I said “would have argued”. According to a lecture from my International Business professor, Dr. Apfelthaler, China is exporting an increasing amount of goods from Africa and they are also investing a lot into the country. This could increase Africa’s GDP over the next few years and create an increase in purchasing power and business opportunities. Getting into business with Africa might be something that the United States should be proactive about and potentially consider a systematic approach of entering their markets. If China succeeds and the US enters later, then they will be entering as a reactive approach, which could also work because they want to see how successful China is in penetrating the market. Hopefully if China is successful then US can enter and take some of the market share from their competitor country. Clemens Gamsjaeger March 6, 2017 @ 9:04 pm Without any doubt – this map of Africa is showing a comparison in size to global player nations – it is impressive. I would use the chance to comment the given picture of Africa in a different way as have been done before. But I definitely agree to the previous post and would like to thank the authors for sharing their thoughts. Africa is a continent with uncountable “pain points” and even more possibilities – for developed countries and Africa itself. The world is experiencing an unprecedented urban shift: less than a century ago, a mere 10% of the world’s population lived in cities. Today the figure is almost 60%. By 2050, three in four people will reside in a city, with the majority of new cities stemming from the Global South (especially in Africa). This trend comes as no surprise as economic activity, innovation and opportunities are concentrated in urban agglomerations. Cities across the world currently account for an estimated 70% of global GDP, (Edinger & Matambo, 2014). Cities such as Kinshasa and Lagos, already boasting populations of about 10 and 12 million people respectively, will need to look at accommodating a further 5.2 million and 6.3 million more persons respectively between now and 2050, (Edinger & Matambo, 2014). Some would see these as conservative estimates, expecting Lagos to increase to more than 25 million residents many years before 2050. In other cases, such as Niamey and Kampala, the city population is expected to double or even more than double, as is predicted to be the case in Ouagadougou. This trend is particularly evident in Western and Eastern African cities. Every fast growing area and especially areas in emerging markets are facing huge challenges. The expansion and development of cities have to deal with urban employment and housing, education and health, pollution, water and power supply, and especially economic and social infrastructure provision particularly around transport. As for instance African cities grow despite of the challenges they are faced with, the old adage, “necessity is the mother of invention”, applies. Cities have grown to innovate to address these and other constraints. One such move is the positioning of African cities in developing Information and Communication Technology (ICT) hubs in the run to create “Smart Cities”. The concept of Smart Cities is not just that of high-tech cities, but of cities that are ultimately better functioning, and that have found ways to integrate ICT/technology in managing systems and processes. This includes information collection, data storage and more efficient and effective analysis tools. The City of Lagos in Nigeria is Africa’s innovation hub and a lot of Information Technology leading companies, like Google, IBM, Huawei, Datamatics, and so forth have subsidiaries there. The automotive original equipment manufacturers (OEM’s) are going to build up their Research and Innovation Centers in Lagos to use this growing Technology/ICT Cluster for future developments. Technology companies in Nigeria, no doubt, have blossomed in recent times, thanks to the availability of a ready market. Africa’s largest economy provides lots of patronages, which is an absolute necessity for these tech companies to thrive. The linkage of Information Technology companies and automotive suppliers and OEM’s within the growing innovation hub in Lagos provides an additional innovation network for new (autonomous) mobility concepts with regards to the growing urbanization globally. I just wanted to point out, that there are a couple of initial seeds, which are of importance within developed countries and Africa itself – a chance to strengthen international businesses and to grow Africa’s common wealth. Edlinger H. & Matambo, G. (March 2014) African Cities as Emerging Hubs and Drivers of Innovation and Growth. Africa Frontiers Forum: March 2014, Frontier Advisory (Pty) Ltd. https://www.forbes.com/sites/joelkotkin/2013/04/08/the-worlds-fastest-growing-megacities/#23eef64b7519 https://www.howwemadeitinafrica.com/rise-africas-megacities/ Bernhard Freitag March 8, 2017 @ 9:56 pm Many of the previous authors have already explored the problems and the size of the country. Of course Africa is a very interesting opportunity for companies to invest in. Due to Africa Business Forum in New York companies from China, Turkey, Brazil, and Indian flock to Africa. American firms continue to be underrepresented.  One explanation is that Americans’ are unfamiliar with the African market. U.S. schools spend little to no time on Africa. This leads to an educational deficit. Additionally, the geographic distance between the United States of America and Africa is also not an advantage for American companies.  Beside that American media does not report a lot about African countries. The only news reported from Africa was bleak. The media reported only about terrorism, famine, political corruption, and the proliferation of AIDS and other diseases. Those media of course shaped the perception of American companies.  Unfamiliarity and misperceptions of the African market is one of the reasons why companies do not invest. Those organizations often conclude that the cost of gaining sufficient understanding of African markets outweighs any potential investment prospects. Therefore those companies decide to make good returns in other and more familiar countries.  Are those countries missing an opportunity? Robert Sichinga, Zambia’s minister of commerce stated when he was in Atlanta: “African development has skyrocketed in the last five years, and the U.S. has risked missing key window for investment.”  Based on demographic trends alone, Africa will be a major future market. In 2050, Africa will comprise one quarter of the world’s labor force and 1 out of every 4 people in the world will be African. Beside, that Africa’s population is young and increasingly urbanized and connected. Another fact is that Africa has the fastest growing middle class in the world. McKinsey expects that these African consumers will contribute over $400 billion in consumption growth in the next 10 years.  Beside those numbers, Ernst & Young’s most recent survey of business attractiveness shows that over the last four years Africa is getting a very attractive investment destination.  Of course this continent is not an easy market. First off all, the infrastructure in Africa is not the best, so Africa has an infrastructure deficit.  There exist still paramount external influence factors like the political situations in some countries. The political instability is still one of the biggest short-term threats to growth in Africa.  Another threat is the corruption in Africa. Roughly 40 percent of the African countries are included in the Corruption Perception Index of 2014. There it can be seen that corruption is still a major uncertainty factor.  Africa can be a future market for American companies, but of course it is a complex and unfamiliar market. Despite all those challenges there already exist companies that do invest in Africa. One very good example is the telecommunication industry. Although the infrastructure is not the best, African connectivity has exploded over the past decade. Africa now boats nearly 10 percent of the world’s Internet users.  One of the companies that were investing over the last decades in Africa is Google. Google has a number of on-going projects in Africa, from expanding its network to installing Google Fiber. Another good example is the company Cummins. . Cummins, a global designer and manufacturer of diesel engines has been present in Africa since 1946. They are selling power generators for homes and business. Also Ford has been involved in the South African automotive industry since the 1920s. They even plan to establish a production plant in Nigeria. As you can see there are already American companies that invest in Africa.  As said many companies are already investing in Africa, and the U.S. lags behind. Especially, China is investing a lot in the infrastructure and natural resources of Africa.  Personally, I think that Africa is a future market for companies, and U.S. companies should get familiar with this market. I think in a few years that market will be important to every company. Therefore it is beneficial to step in early into this emerging market.  https://www.forbes.com/sites/realspin/2016/09/20/bedwetting-u-s-capital-missing-out-on-african-growth/#6f333e0932a5  https://www.lw.com/mediaCoverage/africa-is-now-the-opportunity-for-mid-sized-US-companies  https://www.africa.com/u_sinvestment_in_africa_making_up_for_lost_ground/  https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AEO_2016_Report_Full_English.pdf  https://borgenproject.org/american-companies-investing-in-africa/ Lilian Laub June 16, 2017 @ 6:57 am Unlike previous posts, I would not like to focus on the size aspect of this map but rather draw the attention to world maps we usually see in western countries. It might also be an explanation, why we are not aware of the size of Africa. In Europe, we always just see world maps with “us” Europe in the center. This fact distorts the reality and gives the impression that there are countries more important than others. Whereas the world is a globe and there should not be places considered more important than others. A change of perspective with the help of different kind of world maps could help to understand other cultures better. It would underline, that we are all on the same planet and do have to share the same resources. Martina T June 20, 2017 @ 11:01 pm It is unbelievable how the map of Africa deviates from reality. I heared of it about one year ago and I couldn’t believe it. This kind of map is a really interesting but also shocking depiction of Africa. When I started thinking about it i realized more and more that this can really influence the whole society as well as the economy in Africa, because it is seen smaller than it is, inconspicuous and even more unimportant. As Africa is already, the most poor continent in my opinion, this may contribute to making it even more disadvantaged. Nevertheless, I think Africa has a huge economic potential, especially South Africa which already is an emerging market. Also the northern states could be more valuable, but at first it is important to dispute the political conflicts and build up a stable social system. John P. July 7, 2017 @ 10:38 am I think the discussion about Africa and its political and economic situation would not go deep enough without mentioning the questionable influence of the US and Europe (especially the former colonial states) over the African continent. Although the Chinese role in the land grabbing affair is likely to be a very substantial one, these activities are still an issue of the more recent past. The extensive impact, however, of all political actions the former European colonial states and the US have been taking regarding Africa over the last few centuries, is certainly the more fundamental factor in this case. The idea of just taking over anything valuable you can find on a foreign continent, wether if its natural or human resources, is presumably the origin of the comprehensive enslavement of Africa. The “invasion” of the African economy by powerful western companies – also mostly driven by the thirst for cheap natural resources – supported the oppression of the indigenous population by preventing African states to attain economic autonomy. And finally the current developments in terms of land grabbing by investors from all over the world seem to complete the total sellout of the African continent including the basic food and water resources of the population. In fact, the example of Africa illustrates the dramatic effects of our basic economic principles “company growth” and “maximization of profits and/or shareholder value” and should actually induce all of us to completely reconsider the foundations and “values” of our capitalistic economic system. 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