The emergence of Africa: the Subsaharan attempt to join the emerging markets club.

• Author: Kleiman, Gary

After 2005's proclamation by the official aid and development community as the "year of Africa" spurred a flurry of headline initiatives that underscored solid economic and financial system progress in selected countries, private sector emerging market investors have begun to take notice. According to data trackers, the region outside South Africa has received a modest pickup in capital inflows for the first time in a decade, as multinational business and money managers continue to pursue exotic destinations to secure long-term returns and natural resources. This trend should strengthen in 2006, and see the sub-Sahara finally gain acceptance in the global commercial and financial mainstream.

For both 2004 and 2005 the International Monetary Fund reports overall 5 percent GDP growth as inflation dropped to a thirty-year low. Oil and non-energy commodities fueled the upswing. At the same time, structural reforms boosted competitiveness and trade, enabling exporters to tap duty-free privileges, such as available under the U.S. African Growth and Opportunity Act (AGOA). Inroads could be extended with the WTO agreement in Hong Kong for industrial countries to phase out agricultural subsidies over the coming years. Intra-regional barriers are also falling slowly through such blocks as COMESA, SADC, ECOWAS, and the respective Central and West African CFA franc zones which share common euro pegs and tariff regimes.

At the historic Gleneagles summit in July 2005, G8 leaders pledged to double assistance to Africa by 2010, while writing off the remainder of bilateral and multilateral debts owed by two dozen countries qualifying under the IMF and World Bank's Heavily Indebted Poor Country (HIPC) program. The 100 percent relief presumes sound fiscal and monetary directions and efforts to better mobilize domestic and foreign private capital. These preconditions must also be demonstrated over time to be eligible for new aid vehicles such as the Millennium Challenge Account in the United States and the Investment Climate Facility in the United Kingdom, which also require basic standards of political and social achievement.

Sub-Saharan stock exchanges, which are minor components in benchmark indices, have been good performers the past two years. Botswana, Cote d'Ivoire, Ghana, Kenya, Mauritius, Namibia, and Nigeria have all turned in prolonged stretches of double-digit gains. On the debt side, ratings agencies Fitch and Standard & Poor's now cover a dozen...