Africa: A place global investment captains can no longer ignore As the US-Africa Leaders Summit closed its doors in Washington DC early last month, there was hope that the leading global captains of industry, particularly those in the West, would finally yield to the allure of the continent as a key investor destination, if not a trading partner. That this was like no other conference the US had ever hosted was underscored not only by the number of African leaders who attended, but also by the fact that it brought them under one roof with the who’s who in the investor arm of the American economy. By choosing to discuss investment options with leaders from our part of the world, American industrial behemoths appeared to have recognised the unsurpassed, but largely unrealised potential that Africa possesses. The US-Africa Summit was convened by President Barack Obama, at a time when the rest of the world had dropped the image of Africa as a continent deserving global pity and handouts; a place where real investments rarely go. It offered American investors the opportunity to network and strike deals with the African countries represented. To many an analyst, the event gave the US a chance to embrace not just the turnaround Africa has been through lately, but also a platform to say what it is the superpower had to offer a continent that no longer yearns for handouts. Huge potential Critics, however, say that although the continent has a huge potential, as well as impressive economic growth, “it is not the easiest place in the world to do business.” But data on GDP growth on the continent appears to contradict this. Sub-Saharan Africa’s GDP growth has been averaging almost five per cent a year since 2000. Last year, it stood at 4.7 per cent, according to the World Bank, which forecast a rise to 5.2 per cent this year. This growth is not just the envy of Europe and the US — where things have not been looking bright — it has a potential the world can no longer afford to ignore. But even with such potential, Africa has not attracted as much investments in certain sectors compared with other regions. For example, in 2011, the Americas attracted transactions in the hospitality sector worth $15.2 billion out of a global hotel transaction volume of $31.2 billion. But the transactions that came to Africa appeared not to have hit the global radar since major trackers of hotel investments lumped them together with what Europe and Middle East received. Investments So why has the continent not been attracting such big investments as are enjoyed by other parts of the world? Usually, when this question is posed, it is common for commentators to employ statements such as “how bad things are” on the continent — mentioning such practices as corruption, bad governance, poor infrastructure, faulty legal and institutional frameworks, high political risks, mediocrity, bad work ethics and long bureaucratic procedures that lead to delays especially with regard to people setting up businesses. However, this is not necessarily a true reflection of Africa in its present, emergent form. For a long time, the continent received bad press, so much so that even when things started to look up, many international media outlets either failed to notice or were reluctant to embrace a different African story. The African story was told by people whose focus was diseases that decimate people in their tens of thousands; crippling famines that alternate with severe floods; long-running conflicts that take the lives of millions; corruption that cripple entire economies among other negative issues. Some went ahead to dub the continent a “scar on the conscience of the world.” On the other hand, studies now show that many investors are alive to the emergence of a brighter, more rewarding Africa. For instance, an investor survey carried out in 2011 by the UK-based financial services company Silk Invest to gauge investors’ views on emerging markets, found that 43 per cent of people viewed the continent as the most attractive investment destination compared with 37 per cent who preferred Asia. Arguably, the most interesting outcome of Silk Invest’s research was that more than 50 per cent of the 157 investors interviewed had no investment portfolios in Africa. Given the continent’s one billion consumers and a collective GDP of $1.7 trillion (by 2010), the African market is not one any one can take for granted any more. Furthermore, as many as 21 African countries are now considered attractive for equity investors seeking high returns. According to the International Finance Corporation, only one country was this attractive 10 years ago. Investment financiers have taken note. For instance, when HSBC Global Assets Management launched a long-term equity portfolio of $170 million in late November 2011, it based its decision on a forecast made earlier that projected the size of emerging markets would increase by 500 per cent, surpassing the developed world’s market, and that 19 of the biggest economies will be in Africa and elsewhere. The HSBC Fund is meant to give private and institutional investors the opportunity to get a foothold in the next generations of emerging markets. Opportunities in Africa For Africa and Africans, a statement attributed to Stephen Murphy, the chief executive of Citadel Capital, is reassuring. He told the media during a conference in Nairobi a year ago that the time for taking Africa for granted and issuing simplistic explanations on its reliability as an investment destination are over. Africa is among the last great frontiers for private equity…Africa is about opportunity — the opportunity to do better because of brighter macroeconomic fundamentals, and on a micro-level because of its natural resources,” said Mr Murphy. Even naysayers are reversing earlier theses. For instance, The Economist appears to be alive to the fact that the story about Africa being a basket case no longer sells. After writing Africa off as “the hopeless continent” in May 2000, the publication had to eat humble pie when it paid glowing tribute to rising, “hopeful Africa” in one of its articles: The shops are stacked six feet high with goods, the streets outside are jammed with customers and sales people are sweating profusely under the onslaught. But this is not a high street during the Christmas-shopping season in the rich world. It is the Onitsha market in southern Nigeria, every day of the year…” wrote the Economist. The publication attributed this positive growth to the commodities boom in the 2000-2008 period; rise in service industries and manufacturing as well as what it terms “favourable” demography. With fertility rates crashing in Asia and Latin America, half of the increase in population over the next 40 years will be in Africa.” It seems that after all the negativity, something good is being said about Africa’s demographic profile and its fast-growing middle class that, according to the IMF, now stands at 60 million and is expected to rise to 100 million by 2015. Surprisingly, and contrary to popular opinion, these things have not just happened from out of the blues. Africans have been doing all they can to prime the continent for investments while making it a good home for everyone. On this, The Economist says: “All this is happening partly because Africa is at last getting a taste of peace and decent government.” Critics who hardly see the smart moves that Africa has been making, say that the level of technological development on the continent is still too low to write home about, and that investors willing to set up shop here are likely to face all manner of obstacles. But, is this wholly true? In some aspects, Africa is not out of the woods yet. But as the story of ICT growth around the continent has demonstrated, the Africa often described in the media may, after all, exist only in the minds of those who write the tales. Though many parts of the continent have challenges with physical infrastructure, Africa appears to have “compensated” for this by expanding, by leaps and bounds, its telecommunications industry. Today, there are more than 600 million mobile phone users on the continent according to the World Bank, surpassing the US and Europe. Again, this has been attained through a deliberate effort by many African countries. Kenya, for instance, has crafted an ICT policy and strategy that commits the government to invest in and promote access to ICT at all levels of education. The country was among the first in Africa to put in place reforms in the sector that culminated in the government offloading its massive equity in a near-moribund national telecommunications outfit, Kenya Posts and Telecommunications Corporation, in the late 1990s. Since then, studies show that the country has received massive investments in ICT that have spurred growth in other sectors. In 1999, the country’s mobile phone subscriptions stood at one in every 1,000 people; today, three out of four Kenyans have a mobile phone. Indeed, by March 31, 2012, there were 29.2 million subscribers in a national population of 38 million. To some, Africa’s economic “dance” with China, India and other countries in the East is yet another smart move that has ushered in good tidings for the continent. Wachira Kariuki, a Kenyan lawyer, says that Asia’s rising investment portfolio in Africa started to happen when the manufacturing sectors in China and India started looking out for raw materials. After capitalising on technology from the West, Asian countries became industrialised and have been seeking raw materials from Africa,” he said. To Kariuki, the West remained “in love with the narrative that it had crafted for Africa, leading it to fail to acknowledge that there was a potent competitor in town.” China model China, on its part, adopted a quiet, but nonetheless aggressive economic diplomacy that is now more attractive to Africans than the Western model. This saw the total volume of trade between China and Africa hit a record high of $166.3 billion in 2011, compared with only $10 billion in 2,000, making China Africa’s biggest trading partner. Although many countries in the West have traditional economic ties with Africa by virtue of having established colonies on the continent, some, including the US, now appear to have woken up to the challenge posed by the Chinese. On her 11-day trip to different African countries in Africa in 2012, Hillary Clinton, the former US secretary of state, was hard pressed to deny that her visit was informed by US worries over China’s growing economic influence in Africa. Critics believe that at a time when the global economy is not doing so well, investors from the US, European Union and other countries in the West would do themselves a favour were they to regard Africa as a trading partner rather than an object of pity or a continent with an insatiable love for development assistance. While potential investors eyeing the continent may still have inhibitions, the challenges in the region are not insurmountable, particularly for investors willing to study the continent more closely. This is partly because African countries have, and continue to make things better and easier for investors. In Kenya, for example, besides having a blueprint on where it wants the country to be in 16 years’ time (Vision 2030), the government has come up with a series of economic reforms to boost its tourism sector, which is a key source of foreign exchange. These include a new law that establishes a national tourism strategy, as well as regulatory and marketing bodies to iron out the functions and roles of the institutions governing the sector. Most importantly, Kenya has put together a document entitled: Investment Opportunities in Kenya, that offers potential investors detailed information on how and where to invest. Other African governments like Mauritius have developed tourism master plans while South Africa, Morocco, Senegal, Benin and Kenya have established financial mechanisms that can become handy tools for investors seeking a foothold in these countries. theeastafrican.co.ke/news/Africa--A-place-global-investment-captains-can-no-longer-ignore/-/2558/2443602/-/item/0/-/ddgsb9z/-/index.html Africa: A place global investment captains can no longer ignore As the US-Africa Leaders Summit closed its doors in Washington DC early last month, there was hope that the leading global captains of industry, particularly those in the West, would finally yield to the allure of the continent as a key investor destination, if not a trading partner. That this was like no other conference the US had ever hosted was underscored not only by the number of African leaders who attended, but also by the fact that it brought them under one roof with the who’s who in the investor arm of the American economy. By choosing to discuss investment options with leaders from our part of the world, American industrial behemoths appeared to have recognised the unsurpassed, but largely unrealised potential that Africa possesses. The US-Africa Summit was convened by President Barack Obama, at a time when the rest of the world had dropped the image of Africa as a continent deserving global pity and handouts; a place where real investments rarely go. It offered American investors the opportunity to network and strike deals with the African countries represented. To many an analyst, the event gave the US a chance to embrace not just the turnaround Africa has been through lately, but also a platform to say what it is the superpower had to offer a continent that no longer yearns for handouts. Huge potential Critics, however, say that although the continent has a huge potential, as well as impressive economic growth, “it is not the easiest place in the world to do business.” But data on GDP growth on the continent appears to contradict this. Sub-Saharan Africa’s GDP growth has been averaging almost five per cent a year since 2000. Last year, it stood at 4.7 per cent, according to the World Bank, which forecast a rise to 5.2 per cent this year. This growth is not just the envy of Europe and the US — where things have not been looking bright — it has a potential the world can no longer afford to ignore. But even with such potential, Africa has not attracted as much investments in certain sectors compared with other regions. For example, in 2011, the Americas attracted transactions in the hospitality sector worth $15.2 billion out of a global hotel transaction volume of $31.2 billion. But the transactions that came to Africa appeared not to have hit the global radar since major trackers of hotel investments lumped them together with what Europe and Middle East received. Investments So why has the continent not been attracting such big investments as are enjoyed by other parts of the world? Usually, when this question is posed, it is common for commentators to employ statements such as “how bad things are” on the continent — mentioning such practices as corruption, bad governance, poor infrastructure, faulty legal and institutional frameworks, high political risks, mediocrity, bad work ethics and long bureaucratic procedures that lead to delays especially with regard to people setting up businesses. However, this is not necessarily a true reflection of Africa in its present, emergent form. For a long time, the continent received bad press, so much so that even when things started to look up, many international media outlets either failed to notice or were reluctant to embrace a different African story. The African story was told by people whose focus was diseases that decimate people in their tens of thousands; crippling famines that alternate with severe floods; long-running conflicts that take the lives of millions; corruption that cripple entire economies among other negative issues. Some went ahead to dub the continent a “scar on the conscience of the world.” On the other hand, studies now show that many investors are alive to the emergence of a brighter, more rewarding Africa. For instance, an investor survey carried out in 2011 by the UK-based financial services company Silk Invest to gauge investors’ views on emerging markets, found that 43 per cent of people viewed the continent as the most attractive investment destination compared with 37 per cent who preferred Asia. Arguably, the most interesting outcome of Silk Invest’s research was that more than 50 per cent of the 157 investors interviewed had no investment portfolios in Africa. Given the continent’s one billion consumers and a collective GDP of $1.7 trillion (by 2010), the African market is not one any one can take for granted any more. Furthermore, as many as 21 African countries are now considered attractive for equity investors seeking high returns. According to the International Finance Corporation, only one country was this attractive 10 years ago. Investment financiers have taken note. For instance, when HSBC Global Assets Management launched a long-term equity portfolio of $170 million in late November 2011, it based its decision on a forecast made earlier that projected the size of emerging markets would increase by 500 per cent, surpassing the developed world’s market, and that 19 of the biggest economies will be in Africa and elsewhere. The HSBC Fund is meant to give private and institutional investors the opportunity to get a foothold in the next generations of emerging markets. Opportunities in Africa For Africa and Africans, a statement attributed to Stephen Murphy, the chief executive of Citadel Capital, is reassuring. He told the media during a conference in Nairobi a year ago that the time for taking Africa for granted and issuing simplistic explanations on its reliability as an investment destination are over. Africa is among the last great frontiers for private equity…Africa is about opportunity — the opportunity to do better because of brighter macroeconomic fundamentals, and on a micro-level because of its natural resources,” said Mr Murphy. Even naysayers are reversing earlier theses. For instance, The Economist appears to be alive to the fact that the story about Africa being a basket case no longer sells. After writing Africa off as “the hopeless continent” in May 2000, the publication had to eat humble pie when it paid glowing tribute to rising, “hopeful Africa” in one of its articles: The shops are stacked six feet high with goods, the streets outside are jammed with customers and sales people are sweating profusely under the onslaught. But this is not a high street during the Christmas-shopping season in the rich world. It is the Onitsha market in southern Nigeria, every day of the year…” wrote the Economist. The publication attributed this positive growth to the commodities boom in the 2000-2008 period; rise in service industries and manufacturing as well as what it terms “favourable” demography. With fertility rates crashing in Asia and Latin America, half of the increase in population over the next 40 years will be in Africa.” It seems that after all the negativity, something good is being said about Africa’s demographic profile and its fast-growing middle class that, according to the IMF, now stands at 60 million and is expected to rise to 100 million by 2015. Surprisingly, and contrary to popular opinion, these things have not just happened from out of the blues. Africans have been doing all they can to prime the continent for investments while making it a good home for everyone. On this, The Economist says: “All this is happening partly because Africa is at last getting a taste of peace and decent government.” Critics who hardly see the smart moves that Africa has been making, say that the level of technological development on the continent is still too low to write home about, and that investors willing to set up shop here are likely to face all manner of obstacles. But, is this wholly true? In some aspects, Africa is not out of the woods yet. But as the story of ICT growth around the continent has demonstrated, the Africa often described in the media may, after all, exist only in the minds of those who write the tales. Though many parts of the continent have challenges with physical infrastructure, Africa appears to have “compensated” for this by expanding, by leaps and bounds, its telecommunications industry. Today, there are more than 600 million mobile phone users on the continent according to the World Bank, surpassing the US and Europe. Again, this has been attained through a deliberate effort by many African countries. Kenya, for instance, has crafted an ICT policy and strategy that commits the government to invest in and promote access to ICT at all levels of education. The country was among the first in Africa to put in place reforms in the sector that culminated in the government offloading its massive equity in a near-moribund national telecommunications outfit, Kenya Posts and Telecommunications Corporation, in the late 1990s. Since then, studies show that the country has received massive investments in ICT that have spurred growth in other sectors. In 1999, the country’s mobile phone subscriptions stood at one in every 1,000 people; today, three out of four Kenyans have a mobile phone. Indeed, by March 31, 2012, there were 29.2 million subscribers in a national population of 38 million. To some, Africa’s economic “dance” with China, India and other countries in the East is yet another smart move that has ushered in good tidings for the continent. Wachira Kariuki, a Kenyan lawyer, says that Asia’s rising investment portfolio in Africa started to happen when the manufacturing sectors in China and India started looking out for raw materials. After capitalising on technology from the West, Asian countries became industrialised and have been seeking raw materials from Africa,” he said. To Kariuki, the West remained “in love with the narrative that it had crafted for Africa, leading it to fail to acknowledge that there was a potent competitor in town.” China model China, on its part, adopted a quiet, but nonetheless aggressive economic diplomacy that is now more attractive to Africans than the Western model. This saw the total volume of trade between China and Africa hit a record high of $166.3 billion in 2011, compared with only $10 billion in 2,000, making China Africa’s biggest trading partner. Although many countries in the West have traditional economic ties with Africa by virtue of having established colonies on the continent, some, including the US, now appear to have woken up to the challenge posed by the Chinese. On her 11-day trip to different African countries in Africa in 2012, Hillary Clinton, the former US secretary of state, was hard pressed to deny that her visit was informed by US worries over China’s growing economic influence in Africa. Critics believe that at a time when the global economy is not doing so well, investors from the US, European Union and other countries in the West would do themselves a favour were they to regard Africa as a trading partner rather than an object of pity or a continent with an insatiable love for development assistance. While potential investors eyeing the continent may still have inhibitions, the challenges in the region are not insurmountable, particularly for investors willing to study the continent more closely. This is partly because African countries have, and continue to make things better and easier for investors. In Kenya, for example, besides having a blueprint on where it wants the country to be in 16 years’ time (Vision 2030), the government has come up with a series of economic reforms to boost its tourism sector, which is a key source of foreign exchange. These include a new law that establishes a national tourism strategy, as well as regulatory and marketing bodies to iron out the functions and roles of the institutions governing the sector. Most importantly, Kenya has put together a document entitled: Investment Opportunities in Kenya, that offers potential investors detailed information on how and where to invest. Other African governments like Mauritius have developed tourism master plans while South Africa, Morocco, Senegal, Benin and Kenya have established financial mechanisms that can become handy tools for investors seeking a foothold in these countries. theeastafrican.co.ke/news/Africa--A-place-global-investment-captains-can-no-longer-ignore/-/2558/2443602/-/item/0/-/ddgsb9z/-/index.html LikeLike · · Share Mukulira Whitestone Write a comment...
Posted on: Sun, 07 Sep 2014 12:23:41 +0000
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