Laurance Allen, Editor and Publisher, ValueNewsNetwork.com
International investors and development agencies alike have recently taken notice of Africa's unprecedented economic growth. With democracy taking root in many countries, some observers believe that the continent has turned the corner. Bankers from New York to London to Nairobi have launched new funds that invest in sub-Saharan Africa. This panel, moderated by Laurance Allen of ValueNewsNetwork.com, sought to analyze the risks and rewards from both the African and foreign investor perspective.
Blen Mekuria of Blenum Global Ventures cited the rise of Africa as a hotspot for foreign direct investment. She referred to China and India's increasingly important role in phasing out Africa's dependence on the West, along with high returns in the service sector as a result of a rising middle class. "Africa is the best source of aid to Africa," said Mekuria, referring to the high remittance rate to Africa from Africans living abroad. She also noted the intellectual capital being brought back to Africa by Africans who complete higher degrees of education in the United States and then return home.
Jonathan Stichbury of AIG Investments, Nairobi, cited some of the common perceptions of Africa: war, famine, disease, high HIV/AIDS prevalence and a low GDP. While acknowledging the seriousness of these problems, he contrasted that with other lesser-known realities of Africa, including the rise of democratically elected leaders; great strides made in AIDS reduction in Kenya, Uganda and Zambia; African growth exceeding the global average; an increase in liquidity; and fifteen functioning stock markets. "Africa is not without its challenges, but it is coming at a very low base," said Stichbury, highlighting the opportunities for investors. "Don't be distracted by the noise. There are a lot of good things going on."
"Today, Africa has clear frontier status," said Thomas Gibian of Emerging Capital Partners. Africa, which was once seen as exotic and forbidden, now presents a great opportunity for investors. "Africa has seen the demise of socialism. The Cold War is over. Capitalism and market-driven economies have won by a landslide." He added that there is a rising desire for foreign direct investment and an increase in the private sector. He cited the need for greater transparency in African countries and pointed to private-sector investment as a potential catalyst for better governance, decreased corruption and better political processes.
That view was disputed by economist George Ayittey of American University: "Those changes are baby steps." He affirmed that foreign investors are welcome in Nigeria, for example, but asked, "If Nigerians aren't investing in Nigeria, why should foreigners?" He said that most of the remittances are going to consumption and that every educated person who wants to make money goes to the government. "The informal and rural sector is neglected by the elite, which is why Africa can't feed itself." Ayittey discussed the importance of empowering farmers by finding markets for them. "It's like taking Africa back one village at a time."
Sivendran Vettivetpillai of Aureos Advisers said that as a fund manager, Africa is the strongest foothold for his business. He has seen an increase of inflow back into Africa and positive changes in infrastructure. He recommended growing small and medium-sized enterprises quickly in order to turn the greatest profit.
When asked about the drivers for growth, Mekuria noted that "the key is improved access to credit." She noted that Chinese companies undercut local companies for contracting bids, but in doing so they increase competition and quality while driving down prices. Gibian agreed, saying that Chinese investment is good for growing markets in Africa because "no market functions without participants." Ayittey disagreed, citing the lack of incentives for African political leaders to practice good governance when Chinese investments are not tied to reforms, as are IMF and World Bank investments.
Mekuria ended the discussion by saying, "The informal sector is vibrant, entrepreneurial and wants to work. A little help and a little credit will get them moving."
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
