African Opportunities Are Being Overlooked
A commentary by Insparo Asset Management Head of Research, Francis Beddington
The focus on high profile conflicts in Africa, such as the ongoing election in Zimbabwe and recent events in Kenya misses many positive developments in the continent.
Unnoticed by the media and much of the investment community has been a step change in Africa’s economic performance in the last 5 years. Real GDP growth in Sub-Saharan Africa (SSA) averaged 4,1 percent in 1997-2002 and by 2007 it had risen to 6,6 percent.
At the heart of the improved economic performance is a significantly better policy environment. Economic stability has seen a resurgence of private sector investment both domestic and foreign.
In the late 1990s investment as a proportion of GDP had fallen significantly below 20 percent almost everywhere on the continent. Since then investment has risen sharply and is approaching 30 percent of GDP in most countries and in some such as Ghana, Madagascar and Senegal has passed into the mid-30s.
A new feature of this investment has been the involvement of other emerging market countries as sources of foreign direct investment. China, India, Russia, Brazil and South Africa have been substantial investors in sectors as diverse as mining, oil, banking, retail and telecommunications.
New technologies are throwing up new business models. The sale of pre-pay cards is a ubiquitous feature of any crossroads or traffic jam in any African city. In many countries rather than send cash back to families in rural areas, city dwellers are texting airtime back which is then redeemed for cash.
It is not only physical technology – such as a burgeoning telecoms infrastructure – that is being adopted, financial technologies are penetrating just as fast and leading to rapid developments, especially in credit markets.
A major feature of the last 3-4 years has been duration extension. Government bond yield curves in many countries now stretch to 10 years and in countries like Zambia and Kenya stretch to 15 years.
Duration extension is feeding into retail financial markets. In Zambia it is now possible to get a 20 year mortgage, when only 5 years ago the maximum duration was 5 years.
Anyone who has traveled in the region is well aware that Africa is not short on entrepreneurs or entrepreneurial spirit. Reducing the dead hand of the state and a supportive environment are releasing Keynes “animal spirits” and African entrepreneurs are thriving.
Ignoring Africa today is like not investing in emerging markets in the 1990s, South East Asia in the 1970s and 1980s and Japan in the 1950s, Beddington cuncludes.
Kilde: www.worldbank.org
