‘Anver Versi asks - is it time to invest in Africa?’

After several false dawns, is the sun now really shining on Africa? The consensus, at least that expressed during May’s World Economic Forum on Africa in Cape Town – and by an increasing number of private equity investors – is that Africa’s time has finally come.

The theme of the forum was “Translating vision into action”. An impressive cast of speakers, including African heads of state, the private sector and academics, were generally agreed that a favourable confluence of external factors and internal reforms have now put Africa at a point from which it should be able to sustain an average annual growth of around six per cent for at least the next decade.

“Since 2000 we’ve seen a global dynamic that has spread growth and prosperity through Africa, Latin America, the Middle East and elsewhere,” said Robert Lawrence, professor of trade and investment at the Harvard Kennedy School. “We are living in a changing world.”

It is this changing world, with the global centre of gravity moving towards emerging markets, that has opened up opportunities for Africa to occupy a pivotal position and sling-shoot into the next stage of development: industrialisation.

Africa has a population of just over one billion and will have the world’s youngest workforce in the next few years. According to the African Development Bank, one in three Africans is now middle class. Africa’s consumer class is growing rapidly and its urban centres are becoming increasingly attractive to investors.

“Mainstream institutional investors are very focused on Africa” says Colin Coleman, managing director of Goldman Sachs, Africa. He says the problem is that investors “are not quite sure how to play Africa”, given the fact that the only functioning liquid capital market in Africa is the Johannesburg Stock Exchange which, with a market capitalisation of $740bn, is comparable with Russia. Many investors, he says, use South African companies, such as the supermarket chains Shoprite,

Pick n Pay, Standard Bank and the African telecoms giant MTN, to channel their investments. Private equity funds are also looking at Africa with growing excitement. Among the latest to join the ‘new scramble for Africa’ is the huge, US-based Carlyle Group, which is setting up shop in Nigeria and South Africa, while Sir Bob Geldof has been raising funds for a $1bn fund aimed at increasing investment into the continent.

However, it is the BRIC countries – Brazil, Russia, India and China – that are expected to be the biggest drivers of Africa’s economy over the next two decades.

China’s huge investments in Africa and its roll-out of infrastructure has already had a massive impact on African economies – and more is on the way.

Liu Guijin, China’s special representative on African affairs, sees the continent not just as a virtually untapped consumer market and source of essential commodities for China’s own domestic and export needs, but as possibly succeeding it as the next low-cost manufacturing base.

“We are establishing six industrial zones in Africa to kick-start the continent’s industrial revolution. Africa’s development benefits China,” he says.

Indian prime minister Manmohan Singh led a powerful delegation of business leaders at the India-Africa summit in Addis Ababa, Ethiopia, in May.

“Africa is emerging as a new growth pole of the world,” he said, “while India is on a path of sustained and rapid economic development.”

South Africa was inducted into the BRIC elite club in April. “This means that Africa has come out of the cold and it is now very much part of the global economy,” says Maite Nkoana-Mashabane, South Africa’s minister for international cooperation.

Africa’s moment of destiny has arrived, but will the continent take it on the flood and find fortune, or will it let it pass and remain in the shallows?

23/06/2011

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