There is renewed and growing investor interest in Africa, which is poised to continue to grow, despite the turmoil being caused by the eurozone sovereign debt crisis and the US’s debt problems, delegates to the Africa Frontiers Forum heard on Thursday in Johannesburg.
Forum organiser Frontier Advisory CEO Martyn Davies said that the western world largely economically disengaged with Africa after ending colonialisation, leaving the continent to fend for itself politically and economically, notwithstanding the fact that there was limited governance experience. This resulted in many economies failing.
“Nowadays, the continent’s economies are being better integrated into the global economy. However, Africa’s growth trajectory is more aligned with that of the Asian region, rather than its traditional trading partner countries in the West.”
Deloitte head of the Africa desk Anushuya Gounden added that several African economies were growing faster than any other region in the world. For example, Ethiopia was expanding at a rate of about 7% a year, despite the absence of oil in the country.
She agreed that Africa’s traditional trading partners’ economies were losing ground to the large emerging markets. “China and India’s growth bodes well for Africa, as these emerging economies become its new trading partners. The key is for Africa to learn how to harness the new investment interest in the continent to create a better-integrated regional economy. Intra-African trade growth is the key to developing the continent,” she told the forum.
Davies warned, however, that the increasing intraregional competition being seen in other emerging territories was not as strongly evident in Africa, which could impose a constraint, owing to the fact that “competition is an essential driver of growth”.
But FNB commercial banking head of Africa and China strategy Stephan Claassen said the negative image of Africa remained a problem. “We have a lot going for ourselves, but for some reason it is not in the perception of the outside world,” he said, arguing that the continent was in need of a brand manager.
Claassen said investors were interrogating three issues when considering entering into a market such as Africa, including: the size of the domestic economy; how fast it was growing; and how easy it is to enter from a legislative point of view.
Countries currently meeting these hurdles included Ghana, Nigeria, Zambia, Ethiopia and Kenya.
But Gounden argued that Africa’s next ‘Johannesburg’ could well be Kinshasa, in the Democratic Republic of Congo. She pointed out that the city was already becoming the melting pot for people from all over the north, west and eastern regions of Africa, where people meet. The country also has significant mineral resources.
All concurred, though, that African governments should do more to put legislative frameworks in place to allow the private sector to help government develop infrastructure. “The region suffers from inadequate infrastructure, which is a key challenge to be overcome to Africa’s economic success,” Davies averred.
There was also a warning that the continent’s growth prospects could be stifled by serious food inflation pressures. “It could derail growth in about three years time, if inflation continues to stay around 20% in certain areas,” Gounden cautioned.