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Is Africa a good bet?

February 19, 2009

For those looking to invest in Africa, the best prospects are in Nigeria and Ethiopia according to a new index of potential investment destinations published this week.

But should anybody want to put money into Africa at a time the global financial crisis and falling prices for export commodities, on which the continent is so reliant, have discouraged investors who had begun to see some African countries as promising frontier markets?

“Africa is going to overtake the Middle East to become the second fastest growing region in the world after emerging Asia. It will be affected by the global financial crisis but it is much less exposed than many places,” Katharine Pulvermacher, chief executive of business consultancy African Rainbow said this week on the launch of its Star of Africa index.

The index’s creators told my colleague Peter Apps that potential growth in energy, water and communications consumption could amply reward investors taking the risk in Africa. South Africa, Mauritius and Tanzania took third, fourth and fifth place respectively on the index. Somalia, Chad and Eritrea were the least appealing countries for investors.

The International Monetary Fund’s most recent forecast of economic growth for Africa this year was 3.3 percent – much slower than the 5-6 percent of recent years but good by the standards of Western countries in recession. A senior IMF official noted recently, however, that African growth could be sharply lower than its forecasts.

“Remittances, tourism revenue and even aid, we feel could fall further,” said the IMF’s Africa Department Director Antoinette Sayeh.

The African markets that had attracted most foreign investment in recent years – not only developed South Africa but also countries such as Nigeria and Kenya – are among those that have so far been hardest hit, while smaller economies that may not have had so far to fall have been less touched.

Despite the global woes, bulls still cite long term changes in Africa such as improvements in political and economic openness, a decrease in the number of conflicts, new technology, emerging middle classes and long term investment from Asia as reasons for optimism. Zimbabwe’s stock exchange restarted on Thursday after a three-month halt and a still shaky power-sharing deal has brought some hopes of economic revival in what used to be a strong performer.

For some, looking to the long term is not enough, though. UK asset manager New Star – being bought by a rival – said this month it was winding up its Heart of Africa Fund due to deteriorating market conditions on the continent.

Is Africa a good bet for investors? What do you think?

Comments

I’d be willing to buy some stocks in africa but i have no idea how. I don’t even know how to buy stocks at my current location… Can anyone put up some pointers please.

Posted by Didi | Report as abusive
 

The advisable way to invest in Africa may be to invest in Chinese companies investing in Africa. They will have the political support of the Chinese Government which helps the security of the company investments.

The Chinese Government is very pragmatic and has developed excellent relations with the leaders of countries which have the resources they need.

So, Africa is good for investers via Chinese companies.

Posted by buffalojump | Report as abusive
 

The best way to invest in Africa is for the European colonial powers to restore their colonial rule. Anything else will fail – just look at Africa and weep, especially for raped Rhodesia (now Zimbabwe ruins).

 

Bet is bet and can not be replaced by careful planning. Betting to invest in Africa is as good as betting in lottery in the United Kingdom. I sometimes wonder where the world bank and the International Monetary Fund find their data to project in countries such a “Democratic Republic of Congo”. It is a joke and pure joke to pretend that a country with no official statistics can ponder data to be used internationally. Can the world bank or the IMF give anyone a figure on the unemployment in Congo. The answer is no. Can the world bank or the IMF explain why Congo is still dependent on their support to fund its budget in spite of all the incomes from mining sector. Politik is the really answer. And until this is resolved, there will be no answer to whether or not Congo is good place to invest at this downturn moment.

 

Isn’t it ironic Nigeria and Ethiopia are listed at the top twenty on the World’s FAILED STATES INDEX yet miraculously they are the top two prospects for investors in Africa?
Of course, the worst of the worst nations — the failed states — are very attractive to investors who look for cheap labor and raw materials. It is called neo-colonialism, and both failed states Nigeria and Ethiopia allow such exploitation to go on in their countries.

Posted by Chris Hammond | Report as abusive
 

It is good to invest in places like Ghana in West Africa where there is political stability. Ghana is the leading country in the western part of Africa after nearly two decades of political stability and economic improvement. There are raw materials in Ghana. The people in Ghana are educated and hospitable. If you invest in places like this then you are good to go.

 

Africa and Nigeria in particular is certainly the best investment destination in this times. For instance ,Cellular mobile communication grew from less than one million subcribers to over 70 milion in the last 5 years with one of the telecomms companies making over $2billion annually with all its cost fully written off. You hardly see Ponzi profit in its economy as transactions are almost always on cash basis and rent margins of over 70% are common.

 

To see a country like Nigeria called a good destination for investment might seem very funny but there has been very much improvement in the past years our fear is that may not continue. Nigeria must show it is strong for Africa to be strong and then the whole Africa will prosper.

Posted by Chuks | Report as abusive
 

Chris Hammond, I guess you would call Dubai a failed state then since its investment prospects are some of the best on Earth.
Some peoples logic is beyond comprehension.
I will agree that cheap labor is definitely a plus though, whether in Africa or Dubai or China or Singapor etc. It is not the only factor by any means however.

Posted by Think for a second | Report as abusive
 

Of course, you may wish to invest in Nigeria, but it is a gamble. Forget about statistics, as they do not exist, and if they do they are a sham. Next is governance. It simply does not exist, that corruption is rampant is well known. The miracle is that Nigeria somehow survives with a lot of imperfections. As such it is a prefect place for hard nosed investors, yes you may be ripped off, but imperfect country equals incredible profits and that’s the attraction of Nigeria. the W Bank & IMF talk a lot of tosh, they know nothing, though they have come up with the same conclusion based on doubtful research. Take a gamble, invest in Nigeria, but be prepared to lose your money. Caveat emptor!

Posted by Alien in Abuja | Report as abusive
 

How disrespectful of a nation.
” The best way to invest in Africa is for the European colonial powers to restore their colonial rule. Anything else will fail – just look at Africa and weep, especially for raped Rhodesia (now Zimbabwe ruins).”
I am Zimbabwean and i wouldnt want to be Rhodesian for investment… which we all know will give little profit to the locals.We will find a way around this without colonization, thank you!

Posted by Zvaida Kushinga | Report as abusive
 

“The best way to invest in Africa is for the European colonial powers to restore their colonial rule.”
- Posted by David Ben-Ariel

What a pathetic comment!!!

It the neo-colonization effect that makes Africans to fight amongst themselves

Posted by realAfrican | Report as abusive
 

I am keen to invest in ‘potentially’ high risk shares and Africa.

Does anyone know what the broking costs would be to buy shares from the UK?

Are there any companies that anyone could recommend that really specialise in this field?

I am particularly excited about this area as now is a time when good investments could be had. Pinning my hopes on the belief that developing countries will be the first to start picking themselves up from this recession.

Posted by JOOST WETERINGS | Report as abusive
 

Fortunately for Asia, the West is conditioned by its own media to fail in Africa. Asians know their (future) place (which is manufacturing) in Africa better than Westerners really do. Banks run by Europeans mistreated Africans and now the most thriving banks (service industries) in Kenya are run by Africans. With the likes David Ben-Ariel (3rd comment to this article)the West cannot make many friends in Africa while Asia learns to treat Africa with more respect.

 

China brings its own (unqualified and qualified)workers to Africa despite being more expensive. Guess that pretty much sums up what manufacturing opportunities in Africa are compared to countries like Vietnam or China.

Posted by Simon | Report as abusive
 

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