African Investment Climate Is Heating Up!

African InvestmentAfrican investment is far from occupying a central place on world financial stage, yet there are signs that it is commanding more attention.

Data Driving African Investment

Most commentators and promoters of African investment point to data that testifies to what some are calling “Africa’s demographic freight train.”  There is a growing middle class.  They are more educated and skilled than ever.  They have a larger chunk of disposable income than their predecessors.  Almost every African urban center is growing.

Added to this are the economic realities of growth: six of the top ten world’s fastest growing economies are in Africa.

I have highlighted these facts as well.  They are compelling reasons to seriously look at African investment.

African Diaspora Increasing Investment

Recently some other, not often highlighted, developments are surfacing that show that the African investment climate is heating up.

First is the increased investment interest from the African diaspora.   About 30 million Africans have migrated to other countries in Africa or on other continents, according to USAID.  Pacana Partners, a UK-based, pan-African private equity firm, conducted a survey which revealed that 70% of Africans grinding out MBAs at premiere Western business colleges have firm plans to return to the continent to work after graduation.  Half of those have entrepreneurial aspirations – desiring to start companies that will produce jobs and new streams of income for their homeland.  “I think there are a lot more opportunities in Africa,” says Jonathan Howard the CEO of the UK-based Business Council for Africa (BCA).

In many corners of the continent, critics are turning up the volume on their cry for Africans of the diaspora to send more money back home.  Some African expats living in the USA defend themselves by saying that they are paying too much to transfer their funds back to Africa.  The USAID has heard their complaint and plans to lower this cost by encouraging competition among banks and money transfer operators.  The agency also plans to introduce new technologies and regulations that will make for easier transfers.

In 2010 in preparation for that year’s African Diaspora Marketplace awards, George Washington University published a Investment Interest Survey.  All respondents to the survey were entrepreneurs or aspiring entrepreneurs of the African diaspora. Over 2/3 of said they spend a significant amount of time on investment-related activities.  Almost the same number  consider themselves active investors.  They have been successful at their African investments.  Thirty-eight percent responded that agreed that their investments in their country of origin generate a large part of their annual income.   They are not investing in their homeland out of an altruistic motivation.  Close to 2/3 of those surveyed said personal financial independence is an important motivator for investing in their country of origin.  If you believe, as I do, that for-profit investment in Africa will do a better job of stimulating economies than outright aid or grants, than this is very good news.
Analysts and Politicians on the Offensive

At the recent World Economic Forum in Davos there were many panels, side meetings and discussions about the African investment climate.  That is not new for the forum.  What caught my attention was that when investment analysts and politicians, like South African President Zuma, were asked about the often touted risk of investing in Africa, they did not respond with a list of measures that governments were taking to lower the risk.  They were on the offensive saying, there is no more risk in investing in Africa than most places in the developed world.  In fact, they said the risk my even be less in many African countries.

Tech Ihubs Spouting Everywhere

A third very significant, sign of an uptick in the African investment climate is the number of ihubs and technology incubators that are popping up all over the continent.  VC4Africa, the largest and fastest growing community of  African entrepreneurs and investors, just published a list of 14 of their partner incubators in Africa.   According to a BBC Business news article, in July of last year (2012) there were more than 50 tech hubs, labs, incubators and accelerators in Africa.  Six of them were in Nairobi, Kenya.

 

Investment in African tech start-ups, infrastructure projects, healthcare innovations, and agricultural sector is increasing by the day.  New investment funds with an emphasis on Africa are popping up almost monthly.  I will be covering a few of them in an upcoming article.

 

Are you aware of some other signs that African investment climate is heating up?  Let us know about them.

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