The New Africa – Ready For Global Investment

By M. Isi Eromosele

The continent of Africa is home to some of the world’s fastest-growing economies and offers the highest risk-adjusted returns on foreign direct investment among emerging economies.

Africa’s traditional business partners, the United States and Europe, now face stiff competition from emerging-market investors who have moved faster to seize the new investment opportunities in the continent.

Businesses from other major emerging markets have been comparatively quick to recognize Africa’s new potential, even as many Western investors remain cynical about it. Chinese and Indian businesses, in particular, are rapidly expanding their investments in Africa, while simultaneously proffering African nations with new development opportunities.

With more potential partners to choose from, the expectations of African nations and its people and policy makers have risen exponentially. These developments are creating vast opportunities for global investors to partner profitably with African stakeholders to participate in their countries’ continued economic progress.

With the right approach, the opportunities for foreign investors far exceed the risks. To succeed, investors will have to look beyond dazzling returns and one-off projects, and sign on as participating partners in Africa’s long-term growth and development.

Implement the following strategies:

• Manage Africa’s diversity with regional strategies. Africa is made up of mostly small to medium markets with varying cultures. So how does a company achieve efficiency and scale? They should think regionally, as many African governments do, while respecting the diversity that is the hallmark of Africa.
• Know and analyze your competition. Businesses from emerging economies often enjoy particular advantages when it comes to operating in Africa’s complex environment. Understand them, not only as competitors but potential business partners.
• Put down roots and invest in the local society. The most successful deal makers should look beyond high short-term returns. Their deals reflect African stakeholder involvement and broad economic interest of respective countries and regions.

It would be a mistake to think of Africa as a monolith; it is home to 54 sovereign states, with uneven development, numerous markets of varied sizes with an assortment of practices and regulations. So how does a company navigate Africa’s complexity?

One approach is to segment Africa regionally, as encouraged by its own policy makers. Africa’s regional economic communities (RECs) have either established free trade areas or are working toward it.

Diversified Economies

Mining and oil remain big businesses, but now there are two other major growth areas:

infrastructure (the key to integrating Africa’s resources and markets with the global economy) and the consumer market  with all the allied industries developing around both.

Telecom, financial services, retail, pharmaceuticals, and cleantech are only some sectors on the rise. Telecom is a booming industry; mobile subscriptions on the continent grew from less than 50 million to almost 350 million between 2003 and 2008. In Kenya, for instance, it has accounted for about a fourth of the country’s GDP in the past decade. At this time, Nigeria has the fastest telecom market in Africa.

Thanks to the explosion of cell phones, mobile banking has also taken off.

Engaged Partnerships

Generalizations about Africa should be resisted, but investors have noticed the active role of public policy in Africa’s development. In many countries, this is particularly evident in the infrastructure sector.

For example, Nigeria’s $347 million Lekki Toll Road Concession is a public-private partnership between Lagos State and the Lekki Concession Company, whose shareholders include Macquarie Bank of Australia, Old Mutual of South Africa, and African Development Bank (among others).

The project’s success is attributed to local participation, which ensured prompt resolution of issues as they arose.

Foreign direct investment (FDI) in Africa stood at $55 billion in 2010.What is most interesting, however, is not the volume, but the source of this investment. Please read the next post “Understanding The New Investment Players In Africa”

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

Copyright Control © 2012 Oseme Group