African Ad­ven­ture

Look be­yond the clichés and con­sider the myr­iad in­vest­ment op­por­tu­ni­ties in rapidly grow­ing sub-sa­ha­ran Africa, writes Ru­pert Walker

Hong Kong Tatler - - Real Estate -

ub-sa­ha­ran africa is a frus­trat­ing enigma for in­ter­na­tional in­vestors. In al­most any of its di­verse coun­tries, they en­counter energy, ini­tia­tive and tenac­ity among en­tre­pre­neur­ial, dis­ci­plined in­di­vid­u­als and com­pa­nies ea­ger to im­prove the lives of their fam­i­lies and com­mu­ni­ties. These coun­tries also have rich nat­u­ral re­sources, de­vel­op­ing in­fra­struc­ture, young de­mo­graph­ics and a ris­ing mid­dle class with dis­pos­able wealth.

Of course, this char­ac­ter­i­sa­tion smacks of con­de­scen­sion, in­fer­ring that the vast con­ti­nent with a pop­u­la­tion of a bil­lion peo­ple is a spe­cial case, an un­re­li­able ap­pli­cant for en­try into the in­vestible uni­verse. Yet there is an im­age prob­lem. Many in the media por­tray Africa as over­whelmed by poverty, dis­ease and war, while aid agen­cies and aca­demic ex­perts per­pet­u­ate the no­tion of the con­ti­nent as a vic­tim in con­stant need of re­ha­bil­i­ta­tion. It’s hard to know which is worse: clichéd re­port­ing by jour­nal­ists who glam­or­ise their voyeurism, or the Mun­chausen by proxy of un­qual­i­fied Western­ers who dodge com­pe­ti­tion and re­spon­si­bil­ity at home.

In­stead, in­vestors should recog­nise the con­ti­nent’s tremen­dous po­ten­tial, iden­tify coun­tries with the best prospects and seek in­vest­ment op­por­tu­ni­ties in com­pa­nies that are driv­ing and prof­it­ing from boom­ing economies. The macroe­co­nomic ra­tio­nale is com­pelling. The In­ter­na­tional Mon­e­tary Fund fore­casts that the real GDP of sub-sa­ha­ran Africa will grow by 5.8 per cent this year, spurred by for­eign in­vest­ment in nat­u­ral re­sources, public spend­ing on in­fra­struc­ture, im­proved agri­cul­tural pro­duc­tion and buoy­ant con­sump­tion.

In­deed, some African na­tions, such as Kenya, Rwanda, Tan­za­nia and Ethiopia, could dou­ble the size of their economies over the next decade, im­ply­ing an av­er­age an­nual growth rate of 7 per cent, ac­cord­ing to Ox­ford Univer­sity’s Cen­tre for the Study of African Economies. Rapid eco­nomic growth will sup­port greater con­sumer de­mand for prod­ucts and ser­vices through­out the world, and will there­fore boost rev­enue for telecom­mu­ni­ca­tions com­pa­nies, food and bev­er­age man­u­fac­tur­ers, dis­trib­u­tors and banks. For ex­am­ple, Nige­ria’s mid­dle class grew by 600 per cent be­tween 2000 and 2014, ac­cord­ing to South Africa’s Stan­dard Bank. Other coun­tries ex­pected to see a sig­nif­i­cant rise in the num­ber of mid­dle-class fam­i­lies by 2030 in­clude An­gola, Ghana and Su­dan.

Po­lit­i­cal sta­bil­ity in many parts of subsa­ha­ran Africa and, un­til re­cently, strong com­mod­ity prices have en­cour­aged for­eign in­vest­ment. Most im­por­tant, much of that in­vest­ment is long-term and likely to be mul­ti­plied, es­pe­cially by China as it seeks sta­ble ac­cess to nat­u­ral re­sources to sus­tain its own eco­nomic growth. Ac­cord­ing to a white pa­per on China-africa eco­nomic and trade co­op­er­a­tion pub­lished by China’s State Coun­cil in 2013, Chi­nese for­eign di­rect in­vest­ment (FDI) in Africa in­creased at an an­nual rate of 20.5 per cent be­tween 2009 and 2012. Cu­mu­la­tive FDI to­talled US$21.23 bil­lion by 2012, mostly in the energy and min­eral re­sources sec­tors, and Chi­nese

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