Exploring The Markets In The Motherland

MoroccoThe country of Tanzania recently hosted an African investment forum. The forum, whose theme was “Accelerating East African Investment and Accessing a Market of a Billion People”, was organized by the Common Wealth Business Council in partnership with the government of Tanzania and the East African Community.

While the forum focused on business and investment opportunities in East Africa, all of Africa is worth exploring as potential business investment. As businesses on the continent are growing, the time is ripe for investing in this emerging market. China has invested heavily in Africa, with India and Japan not far behind. The United States, however, has been slower to pounce on the opportunities in Africa, but now is the time, notes African business expert Dr. Olajide Oladipo, York College/CUNY.

“Recently, sectors that national governments in Africa consider as priority sectors are now privatized. The rationale is that privatization engenders healthy competition that helps expand markets, establishes best practices and improves production and service standards. For instance, the telecommunication, oil and gas, transportation and mining sectors – which over the years have been classified as priority sectors – are now privatized in many sub-Saharan African countries,” explains Oladipo. “The privatization exercise presents ample opportunities to international investors to invest in Africa. Apart from the relaxed taxing system and enabling investment climate, the overall rate of returns on investment in many African ?countries is higher than in developed countries.”

According to Forbes, the rate of investment return is more than attractive in Africa. The magazine found that “only about 1% of the private capital in the world is invested in sub-Saharan Africa. As the continent becomes gradually more prosperous, levels of private investment are set to increase significantly, especially since (according to World Bank figures) Africa currently offers ‘the highest returns on foreign, direct investment of any region in the world”.

Oladipo agrees, adding that even with the instability of some African economies, investments still have a greater return.?”The ranking of political risk among foreign direct investment (FDI) determinants remains somehow unclear. I observed that when the host country possesses abundant natural resources, no further incentive may be required, as is seen in relatively unstable countries in Africa where high returns in the attractive industries seem to compensate for political instability,” Oladipo points out. And with GDPs growing for many African nations, it is now safer to invest. Plus, more governments are turning to democracies. In fact, democracies on the continent have grown from four in 1990 to 17 currently.

Despite the attractiveness of Africa, many in the West have failed to invest. “For many decades in Western nations, local consumer spending and investment have been the main drivers of economic growth. Recently, net exports (exports of goods and services minus imports of the same) have become an important contributor to growth, as the growth of foreign demand has outstripped that of Western nations? domestic demand, and also as a result of the current development in the foreign exchange markets (i.e. stable and weakened dollar value),” says Oladipo, adding that Western countries may miss out. “With these trends projected to continue, Western nations need to invest and trade outside their ?comfort zone? to propel economic recovery.”

Europe and Asia have long seen African investment potential, patiently waiting for governments to stabilize and for the African economies to grow. This is especially true of former colonizers. “Italy, Brazil, China and many European countries have economic or political ties with the African continent. Further, some African countries were colonized by some of these countries, so these countries understand business forces (political, religion, culture, etc.) in Africa,” says Oladipo.

Investing in Africa also helps stimulate the economy in various countries in Africa. According to Forbes, “In the long term, Africa’s best chance for prosperity and stability is not from dependency on foreign aid, but from sustained private investment and enterprise”.

But where should one invest? Look at such countries as South Africa, Botswana, Namibia, Angola, Nigeria, Ghana, Kenya, and Tanzania, among others. Forbes found that in 2007, African markets easily outperformed the world averages last year and over the past three years.

“I advise individuals or businesses planning to invest in Africa to invest in oil and gas, mining, construction, telecommunication and agricultural sectors, among others. I strongly suggest that individuals or corporate entities seek professional advice from experts on the African economy, especially those who have lived and worked in Africa for many years,” explains Oladipo.