Despite Ebola, investors betting on Africa

Not so long ago, declining commodity prices and the outbreak of an epidemic such as Ebola would have triggered a firesale of interest in Africa. While this effect is evident to some regard, it is clear investors are still betting on the future of the continent as a big emerging market opportunity.

“Africa is on the radar,” says Miguel Azevedo, head of sub-Saharan Africa investment banking at Citigroup in London. “Companies are developing strategies to go into the region, and M&A is naturally following up.”

In a survey of Africa’s investment attractiveness, 72.7% of those surveyed had improved optimism. Part of the reason for this is Africa’s economy is becoming more diversified, and weighted towards more consumer facing services.

There is steep competition for foreign direct investment as China has played a key role in development for the last 15 years. Johan Steyn, a portfolio manager at Prescient Africa Equity Fund, outlines China’s impact on the continent.

“In 2013, Africa–China trade was over $210 billion, which over the last 10 years makes up about a 30 per cent cumulative annual growth.”

China uses a “non-interference” policy, which means they do not participate in local politics or issues. This type of deal-making appeals to some African leaders that see this type of potential intervention as a threat to their regime.

The hotspots for foreign direct investment include Ghana and Kenya, which have compound annual growth rates of 51% and 40% respectively. West Africa as a whole has had the biggest increase in investment with a combined CAGR increase of 28%.

Original graphics from: Raconteur and FT

Jeff Desjardins