Is Investing in Africa a Good Bet?

Joe DeCapua

January 24,2013


Many sub-Saharan countries have had sustained economic growth despite the global recession. But conflict, political instability and weather extremes in some areas may keep investors away. At the World Economic Forum in Davos, Switzerland, African leaders and others talked about what’s being done to make the continent more attractive to investors.



From the start, those on the panel questioned the title, De-risking Africa. South African president Jacob Zuma said, “I’ve been questioning myself about the topic. De-risking Africa. Is Africa risky more than any other region of the world? Somebody will have to explain to me because it looks like there’s a perception about Africa which needs to be dealt with.”


Mr. Zuma said that he takes issue with that perception, adding that many African leaders have taken measures to ensure stability in their countries.



“African leaders have collectively come together to do things that [are] going to make Africa to move forward. We have collectively dealt with the issue of democracy in the continent of Africa. We are entrenching democratic rule. We have taken a decision to grow our infrastructure; to grow our intra-trade. We are moving to integrate the five economic regions in the continent,” he said.


Nigerian president Goodluck Jonathan agreed that overall, the continent has become much more stable politically and economically.

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“Before this time, the growth rate has been stagnant, just as Zuma said. But over the period the growth rate of a number of African countries is significantly above the world average. Countries like, of course, Ethiopia, Ghana, Niger, Liberia, though they are small economies. But in terms of growth it’s quite significant. That shows a focus and a promise,” he said.


Mr. Jonathan was asked whether Nigeria is vulnerable to global economic shocks because it relies so heavily on one commodity – oil.


“Any country that depends on one major commodity – it’s a big risk because anything that affects the oil production or the global oil price – it affects us. Of course that is one aspect. And that is why we are looking to different areas,” he said.


These include agriculture and minerals.


“We have the potential,” he said.


He added that the opportunity for Nigeria to diversify its economy is due to political stability after years of political turmoil, including military rule.


Sunil Bharti Mittal, president and CEO of the Indian firm Bharti Enterprises and co-chair of the India-Africa Business Council, took part in the discussion. His company provides mobile telecommunication services.


“I think the African continent and most of the nations welcome foreign investment. When I moved in three years back, I was amazed at the welcome we received in every country, including Nigeria. In Nigeria of late we see a lot of stress in the upper north, where Boko Haram had been targeting cell sites, switching centers. And the support that we have received from the government has been tremendous. Security has been beefed up. People have been reassured, especially foreigners who are working there. And that’s what counts in the end,” he said.


Mittal said that it only took about 80 days to get a mobile operation up and running in Rwanda.


“Will Africa have issues from time to time which will scare investors, which will worry investors? That’s a fact of life. There are some pockets – a new one developing in Mali now, upper Nigeria, some of the parts of Congo and the northwestern border. Issues will be there. But investors go with their eyes open. The opportunity is big. The prize to be won in the end is very big and the growth is there. At the end of the day, all emerging markets offer growth. But today really the last bastion of big growth is the African continent,” he said.


Among those concerned about security in Africa is Louise Arbour, head of the International Crisis Group and former chief prosecutor of the International Criminal Tribunals for the Former Yugoslavia and Rwanda. She said that despite Africa’s economic growth, many leaders and regional economic groups are devoting more of their time and attention to resolving conflict. Those driving factors include competition for resources, organized crime, radical Islamist militias and piracy off the Somali coast and in the Gulf of Guinea.


“Behind these ostensible, sort of, conflict drivers I think there’s a commonality of issues that the continent still is struggling to address. I think the first one is issues of governance. Most importantly, political and economic exclusion. And finally, still very weak institutions. So to varying degrees, in varying countries, these underlying issues, I think, continue to pose a very, very serious challenge,” she said.


The company SABMiller has been operating breweries in South Africa for more than a hundred years. And since the end of apartheid in 1994, it has branched out to other African countries.


Chairman Graham Mackay said, “In my perspective, it’s not so much a question of de-risking. It’s taking the brakes off what is already remarkable economic progress by removing some of the bottlenecks. I don’t know of any part of Africa where we could have invested because we thought there was demand and didn’t for risk factors. We were the first investor into South Sudan, I think, of any kind. Great big brewery there next to Juba just after independence.”


He said that the South Sudan brewery has more than doubled in size since it opened. Mackay also said there are hundreds of millions of people coming into Africa’s cash economy, who are looking for quality goods.


“We don’t hold back on investment because of risk factors. We invest as we think the markets can grow,” he said.


But there are ongoing issues threatening stability in some regions, such as the conflict in Mali. Nigerian president Jonathan says the terrorists and extremists must be contained and he thanks France for its intervention. International Crisis Group’s Louise Arbour says the situation in Mali has already destabilized the region and fears militarization could take on a life of its own.


In South Africa, President Zuma acknowledged that violent labor disputes and strikes have been a problem, both socially and economically. But he said those issues are being addressed through better bargaining agreements.


Rwandan president Paul Kagame, who was in the audience, said there is often a misperception about Africa because its history is written by non-Africans. He said that it’s time for Africans to write their own story.