By THE AFRICA BAZAAR Staff Writer
June 2015
In recent years, there’s been increased interests and steady flow of investments from foreign investors into Africa. Last year’s U.S.-Africa Leaders Summit held at the Capital has furthermore piqued American investors’ interests in the continent’s business affairs.
According to Ernst and Young’s 2015 Africa Attractiveness Survey, in 2014, Africa attracted more Foreign direct investment funding than North America, Latin America and the Caribbean, and Western Europe, with capital investments to the continent surging to US$128 billion, up 136 percent. The average investment went up to US$174.5million from US$67.8million in 2013. Western Europe and intra-African investors remain the largest sources of FDI into the continent. While traditional investors, including those from the US, France,, UAE, Portugal, China and Middle East refocus attention on Africa.
However, many traditional investors still remain weary of the continent’s cloudy past or don’t have adequate information to help them make the right investment decision.
Africa is too risky. You hear these investors say all the time. Sure, for some investors, but at the other end of that risk is potential high reward. Like any other continent with investment opportunities, investors can’t expect to just waltz into any African country with a dream and a bag of money (although some unscrupulous people and businesses on the continent might take advantage of such investors) hoping to invest and cash in big time unless they have done their diligent work of understanding the complexity of the business climate that would allow that investments to grow.
For example, having some sort of understanding beyond the basic key trends that are driving growth on the continent would help mitigate risks.
The time it takes to make a return on those investments can be measured in a couple of years to decade, and this along with a host of other factors from historical to political and corporate, too often obstruct the smooth business and investment transactions and remain the main barriers that discourage investment in Africa.
One of the usual culprits for this delay is governments corruption. Corruption is infused in most aspects of governments activities and business dealings on the continent. To paraphrase how one business investor describes his experience, you have to have enough money to pay the driver, the guy at the gate, the clerk at the receptionist desk, the executive assistant before you can see the officer you want to see, which might require another payment before the deal get done.
While traditional Western investors, who are used to more direct ways of doing business would find this discouraging and unattractive, the burgeoning trade relations between the U.S. and Africa in recent years have led to several regulatory reforms across the continent that now protect investors and businesses as more African governments embrace transparency and good governance, and have begun to put in place systems that would help encourage investments, secure, and protect investors’ interests.
It began with a new generation of Africans, many who have lived outside of the continent and experienced a taste of good governance and transparency, eschewing corruption and demanding transparency from their governments and leaders.
Corruption has been synonymous with the continent and most of its leaders for decades. Today, countries like Nigeria, Angola, Mozambique, DRC and Ghana are slowly, but surely turning a new page.
As transparency becomes a prerequisite for some investors to invest on the continent, perhaps now more than any other time in the history of the continent should it become a style, a way of doing business not just to attract foreign investments and businesses, but also in the ways governments, and other leaders conduct themselves.
By placing significant emphasis on transparency, holding leaders accountable for their conducts, analysts believe that Africa now has the potential to bring about a future that would have been unimaginable a generation ago.
But to realize this potential, African leaders will have to drive the structural transformations necessary to achieve the goals to inclusive and sustainable growth. The result could be an unprecedented step, the big leap the continent needs to mingle with the big leagues.
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