New horizons in Africa’s investment landscape

April 29, 2015

panel on Africa's futureWhen Scott Minerd paid a visit to China in 1991, the memories of the government’s harsh crackdown on pro-democracy demonstrators in Tiananmen Square were still fresh in America’s collective memory. He left the country without making an investment.

Fast-forward to the Milken Institute’s 2015 Global Conference, where Minerd shared a different version of that story. Several years ago, he traveled to Africa, another part of the world whose reputation had been tarnished by decades of violence and political unrest. But after touring Kenya and Rwanda, Minerd decided the African continent had the potential to become a global success story of the next half-century.

“My naiveté made me not make the investment in China in 1991,” Minerd, the chief investment officer for Guggenheim Partners, told his audience of global business leaders. “I will not make that same mistake again.”

Minerd’s enthusiasm was shared by his fellow panelists on a session about the African economy: Rwandan President H.E. Paul Kagame, former British Prime Minister Tony Blair and Patrice Motsepe, the founder and executive chairman of African Rainbow Minerals, a large South African-based mining and minerals company.

“When I was prime minister, I called Africa a scar on the conscience of the world,” said Blair, founder of the African Governance Initiative, a project to support leadership development in the region. “Today, I would say it’s the most exciting continent on the planet because of its opportunities.”

The panel opened with the launch of the African Business Fellowship, which is designed to place promising U.S. graduates in leading African companies. The business fellowship program is a collaborative effort among the Milken Institute, Econet, other African business leaders, the African Leadership Network and Management Leadership for Tomorrow.

Though Africa is still likely to be associated by many Americans with poverty, wars and, more recently, Ebola, the vast continent is starting to attract the attention of U.S. investors with a different vision. They see the potential for a major economic transformation driven by a new generation of political leaders, a rapidly growing middle class and a young population eager to improve their lives.

But there aren’t enough Minerds, according to Kenyan President Uhuru Kenyatta, who joined the panel via video because of last-minute changes in travel plans. “U.S. investment is lagging,” he said. “In the last decade, foreign investment from the U.S. is less than half of Western Europe and lower than Asia. I know many of you present today want to change that picture.”

Panel moderator Bronwyn Nielsen, editor in chief of CNBC Africa and group executive director of the ANB Group, raised this question: Given the recent terror attacks in Kenya and Nigeria, can Westerners be assured that their investments and employees in Africa will be safe?

“I still think the investor’s money is very safe,” answered Kagame. He later did add: “Again, this does not remove the responsibility from individual countries to create stability within their borders.”

Just two decades after the Rwandan genocide, when hundreds of thousands of ethnic Tutsi and politically moderate Hutus were slaughtered in a brutal civil war, Rwanda is now one of Africa’s most promising turn-around stories.

Under Kagame’s leadership, the tiny, largely rural country has been clocking annual growth of close to 8 percent in recent years. It has also seen a reduction in poverty and a boost in life expectancy and literacy levels.

Kagame believes his country can perform even better if it joins forces with its neighbors to create an interconnected regional trading bloc. He is promoting the development of transportation corridors linking Rwanda to its neighbors and major ports on the ocean. “I want to see Africa more and more in an integrated way,” he said.

Motsepe agrees African countries must work together so they can offer foreign investors more efficient ways to get their products to port, more reliable sources of energy and an educated labor pool. Accomplishing that will require a doubling of the $48 billion currently going into infrastructure development each year, he said.

“The future of every single one of those south Saharan economies is inextricably intertwined with the prosperity of the neighboring countries,” he said. “I can’t agree more with what President Kagame said. The most important thing is we’ve got to accelerate the process of regionalization.”