Panelists, from left: Stephen Hayes, Teresa Clarke, Jack Leslie, Harold Doley Jr. and Rodney MacAlister.
Africa is made up of 52 countries with 750 million people, and posted a GDP of $793 billion in 2005. Historically, the continent has been used by developed countries for extraction of platinum, gold, zinc, copper, silver and bauxite. Yet more attractive investment opportunities exist and are ripe for development.
Teresa Clarke, a vice president at Goldman, Sachs & CO. said she expects Africa's real growth to continue to compound at 4 percent annually. The growing African economy will continue to provide a positive environment for foreign direct investment, she stated, adding that in the past three years, Africa has attracted $26 billion in total foreign direct investment.
On the whole, foreign direct investment has primarily focused on the financial and cellular technology industries, with England being the largest provider of foreign direct investment, at $12 billion. The dollar-denominated return on these investments has been better than the returns in many developed countries around the world over the same period, Clarke said. African countries that have primarily contributed to above-average returns were Egypt, Nigeria, South Africa, Tunisia, Ghana, Botswana and Morocco.
Still, foreign direct investment in Africa is not without its risks. Harold Doley, an investment banker in Africa, identified the main pitfalls to investment performance as the shortage of good managerial leadership, prevalent corruption and the lack of a well-functioning legal system that enforces property rights.
Of the world's 30 least hospitable countries for investment, 14 are in Africa. Still, Doley said he remained positive on Africa because of its ability to deliver commodity inputs to China and India′s growing economies. China has invested $3.3 billion in Angola in order to secure a future source of oil, he said. And the flow of foreign direct investment into Africa's infrastructure from China and India will enhance Africa′s future growth prospects.
Venture capital activities have also increased in Africa. Rodney MacAlister of the African Development Foundation said he has been able to pool capital from African governments and persuade the U.S. government to make a dollar-for-dollar matching contribution for investment in African businesses. This venture capital pool has been able to grow because African companies have successfully returned capital back to the fund, which can then be used for future African investments. MacAlister said he thinks venture capital opportunities will continue to increase across the African continent as its infrastructure expands.
The United States has not been a large player in foreign direct investment of Africa in recent years. Stephen Hayes of the Corporate Council on Africa suggested that the United States has missed out on many investment opportunities on the continent because U.S. institutional investors are not willing to assume risk exposure of African countries. To remedy this problem he said, an institution such as CalPERS (the California Public Employees' Retirement System) needs to explore investments in Africa, rather than taking a passive role in an emerging market fund that has little exposure to the continent.
Overall, the panel expressed a strong positive outlook on Africa's future prospects and continued growth of 4 percent per annum. The majority of these gains are expected to come from Egypt, Nigeria, South Africa, Tunisia, Ghana, Botswana and Morocco, which are making progress to solve government corruption, low workforce education and undeveloped infrastructures. In the near future, the panel members agreed, Africa will further develop its consumer markets for technology goods and fuel the development of India and China.
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
