Investment Opportunities in Africa

African Economic Development through Foreign Investment

Rand Merchant Bank report, “Where to Invest in Africa,” among other business information services, ranks African countries for their business environment including ease of doing business and a corruption index to help foreign and domestic investors identify good investments. Most of the data comes from UNCTAD, UN Conference on Trade and Development, or other public sources but is compiled to help potential investors. Rand Merchant Bank is an investment bank headquartered in South Africa. RMB “Where to Invest in Africa” brochure can be downloaded without charge by those seriously interested in learning about investing in Africa  at https://www.rmb.co.za/where-to-invest-in-africa-2018-edition/

African Development Bank Group is another source of economic and investment information, among other sources. You can download the brochure “African Economic Outlook 2018” for free at https://www.afdb.org/en/knowledge/publications/african-economic-outlook/. In addition to private investment and business information services, you can find financial information about any countries or regions through the International Monetary Fund, IMF, at www.imf.org, the World Bank, at www.worldbank.org and UN Conference on Trade and Development, UNCTAD, at http://unctad.org, which publishes an annual World Investment Report. Most of the information in the private investment and financial databases are summaries from one of these public sources.

Personal remittances that immigrants send back home are an important cash flow into the economy for most of the countries in Africa. Remittances to families in the impoverished areas benefit the most from it, but it helps the overall economy. Let me give you an example closer to home.  Mexico officially receives $26.1 billion in remittances sent back to families by Mexican immigrants, mostly from the United States. That’s roughly 2.5 percent of Mexico’s GDP, which is a significant contribution to the country’s economy. Generally, remittances have been on the rise since 2000 worldwide due to increased migration from poor countries to developed countries. For this reason, it is beneficial for developing countries to encourage migration.

Sampling of Top 500 Companies and Organizations that Invest in Africa

 

 

Table 1: Top Ten Recipients of Foreign Direct Investments in 2016

Country Percent of Total Foreign Direct Investments Year Over Year Percentage Change
1 Angola (US$14.4bn) 24.2% -11.2%
2 Egypt (US$8.1bn) 13.7% 17.1%
3 Nigeria (US$4.4bn) 7.5% 45.2%
4 Ghana (US$4.4bn) 7.5% 45.2%
5 Ethiopia (US$3.2bn) 5.4% 45.7%
6 Mozambique (US$3.0bn) 5.2% -20.0%
7 Morocco (US$2.3bn) 3.9% -28.7%
8 South Africa (US$2.3bn) 3.8% 31.3%
9 Congo (US$2.0bn) 3.4% 7.5%
10 Algeria (US$1.5bn) 2.6% 17.1%

77.2 percent of all FDI in Africa is included in these top ten countries. Countries suffering from violence and political unrest account for the reductions in the table above.

Source: UN Conference on Trade and Development, (UNCTAD)

 

“A number of emerging and developed markets acquired a keen eye for African assets in 2016, with capital investments from the Asia-Pacific region firmly outpacing traditional markets . . . Egypt, South Africa and Tanzania were among the largest destinations for Chinese and Japanese investors seeking strategic investments in technology, media and telecommunications (TMT), diversified industrial products (DIP), and the automotive and business services sectors.”                         — Rand Merchant Bank, Where to Invest in Africa, 2018

 Table 2: Top Ten Investors in Africa in 2016

Country Investment
1.      UK US$ 66 billion
2.      US US$ 64 billion
3.      France US$52 billion
4.      China US$32 billion
5.      S. Africa US$26 billion
6.      Italy US$19 billion
7.      Singapore US$17 billion
8.      India US$15 billion
9.      Malasia US$14 billion
10.  Germany US$13 billion

Source: UN Conference on Trade and Development, UNCTAD

 

Table 3: Top Ten Most and Least Corrupt Countries in Sub-Saharan Africa

Rank worldwide Most Corrupt Score Rank worldwide Least Corrupt Score
176 Somalia 10 35 Botswana 60
175 South Sudan 11 38 Cape Verde 59
170 Sudan 14 50 Rwanda 54
168 Guinea-Bissau 16 50 Mauritius 54
164 Eritrea 18 53 Namibia 52
164 Angola 18 62 São Tomé and Principe 46
159 Republic of Congo 20 64 Senegal 45
159 Chad 20 64 South Africa 45
159 CAR 20 70 Ghana 43
159 Burundi 20 72 Burkina Faso 42

Source: Transparency International, Corruption Perceptions Index 2016

 

Table 4: Leading Mineral Production in Africa

Material Percent of world production Countries
Diamonds 73% Botswana 35%, Congo (Kinshasa) 34%, South Africa 17%, Angola, 8%
Gold 89% South Africa 56%, Ghana, 13%, Tanzania, 10%, and Mali, 8%
Uranium 16% Namibia 46%, Niger 44%, South Africa less than 10%
Bauxite (for aluminum) 9% Guinea 95%, Ghana 5%
Steel 2% South Africa 54%, Egypt 32%, Libya 7%, Algeria 6%
Aluminum 5% South Africa 48%, Mozambique 32%, Egypt 14%
Copper 5% Zambia 65%/77%, South Africa 15%/19%, Congo (Kinshasa) 13%/0%, Egypt 0%/3%
Platinum/Palladium 92% South Africa 97% / 96%
Coal 5% South Africa 99%

Source: Wikipedia “Mineral Industry in Africa”

 

Figure 5: Top Five of the Twenty-nine Stock Exchanges in Africa

Exchange Market Capitalizations Number of Listings
1. Johannesburg Stock Exchange (JSE) $987 billion 388
2. Nigerian Stock Exchange (NSE) $44 billion 176
3. Egyptian Stock Exchange (EGX) $46 billion 222
4. Casablanca Stock Exchange (Casa SE) $48 billion 75
5. Namibian Stock Exchange (NSX) $76 billion 36

Source: © Copyright 2018| Nairametrics

 

Table 6: Intended use of selected sovereign bond issues in selected African countries

Country, Year Value

(M US$)

Intended Use
Côte d’Ivoire, 2014 750 Public investment, especially in health care and education
Côte d’Ivoire, 2015 1,000 National Development Plan (NDP), which focuses on infrastructure, education, health care, and poverty reduction
Ethiopia, 2014 1,000 Infrastructure, notably the Renaissance Dam
Ghana, 2013 750 Capital expenditure and refinancing of public debt to reduce the cost of borrowing
Kenya, 2014 2,000 Infrastructure projects and repayment of a $600 million loan that matured in August 2014
Nigeria, 2013 1,000 Projects in the electricity sector, which is undergoing privatization, and support of the shift from domestic borrowing toward cheaper foreign credit
Rwanda, 2013 400 Construction of a 28-megawatt hydropower plant, construction of a hotel, and payment of some state-owned RwandAir debt
Senegal, 2014 500 Construction of a major highway and the upgrading and repair of energy infrastructure

Source: AfDB compilation, based on various sources.

“African Economic Outlook 2018,” African Development Bank

The new hope for Africa involves improving infrastructure, attracting foreign and domestic investment, and ending internationally funded government corruption that discourages investment and permits interference by international programs that keep populations low and the rural poor isolated, ignorant, sick and helpless. Governments that rely on taxes from a growing economy are more accountable to the people, so that they will be prompted to develop infrastructure, such as roads and electricity, and maintain political and economic stability, all of which will encourage increased investments and grow the economy. Corruption is the number one deterrent to global investment, so it is important to end foreign aid that props up corrupt politicians, clean up the government and stabilize the economy.

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New hope for Africa vs. Old stagnation

Africans need Investment, Infrastructure, Education, Employment and Disease Control, not Foreign Aid

https://video214.com/play/tXLpKzOOsWPjvM2HLPgPVA/s/dark

Africa is two worlds: the cities, which are growing economically at a fast pace, and the rural poor who lack infrastructure needed for raising themselves above poverty and disease. Between these are fairly prosperous market agricultural areas and unemployed job seekers who inhabit substandard housing encircling cities.

Poverty is prolonged by long-standing wrong attitudes and practices that are so entrenched in our world view that many do not see any other way.  The colonial powers failed to develop the needed infrastructure for development except marginally in the cities, so the rural poor remained isolated and stuck in poverty, disease and unemployment. Upon independence, communists or their puppets replaced colonialists in most of these countries, but continued the same bad practices and attitudes.

Foreign aid has been a disaster for these countries because of the lack of accountability and corruption of local governments. Country leaders kept/keep most of the money and grew/grow extremely wealthy, while at the same time, failing to build roads, railroads, electrical systems, education systems and health facilities, and to develop job opportunities by encouraging investment. Corrupt leaders were/are only accountable to donor nations/organizations and unaccountable to the people. Relying on foreign aid and not the tax base of the country meant there was/is no incentive to encourage investment and to develop infrastructure that would support business expansion and job opportunities.

Communist attitudes toward free markets and propaganda against foreign investment only deepen the tendency to keep these countries poor and under top-down control.  At the same time, this situation has fostered violent resistance by factions not favored by the government, which had to be strictly controlled and squashed as it arose. Violence and unrest in any form and government corruption serve to discourage foreign investors as well as charitable organizations that could help raise the health and economy of the rural poor.

Investment and infrastructure are key to economic development and ending extreme poverty. Government to government foreign aid should be stopped immediately except for short-term emergency assistance during disasters, and only with  complete accountability about how the money is spent, as well as assurances that the distribution is done fairly.  Any foreign assistance for infrastructure projects should involve paying engineering firms directly, not funneling funds through corrupt officials who might pocket most of the money and promise but never deliver results.

African economies have historically been based on agriculture and extraction industries.  Most of Africa’s agricultural businesses have been based on small to medium farms, but are profitable only in areas where transportation infrastructure permits access to markets. Development of roads and railroads is important to expand agricultural opportunities and markets.  With improved crop varieties and modern agriculture Africa can provide much needed food for the world, but only if markets and ports are accessible.

The exploitation of natural resources by colonial powers without just compensation has been used as an excuse to discourage foreign  investment in mining and extraction activities.  It is only exploitation if the country and its people do not benefit and profit from the activity.  Communist propaganda confuses the two approaches, so that businesses that could benefit the economy are discouraged.  Agricultural and extraction industries with their associated infrastructure development can help to raise economies and standards of living by providing jobs and putting an end to high rural unemployment.

In the cities, manufacturing, banking, service, technical and communications industries are rapidly developing in areas where governments have improved business opportunities and practices. Ease of doing business, stable governments with low corruption levels and adequate infrastructure encourage investment that can raise economies.  Opportunities and workforce availability make African countries a good place to invest and open new businesses.

New US Build Act encourages investment in Africa

How the US will transform its investment role in Africa with a new $60 billion agency

Jonathan Berman

By Jonathan Berman

Business between the US and Africa just took a step forward.   Easy to miss amidst the partisan din of the approaching election, the US Senate passed the Better Utilization of Investments Leading to Development (BUILD) Act, and it was signed into law Oct. 5. Despite the strong bipartisan support (93 of 99 senators voted for it) the act has its critics, in particular among libertarian conservatives.

In my view, the BUILD act brings the US-Africa business relationship from underground to above ground and may yet bring it to the cloud.

 … to continue reading go to the original article at Quartz Africa