A couple of weeks ago we wrote about the fact that China was not the only emerging economic power looking to make inroads into Africa, with India starting to take bigger steps towards increasing its exposure to the continent. This week another one of the so called “BRIC” nations, Brazil, has seen some of its major corporations announcing a move to invest in Africa.
A report on the Dow Jones wires said that two of Brazil’s largest banks and a Portuguese peer announced that they have joined forces to invest in financial services companies across six African countries.
Banco do Brasil SA, run by the Brazilian government, and Banco Bradesco (BBD) plan to join forces with Portugal’s Banco Espirito Santo SA (BES) to explore investments in a broad range of financial services companies in Angola, Cape Verde, Morocco, Algeria, Mozambique and South Africa. Those six countries have “strong economic growth and a strong presence of Brazilian companies,” Brazilian Finance Minister, Guido Mantega, said at a ceremony to unveil the partnership.
The partnership underscores Brazilian President, Luiz Inacio Lula da Silva’s stated intention of increasing that country’s business with Africa, particularly in countries with historic links to Portugal.
The three banks plan to use BES’s existing African operations as a platform to grow in the region, Bradesco President, Luiz Carlos Trabuco Cappi said.
Over the next three months, they plan to discuss their respective investments into the holding company, which will then be used to buy up stakes in companies such as banks, insurance companies or asset management firms, Cappi said. The details haven’t yet been established but the three banks do intend to share management of the operations, he added.
Another notable investment initiative on the continent is that by Brazil’s mining company, Vale, which as reported in the Financial Times, is working with Odebrecht, a Brazilian construction company, to develop the coal reserves, build a power station and construct rail and port infrastructure to bring the black rock to export markets, in Tete, Mozambique.
At Moatize, the location for the mine where digging will begin at the end of this year, Vale estimates its initial investment will amount to US$1.3 billion. Insiders say the total could eventually amount to several times that.
Vale and Odebrecht are not the only Brazilian companies involved in Mozambique. Late last year, CSN, a Brazilian steelmaker, bought 16.3% of Riversdale, an Australian company in which India’s Tata Steel also has a substantial stake. This company is also planning a multi-billion dollar investment in the Tete area.
This further highlights the shift that will begin to make itself more apparent in terms of who Africa’s major trading partners are, from the traditional western partners to the East, and the likes of Brazil and Russia. Given the general positive outlook for growth from the BRIC and similar emerging markets, this further enhances the attractiveness of the continent as an investment destination, driven not only by growing local demand, but that of the emerging economies as well.
Article produced by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.