For years, foreign businessmen shunned Africa. They saw the continent as a highly risky destination for investment. But in the past decade, much of that has changed, with many saying Africa now presents a great potential for business growth and ultimately poverty reduction.
Jennifer Potter is the CEO of the Initiative for Global Development, a network of business executives trying to increase investment in developing countries. She recently held a meeting in New York, where American and African CEOs came together to build personal relationships and share information about business opportunities on the continent.
She attributes the low rate of investment on a lack of information about Africa’s economic potential. Part of her job is to change this attitude by highlighting the potential for huge returns for those with the courage to invest.
“The [upside] investment opportunities are enormous but they are not on the radar necessarily of the investment firms . . .”
That’s now changing.
Old myths, new databases
Papa Ndiaye is the CEO of Advanced Finance and Investment group, a west African-based company that’s invested hundreds of millions in US dollars in Africa. Ndiaye says it’s time to dispel some of the myths that discourage investors.
“There are lots of long-term prejudices . . . When we look at the tremendous changes in Africa . . . people need to update their databases. The Ghana of 1995 is different from the Ghana of today.”
Ndiaye says business leaders need only to look at International Monetary Fund figures projecting that Africa’s GDP will grow at a rate of 6%.
“If an international CEO does not have an Africa strategy, the company’s board should [sack that CEO],” Ndiaye says.
Jean Manirakiza, a Burundian analyst based in Virginia, says Ndiaye’s view is overly optimistic. He says that even though there are opportunities for venture capitalists like Ndiaye, “it is too pretentious to put Africa at the center of the global economy . . . We are still about 5% of global trade.”
He says that Africans should start by strengthening existing trade links and raising capital locally. He adds that external capital flowing into the continent means that dividends will in the end return to western investors.
Assessing Africa’s potential and risk
The recurring myth about the African continent, is that most of it is mired in political conflict.
But many countries have enjoyed years of relative peace and stability.
Karl Zoe is working on her Masters of Business Administration at Wharton School in Pennsylvania. She recently organised a forum bringing together business leaders and students.
She says that over the past decade, Africa has achieved significant progress, with the deepening of democratisation, some improvements in the business climate, more effective use of aid, action against corruption and declining political interference in the economy. There has also been a more concerted effort by African leaders to promote peace and security, says Zoe.
But despite the progress, Ndiaye says there is a tendency to group together well-managed countries with what he calls “the bad apples.”
He says that the onus is on every African to dispel such misconceptions.
“We still have to go out there and put the word out . . . . Risk assessment is such a subjective thing. It is related to the level of information the individual has. The more information you have, the more you lower your risk, because with more information you are able to anticipate where the problems will be and start [devising] solutions.” – VOA