“There is a tsunami of money coming. America is just beginning to muscle up with capital and come to Africa. And if you think the money is coming in now, it’s just begun.”
This is according to Robert Hersov, founder and CEO of Invest Africa, a platform for business leaders and investors to gain better insight into the continent and its business opportunities. During a panel discussion at the Investing in Africa Mining Indaba today, he added perceived risks of investing in the continent are falling, below that of global players such as China and Russia.
“People know the rewards are immense in Africa. But they have always perceived huge risk. And I think what has happened over the last five years – and increasingly happening – is that the perception of risk is coming down. Because as people get into the markets, invest, back people, get decent local partners, they are realising that actually the risk is way higher in Russia or China than it is in most African countries. Yet the reward here is much greater. And people are working that out.”
Also on the panel was founder of the Mara Group, Ashish J. Thakkar, who fully agreed. “I have been active on the continent for the last 18 and a half years and I have never seen so much global excitement around Africa that we are seeing here today,” he highlighted.
“When Bob Diamond and I set about Atlas Mara, the majority of our capital came from the US, and the majority of that was capital which had never before come into Africa. So you can see that there is a new wave of investor appetite. But they need the right homes to come into.”
Higher returns, lower risk
Robin Saunders, founder and managing partner of private equity firm, Clearbrook Capital Partners, said her firm started looking at the continent roughly a year ago and compares it to the California gold rush in 1848.
“You see the very large global private equity funds pouring in… and sovereign wealth funds from the Middle East and elsewhere. And everybody wants to get in on this action.”
CEO of Nigeria-based Sahara Group, Tonye Cole, noted that “Africa still seems to be the only place where you can make returns above 20%, or thereabouts, on projects”.
China’s unintentional role
There has been a general improvement in the business and regulatory environments across the continent, said Hersov. This is, in part, a result of the realisation by African governments that they are competing with each other to attract investment.
“And in some ways we have to thank the Chinese for kicking it off. Because they set the ‘gold rush’ in motion and then everybody else woke up and started pouring in.”
In August the US emphasised its commitment to trade and investment in Africa with the first ever US-Africa Leaders Summit in Washington DC. The high-profile event saw US President Barack Obama host close to 50 African leaders to discuss opportunities for better business engagement between the two regions.