Private capital flows to Africa rise (ATDF)

Read at : African Technology Development Forum

Private capital flows to Africa rise

According to the Financial Times (FT) and the Economist, Africa is no longer the backwater dark continent of the world but rather an emerging location for investor opportunities. The FT suggests that the “continent is at the heart of the latest surge of enthusiasm to hit emerging markets. In their search for yield, investors, bankers and companies are focusing on opportunities in some of the most far-flung corners of the world.” FT quotes two fund managers as saying – “Africa is the largest and most exciting group of the frontier markets and everyone wants to be part of it,” says Richard Segal, fixed income strategist at Renaissance Capital, the Russian investment bank.

“It is a world blissfully unaware of the subprime carnage and the American housing crisis,” says Jeremy Gardiner, director at Investec Asset Management, which manages assets worth about $34bn in Africa. Sub-Saharan Africa has seen substantial economic and political improvements in recent years, fuelled by the current boom in commodity prices and democratic winds that swept across most of the continent in the 1990s. Despite the turbulence of change of the 1990s, widespread debt relief and improvements in economic policy seems to have helped stabilize a situation that was getting out of hand.

It is now estimated that private capital flows to sub-Saharan Africa have tripled since 2003 and grown from about $9bn in 2000 to about $45bn in 2006, equivalent to nearly 6 per cent of gross domestic product. IMF estimates that net foreign direct investment (FDI) should reach about $18bn this year. Among them, is the planned $5.5bn deal by Industrial and Commercial Bank of China to buy a 20 per cent stake in South Africa’s Standard Bank.

It has been observed that FDI in Africa has grown rapidly over the last 6 years. According to UNCTAD, FDI flows into Africa reached $31 billion in 2005 and FDI per capita has risen from about $4 per African person to $33 per person between 1990 and 2005 (as shown in figure 1).


Author: Willem Van Cotthem

Honorary Professor of Botany, University of Ghent (Belgium). Scientific Consultant for Desertification and Sustainable Development.

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