Africa's improvements have created
US firms should enter this
last great investment frontier.By Alonzo Fulgham
Washington - Here's some good,
if counterintuitive, news for American investors.
Normally, by the time an investment tip
makes its way into a newspaper,
conventional wisdom says the money
is already off the table.
Not so in the case of sub-Saharan Africa.
American investors and companies are
overlooking an investment opportunity
in plain sight.
And the smart money will climb aboard
before the economic tide rises.
The rest will miss a fast-moving boat.
Market-friendly reforms in Africa are
happening at a faster pace in this decade
than at any time since most African nations
achieved independence in the
latter half of the 20th century.
They reflect a serious and sustained
commitment by African governments
to meet the needs of local entrepreneurs
as well as foreign investors – because
they recognize that the fastest path
to prosperity for their people is
through investment and
self-sustaining economic growth.
Western media typically cast
sub-Saharan Africa in terms of conflict,
corruption, AIDS, and poverty – and
the present food and energy picture
understandably dominates the news.
But read behind the headlines and
you can see some of the most attractive
investment environments in the world.
Foreign direct investment from all
countries into sub-Saharan Africa grew
by 60 percent in 2007, to nearly $27 billion.
Total private capital flows have grown
eightfold since 2002.
Investment-led growth in Africa will enable
that continent to contribute to the recovery
from the global recession affecting
individual Americans as well as
improving the lives of Africans.
The opportunity isn't going unnoticed
by investors in other parts of the world.
China is poised to overtake the US in
pace of investment in Africa.
Kuwaiti interests purchased Africa's Celtel
for $3.4 billion.
Moscow investment bank Renaissance Capital
announced plans to double its investments
in Africa to at least $1 billion.
French firm SoSuMar is building
a sugar-processing factory in Mali,
where they expect an internal rate
of return of nearly 58 percent.
The territory in most business sectors
is wide-open. Prime areas include
agriculture, healthcare, infrastructure,
information technology, tourism,
telecommunications, and textiles.
Are US investors aware of striking changes
Sweeping reforms have been launched
in 40 African nations since
the 1990s: pro-business policies,
strong judicial systems, better standards,
respect for intellectual property rights.
Debt relief has markedly improved
Africa's credit worthiness.
Monetary policies have pushed inflation
down from the 19 percent average of
the 1980s, to 7 to 8 percent today.
Fiscal policies have turned country budget
deficits into an average budget surplus
of 2 percent of Africa's gross domestic product.
Despite the headlines in Sudan, Zimbabwe,
and Congo, the great majority of
African countries enjoy thriving
democracies and stability,
with governments that have earned
public confidence through audited elections.
Last year more than 54 million Africans
voted in 19 peaceful presidential
and parliamentary contests.
Real economic growth in 2 out of
5 sub-Saharan countries was triple
that of the US economy last year,
on a pace that rivals that
of Southeast Asia in 1980.
African economies from Senegal to Benin
to the Democratic Republic of Congo
are more diversified.
Growth in the region is expected
to hit 6.5 percent this year.
To be sure, there are still serious risks,
challenges, and constraints
for smart money to navigate: shortages
of electricity and skilled talent; countries
where reforms are fragile
and postconflict governments less secure.
Successful investors and entrepreneurs
enter these markets aware that differences
in culture and shortages
of investor-ready information
and institutional capacity put
a premium on patience and collaboration.
There is no substitute for due diligence.
But help is available.
By working with USAID, American firms
can help shape programs that serve
both the aspirations of Africa's citizens
and the interests of investors.
Most African governments have
streamlined business registrations
and launched one-stop shops
to help potential investors.
The Overseas Private Investment
Corporation makes loans of
up to $250 million for projects
in emerging markets.
The Millennium Challenge Corporation
provides powerful incentives to countries
promoting good governance.
And for US exporters, the Trade
Information Center offers targeted
country and market research
as well as counseling
and export assistance centers.
This growth story is in its first chapter,
much as Asia's was three decades ago,
with all of the attendant risks
and potential rewards.
Investors worldwide are aggressively
entering and operating in sub-Saharan Africa
as the last great investment frontier.
American firms should take a much closer look.
Alonzo Fulgham is serving as
acting administrator for the US Agency
for International Development (USAID)
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