Subscribe
As I turned the corner, it appeared almost out of nowhere - a monument to the successes (and failures) of capitalism - the New York Stock Exchange. I had ventured downtown to attend the premiere of Carol Pineau’s new documentary, Africa Investment Horizons, which was being screened inside the Exchange. As first impressions go, you could do no better: it’s impossible not to take Africa’s investment potential seriously when you’re talking about it inside the center of the financial universe.
Even the security line was interesting: long but vibrant, an impromptu salon of Africanists, investors, expatriates and activists, all of whom share a passion for the business of Africa. Not surprisingly, I saw a number of base of the pyramid allies: Liz Wald, of EDI Imports; Emeka Okafor, of TED and Timbuktu Chronicles fame; Joy Sun, COO of Market for Change. This was going to be a good event.
Before screening the movie, we heard from Carol Pineau, its director. Pineau’s previous film, Africa: Open for Business, came out in 2006 and served to shine a spotlight on the quantity and quality of business opportunities in Africa. (Both high, by her estimation, and underexploited.) That conclusion was a natural starting point for Africa Investment Horizons: if there were high-quality, under-exploited business opportunities in Africa, wouldn’t that be a recipe for solid returns?
For the next hour, the audience heard again and again about the fantastic returns delivered by the Botswana Stock Exchange, the Ghanaian mutual fund market, Africa focused investment funds, and a number of other vehicles. The movie features experts who regularly speak about return rates in the eighties, nineties and even triple digits.
I left the movie encouraged and enthused about investing in Africa, but also curious: if the returns on investment in Africa are so fantastic, why are so few investors getting into the space? Maybe it’s an image problem - perpetuated by the mainstream media - whereby most of us know Africa only in terms of war, famine and strife. If that’s the main barrier, then this movie should help paint a more accurate, optimistic picture of the investment landscape.
That said, there are very real, structural issues at hand in many African economies. The bottom spots on the Doing Business rankings are all taken by African countries, a good litmus test for “don’t invest here.” On the other hand, India, Brazil and Indonesia all rank in the bottom quartile of the rankings, and they are some of the fastest-growing, most invested-in economies in the world, delivering sometimes similarly dizzying returns.
If it’s an image problem, then I’m glad to have been at the premiere. After all, as more and more investors stream in to Africa, the returns are bound to return to earth. With that in mind, I’ve just invested in an African mutual fund…we’ll see how things go.
Additional coverage of Africa Investment Horizons:
Timbuktu Chronicles
Grandiose Parlor
African Loft
It Takes a Village
(This post first appeared on NextBillion.net)
2 Comments so far
Leave a comment
In terms of investment capital directly into Africa, there are few
options for investors in the US. There are a couple new mutual funds
focused on the region, but even those typically incorporate the Middle
East into the portfolio (TRAMX being one of the largest at $4.5B).
The others focus on a few distinct areas, mostly South Africa and the
Ghana or Botswana stock exchanges. As you mentioned, a large part of
it could be a question of image, but one of the main factors is the
structural capacity of the markets. Securities firms need size - the
TRAMX fund of $4.5B is already roughly the size of 30% of the entire
Ghana stock exchange, which has a market cap of $15B - and this is
just one fund in the space. Even with this, interest is growing in
these “frontier markets” from Wall Street. Indices are being built to
track these markets by S&P and others - the first step in setting up
funds to invest. The question remains is whether cheap capital
flooding into these markets will do any good. Often times, it simply
means local inflation and large asset bubbles. If anything, this
development points to the real gap in funding between capital markets
at one extreme and philanthropic at the other. The world needs
patient capital in the middle, so these economies can make the jump
from developing to developed and thus support rich, structurally-sound
capital markets. All the more reason and opportunity for funds like
Acumen to fill the void.
Overlooking the impact of the mobile phone in Africa
Ken Banks of Kiwanja.net makes an extremely insightful observation in a recent opinion piece on PC World. He points out that though there has been an increase in hubbub around the developmental and economic efforts in Africa, particularly opinions in
Trackback by Perspective 2.0 05.04.08 @ 11:02 pmLeave a comment
Line and paragraph breaks automatic, e-mail address never displayed, HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>