Parts of Africa are looking like less of a risk than in past years to invest in. However, it is still significantly risky. What Africa is lacking is savings and capital. Which is where the investors come in. Investors will be able to get a better return than they might receive by investing in their native country. A multitude of opportunities to invest in mutual funds and stocks in African companies have also been pooping up in recent year. The concern is now that African firms will not be able to keep up with the demand from international investors. These investors are investing with the hope that Africa will continue to become more stable, less corrupt, and have highly functioning economies. It will be interesting to see how this gamble plays out in the long run.
Thursday, April 11, 2013
Investing in Africa: The Hottest Frontier
After discussing aid in class, I decided to search for an article related to aid projects and instead came across an article with a very different take on Africa. Instead of viewing Africa as a region that was in desperate need of aid projects, this writer from the Economist wrote about Africa as being a hot spot for international investment. Investors are attracted by the 5% growth in GDP in sub-Saharan Africa as well as a 50% increase in the main markets. In the past 10 year Africa has contained 6 of the top 10 fastest growing economies.
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I am so glad this was posted on the blog, because quite honestly find myself slightly in shock. I had absolutely no idea that Africa's attracted direct investment. From the general media and general talk about Africa, I didn't assume this to be true at all. Honestly, seeing
ReplyDelete"Africa's equity markets are hot, with investors attracted by the sub-Saharan region's GDP growth rate of more than 5 % over the past three years."
my mouth dropped! I believe that it makes since that investors would be interested, because of the high risk= possible high return we talked about in class. I am excited to see if this is successful and ends up helping Africa in the long run or ends up like the mosquito net we talked about today. Thanks for posting this!
Surprisingly pleased to hear that "over the past decade Africa supplied six of the world’s ten economies with the fastest growth". Hopefully this development will also be accompanied by greater stability and a higher standard of living, for it is not only economic development that brings prosperity to a country. I can only hope that this will be the founding for success stories to come!
ReplyDeleteI think Ghana and South Africa both serve as great examples for the rest of the African countries in terms of success. Ghana underwent structural adjustment programs and cut back on social programs, and privatized in order to improve its GDP. Although the country still has a far way to go, the GDP has indeed greatly improved. South Africa is another success story. As one of the BRICS countries (Brazil, Rusia, India, China, South Africa), South Africa is making its way in the world scene. It is also, not surprisingly, the top attractor of financial investment on the African continent. I think both of these countries could help advise other African countries on development and attracting foreign investment/attention.
ReplyDeletehttp://www.financialstandard.com.au/news/view/26509182
Although the increased rate of investment being made in African countries is undeniably good news, many societal and organizational problems still remain, even in the more "advanced" countries. South Africa is one of the most criminally violent countries in the world, with approximately 50 murders occurring daily in a country of 50 million (BBC). Although I suspect much of this crime is perpetrated by a huge unemployment rate (24 %), this sort of unstable environment is not conducive to attracting foreign investment. Crime rates are decreasing, though, and if this trend continues, further investment could provide more jobs for Africa's unemployed.
ReplyDeleteI'm actually not very surprise by this article, there are quite a few countries in Africa that are not only experiencing growth, but are also very resource rich. While many of you reference Ghana and South Africa, Nigeria possesses a wealth of oil and many developed countries have taken note. However, the greatest impediment for Nigeria's economic development (and possibly other African countries) is electricity shortages. Hence, while there is a lot of potential in various countries in Africa, there still remains structural deficiencies that are still lacking and stalling further development.
ReplyDeleteIt is great news for Africa that "Investors are attracted by the 5% growth in GDP in sub-Saharan Africa as well as a 50% increase in the main markets." For the past decades postcolonial Africa has been struggling with civil war, unimpressive economies, disease, the resource curse, inequality, and corrupt/dysfunctional governments. Perhaps the the turning point for Africa will be through a growing economy supported by FDI. Maybe the structural changes needed in Africa to create a stable climate will come from a growing economy and strong but fair leaders in the many different governments in Africa. Here is chart from the Economist showing the impressive GDP growth of African countries in the past few decades.
ReplyDeletehttp://www.economist.com/blogs/dailychart/2011/01/daily_chart
I'm am glad to hear that their have been growth and development in Africa. Statistics show that economic development has helped reduce poverty in Africa but it is not enough. An article from the BBC extends this story. http://www.bbc.co.uk/news/business-22156755
ReplyDeleteWhile there is high foreign investment in many African countries in these countries this investment is disparate, in different areas of a country it could be helping and other more rural it could have no effect. Humanitarian aid often goes to these rural areas not where there is international investment. These investments are typically for the development of natural resources and for investment in cities with large markets, not in rural areas where people are the most impoverished which is where most foreign aid goes. It makes sense that African markets are growing, Africa has been economically undeveloped due to the volatility of the continent. All investment as long as it is protected should see a return because there are many under/un-employed laborers and resources. Because there is so much underdevelopment and development has been increasing it should lead to more stability. While there is still so much development to be done in Africa areas of the highest return (usually high population areas) will see the majority of investment so rural development is still a long way off. For that reason humanitarian aid shouldn't end to rural unstable areas where investors see as too risky to invest in, unless due to development in other areas of a country are able to provide the domestic government with enough revenue to take care of those people on their own.
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