Tuesday, 4 June 2013

Africans investing in Africa

THE World Bank's investment arm will increase lending to sub-Saharan Africa by up to a quarter this year as private sector companies flock to the fast-growing region.

Vice President Jean-Philippe Prosper said in Business Report that the International Finance Corporation (IFC) would make new investments of $4.5bn-$5bn for the fiscal year
ending in June, up from $4bn the previous year.

The World Bank sees Sub-Saharan Africa's GDP accelerating to more than 5% over three years, driven by investment and commodity prices.

Roughly half the IFC's annual lending in the region goes to financial markets and institutions to help improve the flow of credit to small businesses, which employ most of Africa's workers. Another third goes to infrastructure projects and natural resources investments.

Emerging markets are investing in Africa — in the period since 2007, the rate of FDI projects has grown at a healthy compound rate of over 21%. In comparison, investment from developed markets has grown at only 8%.

A Southern Times Africa report notes that the top contributors from the emerging markets are India, South Africa, the United Arab Emirates, China, Kenya, Nigeria, Saudi Arabia and South Korea, all rated among the top 20 investors in the world over that period.

Intra-African investment has been particularly impressive during that period, growing at 33% compounded.

SA has been at the forefront of the growth in intra-African trade but Kenya and Nigeria have also invested heavily and it is expected that countries like Angola, will become increasingly prominent investors across the continent.

Among the star performers attracting growing numbers of projects have been Ghana, Nigeria, Kenya, Tanzania, Zambia Mozambique, Mauritius and SA.

Japan will provide $2bn worth of financial support over five years to back Japanese firms' resources development projects in Africa, reports Mining Weekly.

Japan's Trade Minister Toshimitsu Motegi, who made the announcement at the Africa-Japan Ministerial Meeting for Resources Development, said financial support is to be channelled through state-run Japan Oil, Gas and Metals National Corporation.

Examining the reality of the boom, Mohamed El-Erian a contributing editor of Foreign Policy and CEO of the global investment management firm Pimco, says in a report in The Age that despite the need for caution, the cause for hope is on solid analytical soil.

He says an expanding set of small and medium-size enterprises is bringing real economic diversification — they are giving rise to internationally competitive companies, thereby providing access to global markets, and higher wages and salaries.

To sustain this growth, El-Erian says the continent needs infrastructure projects, and it needs public-private partnerships that help build small and mid-size businesses.

Britain meanwhile risks missing out on the 'huge opportunities' in Africa because they are focusing too much on the BRIC economies of Brazil, Russia, India and China. This is according to shadow Business Secretary Chuka Umunna, who is quoted in The Independent as saying that stronger ties needed to be built with countries across the continent.

He said: 'I was very struck by the warning given last year by former President Olusegun Obasanjo on how, in relation to Africa, Britain risks falling behind.'

Entities seeking to expand into Africa must consider regulatory hurdles that exist in the countries into which they seek to expand say ENS director, Justin Balkin, senior associate Aidan Scallan and candidate attorney Lebogang Phaladi, in a report on the Lexis Nexis site.

They point out that beyond sector-specific and other general regulatory requirements there has been a recent emergence of competition regulation within Africa, more specifically within the Southern African Development Community member states.

They caution, however, that although there may be similarities between competition regimes, each jurisdiction has its own legal, economic and political nuances.

It is also important to know that the various regimes are at different stages of development, with some regulators only starting to grapple with difficult competition-law issues.

It is therefore critical for interested parties to understand the competition regimes in each country in which they seek to invest.

—Africa Business.

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