If you had a million dollars, where in Africa would you invest it?
“It does not matter if you have US$10,000, US$1 million, US$10 million or even US$100 million to invest – Africa is as good as, if not a better bet, than most other places,” says Dr Edward Kofi Anan Brown, the director of Policy Advisory Services at the African Centre for Economic Transformation (ACET), “The question is, where in Africa offers you the best returns on you investment?”
Dr Brown should know. Before joining ACET he ran World Bank programmes in markets as diversified as Moldova, Tajikistan, Rwanda and Niger, but now focuses exclusively on Africa. This gives him a unique perspective on investment opportunities.
“People often ask: should I look at sectors or countries in terms of investment?” he says. “My answer is: look to the country first – the sector lies within the country – the two are intimately interlinked.”
What clues should an investor look for when deciding where to invest? “Look at the macro framework. Find the answers to these questions: How easy is it to open and close a business? What is the regulatory process and how transparent is it? Is there rule of law and is the judiciary truly independent? What is the track record on respecting contracts? Is the environment business-friendly or hostile?”
Once you’ve ticked off these lines of inquiry, Dr Brown suggests you make a thorough supply-chain analysis, upstream and downstream. What percentage of your inputs can you source locally and how much will have to be imported? What is the tariff structure and cost of internal transport? What level of skills are available locally?
Throwing everything into the mix, where would he invest in Africa? “Kenya ticks off a lot of boxes for me,” he says. “The country’s constitution is inclusive and the distribution of political space between the centre and counties makes for a more equitable, competitive and robust society. The financial structure is deep, the infrastructure is improving by the day, the business environment is encouraging and the trade networks are globally significant. So, despite challenges such as that from Al Shabab, I would be heading Kenya’s way in East Africa.”
What about the rest of Africa? What are the most promising investment destinations? “Again, despite the challenges from Boko Haram, Nigeria, with its huge market, is outstanding in terms of investment,” says Dr Brown. “There is tremendous internal dynamism, the banking sector is once again solid and diversification, especially in manufacturing and agro-processing, is gathering pace. I have a lot of confidence in the new leadership to see Nigeria through some hitherto intractable problems such as power supply.”
Senegal and Côte d’Ivoire also find favour with Dr Brown. He thinks both West African countries fully understand the power of FDI and have worked out ways of “crowding in internal investment” especially in the growing number of Special Economic Zones.
“But don’t write off South Africa,” he cautions. Despite the low growth rate and shaky politics, he believes the fundamentals are sound and expects to see growth pick up in the near future. “It still enjoys a good brand image among international investors.”