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What African Elections Mean For Investors

What African Elections Mean For Investors

From VentureBurn. Story by Konstantin Makarov.

Electoral cycles have long been a sticky issue for Africa’s business communities. Elections often evoke fears that a regime change will bring uncertainty and instability, two characteristics investors try to avoid in their portfolios.

These reservations aren’t unfounded: Kenya’s bungled 2007 election crippled the East African region and forced landlocked economies such as Uganda and Rwanda to bear the brunt of post-election chaos. Investors expect some inherent risk in emerging economies, but at some point, they draw a line.

So it was with great trepidation that foreign investors watched Africa’s 2015 political season, waiting to see how governmental shifts would affect their expansion opportunities. But with successful elections in Nigeria, Ethiopia, Tanzania, Ivory Coast, and the Republic of Congo, it appears that the naysayers have been proven wrong. Decades of progressive reforms throughout the region are finally bearing fruit, and they bring immense investment options with them.

The following three countries are prime examples of how improved political climates are ushering in an era of prosperity:

1. Nigeria

A largely peaceful polling process in Nigeria’s 2015 presidential race highlighted the disconnect between perceived and actual risk in African economies. Despite operating in a political climate undermined by the extremist group Boko Haram, the All Progressives Congress enjoyed a smooth handover from the People’s Democratic Party, a milestone in and of itself. Yields in the fixed income market showed a significant downward correction after the election, and the Nigerian Stock Exchange’s NSE 30 Index exhibited a strong rebound around the same time.

2. Kenya

Investors began taking Kenya more seriously in the past decade after recent election cycles seemed to indicate a stronger, more secure government system. The 2013 election in particular marked a turning point for the country, and it proved that recent reforms had effectively reduced violence and unrest. Since then, Kenya’s growing economy has become increasingly attractive to investors, especially with the explosion of its fintech sector.

3. Malawi

A hotly contested 2014 election reinforced Malawi’s recent history of relative stability. Former President Joyce Banda peacefully ceded power to then-opposition leader Peter Mutharika, bolstering confidence in this small but growing economy. African Agricultural Development Company, the social impact investor known as AgDevCo, made a US$2-million equity investment in the Malawian macadamia farm Tropha Estates in November 2014, and similar large-scale deals will emerge in the next several years.

Read more at VentureBurn.