Opinion: Greatest Source Of Investment In African Economies Is Africans

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Written by Staff

From Front Page Africa. Guest column by Samuel Nwanze, director of finance and investments at Heirs Holdings.

The greatest source of investment in African economies is not the U.S. or China but actually South Africa.

Even as more American, European, and Asian businesses acquire leading African businesses, Ernst and Young reports that intra-African investment into new projects has grown by 32.5 percent since 2007 — four times faster than investment flows from developed economies.

As most African economies grow by an average of 5-to-6 percent per year, African firms are riding high on this momentum and aggressively expanding their enterprises across the region.

During this year’s World Economic Forum on Africa in Rwanda, African business men and women sitting on various panels repeated a shared sentiment: Africa is less risky now in terms of politics, trade and governance, and offering rates of returns far more appealing than what can be realized in developed economies.

The phone provider giant, MTN and the supermarket chain Shoprite, both of South African origin, are profiled as leaders in intra-Africa commerce in a joint publication by the Tony Elumelu Foundation and Brenthurst Foundation titled “Africans Investing in Africa.”

Nigerian-headquartered United Bank for Africa (UBA), which has expanded into 18 other African countries, building over 160 business offices, is also profiled. UBA expects to increase its revenue generation from the rest of Africa (outside Nigeria) from 24 percent to 50 percent in the coming years.

Dangote Cement is also featured and its rapid $5 billion expansion project from Nigeria into 13 other African countries is comprehensively analysed.

“Africans Investing in Africa” demonstrates the diversity of sectors that are engaged in cross-border economic activity across the continent, while emphasizing the importance of Africans investing in the continent to build stronger diplomatic, political, and cultural ties.

Beyond this optimism, there remains vast untapped opportunities in energy, power, heavy industry, manufacturing, transport, and healthcare. High operating costs, limited infrastructure, lean access to finance and a myriad of other constraints restrict investments in these transformative sectors. According to the World Bank, intra-African trade costs are around 50 percent higher than in East Asia, and are the highest of intra-regional costs in any developing region.

It is impossible to sustain economic growth and attain shared prosperity without advancing intra-regional trade, commerce and investments. This is possible only by eliminating obstacles that thwart private sector growth and competitiveness and prevent more private sector participants from investing in critical sectors.

Read more at Front Page Africa.