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Africa Rising in Long-term Profitability

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In recent years, many people have thought of Africa as a poor continent with many poor individuals or as a place for humanitarian aid. The fact about Africa is very different from these perceptions. Even though it is true that Africa is still a poor continent, Africa has a lot of potential to be a good investment for many companies.

Africa has a many natural resources such as gas, oil and minerals.

In the next decades, the world fuel consumption is expected to rise by 25 percent. Along with the increase in demand for natural resources, the price for these commodities has also increased significantly from $25 per barrel in 1999 to more than $245 per barrel in 2008.

Taking advantages of its reserve in natural resources, Africa has become one of the fastest growing economies in the world.

With the growing economies, African countries are attracting many companies from different industries from oil and gas companies to telecommunication, banking and retailing. However, Africa countries are still dealing with many serious challenges such as poverty, diseases and high infant mortality.

With the help of other nations, these challenges are being resolved in a timely manner to make Africa a more attractive investment for people around the world. One of the biggest indicators for Africa’s long term success is the decrease in its inflation rate for a lower inflation rate means a more stable economic environment and a safer investment.

Africa might carry a high short term risk at the moment, but its long term profit is undeniable by anyone.

– Phong Pham

Sources: McKinsey & Company, The New York Times
Photo: Borgen Project

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Euvin Naidoo TED Talk on Investing in Africa

Euvin Naidoo TED Talk on Investing in Africa
As president of the South African Chamber of Commerce – America, Euvin Naidoo works with leading corporations and governments to strengthen trans-Atlantic economic ties. In his Ted Talk, Euvin Naidoo focused on “Africa: the next chapter”. To separate the rhetoric from the reality and the fact from the fiction; to go to the actual data and statistics that exist about the actual things happening in Africa that make this continent a realistic investment opportunity and an option for all around the world.

He stated that investing in Africa is a broad term. Africa is not a country; it is made up of 53 different countries. And every country in Africa has a unique value proposition. You can win money here, and you can also lose money here.

Starting the talk about an investment opportunity, as a banker, Euvin Naidoo mentioned some macro-factors. The first sign is that Inflation is coming down across Africa while reaching double-digit figures in many other countries; he called it “Z.E.N. cluster”.

Zambia from 2004 to 2006 has moved from 18 percent in inflation to 9 percent; Egypt from 16 percent to about 8.4 percent; Nigeria from 16 percent to 8 percent – all in single digits. More fascinating, you have other countries, like South Africa, Mauritius, Namibia, which are also in single digits. And this is just part of the story.

Then he gave specific examples from some countries to illustrate his research.

Instead of focusing on South Africa’s gold, minerals, and its first infrastructure, Euvin Naidoo mentioned other important aspects. South Africa was recently voted as the top destination for the top 1000 UK companies for offshore call-centers. They have the same language, timeline, et cetera. Other big names that had reached Africa were Bain Capital and KKR, the big companies of private equity. Bain Capital’s acquisition of Edcon, a large retailer, is testimony to the confidence these famous names are beginning to place in the economy in what is going to be a long-term play.

Nigeria is clearly a hot spot. The new report, issued by Goldman Sachs, highlighted that, by 2020, Nigeria is going to be among the top 10 economies in the world. And also, without any sovereign backing, Nigerian companies are raising capital offshore.

In the oil industry, Africa provides 18 percent of the U.S.’s oil supply, while the Middle East offers just 16 percent. So, Africa can be an important strategic partner to America.

Finally, Naidoo concluded with Africa’s important position in the world economy because of its investment potential.

– Caiqing Jin (Kelly)

source: Ted Talk
Photo: WhiteAfrica