In addition to the expectation of these results for nationals, this is going to be a period of anticipation for investors into Africa. Over the last few years the common theme from Africa has been about the growing population that will bring about exponential growth rates and consequently economic opportunity. Every sector is expecting rapid growth to cater to the growing consumer demand. Other than historic investments in mining and extractive ventures, peers are gearing up for additional investments into infrastructure, industry, agriculture, power generation and distribution, education, retail and many other sectors. Technology and innovation are also playing a critical role in disrupting business models in retail, communications and banking. The outreach activities from African countries into the Middle East (a region known to be a net exporter of capital) are higher than ever before. This is a good time for policy-makers to ensure that on one hand, a more investor-friendly approach (including but not limited to simplifying visa procedures) is taken but on the other, incentives must only be given for long-term investments, industrial development and beneficiation. African economies will never be able to stand on their feet if raw material/minerals or agricultural produce continue to be exported and no value-added industries are set up locally.
A major risk in Africa remains currency risk. Some of the major economies that have fared badly are Nigeria, Ghana and South Africa. The Ghanaian Cedi in particular took a bruising starting at about Cedi6 to the US$ at the start of 2022 and ending the year between Cedi12-14 to the US$. The Nigerian Naira has devalued almost 50% since 2020 and remains a very volatile currency with no end in sight. The bigger problem in Nigeria remains remitting funds out of the country where businesses and individuals can lose up to 30% value while buying US dollars in the open market. The South African Rand has also remained extremely volatile. When we invested in 2006/2007, the Rand was at approximately ZAR6 to a US$ and is currently trading around ZAR17 to a US$. This volatility, coupled with the high-interest rates, particularly in West Africa, makes business expensive, unpredictable and unattractive particularly for foreign investors. The situation is not getting any better as borrowings are continuing to increase with countries like South Africa, Kenya, Ghana and Rwanda having debt to GDP ratios of between 70% to 100%; while these numbers are not as alarming as those of Japan, US, Singapore or other European countries, the ability of most African countries to repay debt is questionable. This forces inequitable negotiations with lenders that is continuing to impact growth.
