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Are investors missing out on sub-Sahara Africa?

Africa's improvements have created thriving markets. US firms should enter this last great investment frontier.

By Alonzo Fulgham / September 29, 2009


Here's some good, if counterintuitive, news for American investors.

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Normally, by the time an investment tip makes its way into a newspaper, conventional wisdom says the money is already off the table. Not so in the case of sub-Saharan Africa. American investors and companies are overlooking an investment opportunity in plain sight. And the smart money will climb aboard before the economic tide rises. The rest will miss a fast-moving boat.

Market-friendly reforms in Africa are happening at a faster pace in this decade than at any time since most African nations achieved independence in the latter half of the 20th century. They reflect a serious and sustained commitment by African governments to meet the needs of local entrepreneurs as well as foreign investors – because they recognize that the fastest path to prosperity for their people is through investment and self-sustaining economic growth.

Western media typically cast sub-Saharan Africa in terms of conflict, corruption, AIDS, and poverty – and the present food and energy picture understandably dominates the news. But read behind the headlines and you can see some of the most attractive investment environments in the world. Foreign direct investment from all countries into sub-Saharan Africa grew by 60 percent in 2007, to nearly $27 billion. Total private capital flows have grown eightfold since 2002.

Investment-led growth in Africa will enable that continent to contribute to the recovery from the global recession affecting individual Americans as well as improving the lives of Africans.

The opportunity isn't going unnoticed by investors in other parts of the world. China is poised to overtake the US in pace of investment in Africa. Kuwaiti interests purchased Africa's Celtel for $3.4 billion. Moscow investment bank Renaissance Capital announced plans to double its investments in Africa to at least $1 billion. French firm SoSuMar is building a sugar-processing factory in Mali, where they expect an internal rate of return of nearly 58 percent.

The territory in most business sectors is wide-open. Prime areas include agriculture, healthcare, infrastructure, information technology, tourism, telecommunications, and textiles.

Are US investors aware of striking changes in Africa? Sweeping reforms have been launched in 40 African nations since the 1990s: pro-business policies, strong judicial systems, better standards, respect for intellectual property rights. Debt relief has markedly improved Africa's credit worthiness. Monetary policies have pushed inflation down from the 19 percent average of the 1980s, to 7 to 8 percent today. Fiscal policies have turned country budget deficits into an average budget surplus of 2 percent of Africa's gross domestic product.