Published: February 6, 2012
International investors plan to increase their exposure to the continent.
Africa’s time is here. International investors plan to increase their exposure to the continent during the coming years, with many viewing it now as the most attractive investment destination globally.
In a survey of 160 institutional investors commissioned by Invest AD, a fund manager owned by Abu Dhabi’s government, all respondents said they intend to raise their investment levels in Africa by 2016, with a third expecting to allocate at least 5% of their total funds to the continent. For many, that’s a big jump – almost half of those questioned have either no exposure or less than 1% of their assets allocated there.
Most of the investors questioned believe commodities will be overtaken by private equity and infrastructure as the leading asset classes for investment in Africa in the next three years. Meanwhile, 46% of those questioned said energy and natural resources are likely to offer the best investment return during that time frame, with agriculture, construction, real estate and financial services also favoured.
“Africa was exclusively seen as a commodity play but now there are real economic growth drivers,” said Mohammed Al Hashemi, an executive director of Invest AD Asset Management, when launching the report.
“Africa was a destination for grants and aid but going forward it will be the destination for trade and investment.”
Rebuilding Libya
Those surveyed see Nigeria and Kenya as the countries producing high returns in the next three years. The Economist Intelligence Unit, which managed the research, excluded South Africa from its questioning given the country’s standing as a mature market.
Zimbabwe, Egypt and Ghana were also among the favoured destinations for investors, and Al Hashemi highlighted Libya’s potential following its political uprising last year.
“Libya is in dire need of upgrading its infrastructure,” he said. “The country is wealthy and has the potential to be very wealthy. They are self-sufficient in funding a great deal of projects and we have now a great political will to implement these projects.”
AD Invest, which has funds targeting Africa and the Middle East, suspended its Libya Opportunity Fund when the country’s stock exchange was closed in February last year, less than three months after the fund’s launch.
Aside from developing the continent’s infrastructure, the report found that investors are attracted to its growing consumer market and emerging middle class. The World Bank forecasts that consumer spending in Africa will grow by 60% to US$1.4trn by 2020. But concerns persist – factors deterring investment in Africa include corruption and political risk, noted the report.