Africa Rebranded

Leaders make case that continent is open for business, not hopeless.

April 26, 2010

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1082061_48948025Canadian investors have the wrong idea about Africa according to participants in the Africa Business Forum being held in Toronto today and tomorrow. Leaders from the business, policy and investment communities in Africa have spent the first morning making a case for why institutional investors should look to the continent for growth and opportunities. In particular, much of the discussion so far has focused on “Africa’s brand” as panelist and event organizer Lisa Lambie of Cordiant Capital put it: “there is a perception that Africa is a place of despair, disease and corruption.”

Keynote speaker Adamassu Tadesse from the Development Bank of Southern Africa, kicked off the morning by highlighting major improvements in both the political and fiscal profile of African countries in the last few years. However, he said the cost of doing business is still high on the continent because of a lack of infrastructure. As he noted, while Africa actually produces goods more cheaply and efficiently than China and India, the challenge is what happens when those goods leave the factory. To boost the competitiveness of African countries, the push is on to invest in and improve infrastructure such as roads, airports etc. At the same time, capital markets are benefiting from a commitment from political, regulatory and legal reforms meant to create market stability to draw foreign investment.

Perception, however, continues to be a problem — and Canadian investors in particular have shied away from direct investment in the continent, according to Charles Field-Marshall, executive chairman of the Panafrican Group. While he says the total market capitalization of the top five exchanges stands at over $1 trillion US, Canadian investors on average prefer to get exposure to Africa through resource companies that are listed in Toronto. African exchanges offer diversification across sectors, said Field-Marshall, and by not investing directly in African exchanges and relying on those stocks listed in Toronto, investors are missing out on “80% of African GDP.“

As the conference continues, I’ll be posting stories on infrastructure investment and perception of Africa by representatives from the institutional investment community in Canada….

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paul.williams.5

The case for Africa is very compelling; high growth rates, the emergence of democracies, relative stability, and hugh infrastructure opportunities. However, from a portfolio investment perspective is there a lack of product for institutional investors considering Africa?

paul.williams.5

In his opening remarks, David Creighton, the president & CEO of Cordiant Capital, picked up on a theme that surface at the Global Investment Conference earlier this month. At that conference, keynote speaker Ross Munro spoke about the worsening climate in China for foreign investors. Creighton today told the Africa Forum audience that Cordiant has 160 projects in 57 countries. "One place that gives us a hard time is China; one that doesn't is Africa."

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