Ouleymatou’s Weblog

Africa’s economy is growing at 5 to 6% a year. Inflation is down. Prices are rising for commodities like oil, copper and gold.

Like all emerging markets, Africa is a risky place to invest but “the perceived risk is greater than the actual risk,” says Tom Gibian, the chief executive of Emerging Capital Partners (ECP), a private equity firm based in Washington, D.C., that focuses on Africa.

The firm has invested more than $1.2 billion in several Africa funds since 1999. It has invested in 48 companies, exited from 18, recouped more than $600 million and posted an average return of three times its initial investment. “The financial performance has been terrific,” Gibian says.

Broadly, though, African companies have been aided by increasing efforts by government leaders to promote capital markets, private investment and trade. “The real news in Africa,” Gibian says, “is that over the last five years, virtually every country, their presidents, and even the leaders of the opposition parties, have gotten on the same page regarding the primacy of the private sector, the need to deregulate, and the importance of attracting foreign investment. Centralized planning, state control of assets and socialistic rhetoric, for the most part, are dead. Market forces have won.”

Source:www.money.cnn.com

More and more foreign companies invest in Africa, but how could that phenomenon be explained? The answer should be found looking closer on the African side.

With nearly 766 million people living on its earth, Africa represents around 13% of the humanity and its population is still growing fast. If the growth rate of the continent remains steady (1, 39%), African population will represent 29% of the humanity in 2100 and Europe only 7, 7%. Africa’s high fertility rate grants the continent a young population. Therefore, along side with Asia, Africa is potentially a big market and a cheap labour provider. Still, most African countries remain underdeveloped and lack infrastructures, manufacturers and services. That handicap then represents great opportunity for the future.

World companies are setting up in Africa, providing with the chance to catch up with the rest of the world. Overall, cheap labour price on the continent will keep on attracting those companies in a difficult globalised market. It is on that path that fabric manufacturers are setting for North Africa for competitive production prices.

Africa is more and more appearing as an Eldora ,do for world investors. The continent is a huge potential market, where manpower is available and is among the cheapest. It also provides the world with precious raw materials but its development is still impended by the lack of transformation industries and infrastructures. The building process demands a lot of capital but also yields high profitability rates. World companies are aware of that fact and won’t miss those opportunities.