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Friday, 02 December 2011 21:03

Invest in Africa and its Capital Markets

LONDON, December 02, 2011, (The Citizen) - The World Bank's vice president for Africa, Obiageli Ezekwesili, has called on potential investors worldwide to invest in Africa and its budding capital markets.

obiageliezekwesili"Africa has taught the world a lesson in macroeconomic reform and stability," Ms Ezekwesili told the audience at the African Investment Summit hosted recently at the London Stock Exchange.


She urged investors who are in search of the right market at a time of growing fears of a global recession to "rediscover Africa."


"Africa's fundamentals appear strong, and the continent's outlook remains positive," Ms Ezekwesili said, pointing to the continent's rapid rebound from the 2008-2009 global financial crisis and its higher GDP growth rates projected to be 4.8 per cent, 5.2 per cent and 5.5 per cent respectively in 2011, 2012 and 2013.


It makes business sense to bet on Africa's capital markets, she said, at a time when "global equity markets are headed for their worst quarter since 2008", and returns on investments in Africa are among some of the best in the world.


Ms Ezekwesili cited a recent study by Oxford University Professor Paul Collier, which found the return on capital for over 950 African enterprises to be on the average 11 per cent higher than in Latin America and Asia, and 70 per cent more profitable if compared against similar Chinese firms.


Capital is flowing to Africa, the World Bank vice president explained, "because the continent has become a friendlier and more profitable market, about which businesses, consumers, investors and development partners are all bullish.


Wild roller coaster

Investors who joined the flight for quality at the onset of the 2008-2009 global crisis can now testify, Ms Ezekwesili argued, that "Africa stayed stable" even as the global stock exchanges went on a wild roller coaster ride.


Recovery on African stock markets came fast despite the fact that their limited liquidity and relative small size was amplified.


While initial hopes that investors - weary of markets in developed countries - would seek opportunities in Africa and other developing regions were misplaced, most African stock markets with the exception of the Johannesburg Stock Exchange have grown robustly, doubling their market capitalisation between 1992 and 2002, from $113.4 billion to $244.7 billion.


In a move that is likely to set a new record, the Lagos Stock Exchange, the region's fastest growing market, plans to bring its current capitalisation of $40 billion to $1 trillion in five years. According to Ms Ezekwesili, "one of the key lessons of the past global crisis is that Africa knows how to shrug off the impact."


"Been there, done that", was the attitude she said African finance ministers who attended the September 23-24 Annual Meetings of the World Bank and International Monetary Fund in Washington had on being told that news of a potential global crisis meant even more reforms on their part.


One explanation for Africa's success is the region's sustained pace of meaningful reforms. As many as 36 of the 46 African countries surveyed by the Doing Business report have implemented major reforms over the last five years, including those whose ranking has slipped or has not improved.


Ms Ezekwesili said the continent of which she speaks is "an exciting, new Africa... on the cusp of an economic revolution similar to China's and India's."


She described it as a region of abundant opportunities in agriculture, agribusiness and agro-processing; with strong demand for capital in infrastructure development; but also a region in need of a second round of investments to upgrade the ICT sector, expand broadband use, mobile banking and Internet access.


Ms Ezekwesili called on investors to help themselves, by not focusing too narrowly on making the fast buck, but on building social accountability, transparency, and fostering the fight against corruption, promoting social corporate responsibility by helping to develop the human capital and labour skills that will be needed if "new Africa" is to lure some of the 85-to-90 million labour-intensive jobs in light manufacturing that wage pressures will force firms in China to off-shore in the next three-to-five years. (END)


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