The African continent: a real land of opportunities for investors

Beautiful woman colorful portrait. Young afro girl posing on yellow background with colorful material on head. Ethnic style.

Indeed, the continent’s economic dynamism has been fabulous over the past decade: a third of African countries have grown by more than 6%, thus strengthening the confidence of international economic actors.

Today, before Africa can develop different industries or services similar to those in Western countries, it must face the immense challenge of its energy future. African leaders have succeeded in initiating a reflection on a subject that is essential for the continent’s development: electrification.

According to the report by l’Africa Progress Panel, a think tank led by Kofi Annan on equitable and sustainable development in Africa, more than 620 million Africans (nearly 51% of the continent’s population) do not have access to electricity. This accessibility is a crucial issue to support economic and demographic growth and the emergence of a middle class with consumer power.

This infrastructure development must involve major investments in the energy sector. It is important to note that Africa has vast reserves of natural resources, including energy, agriculture and mining. It also has an exponential capacity in terms of renewable resources (solar, hydroelectric, geothermal, etc.).

Thus, the economic indicators of recent years and the continent’s potential have greatly increased the interest of both private and public investors in terms of opportunities. The International Energy Agency estimates that more than 200 billion dollars is needed to electrify 70% of the population.

Especially since this challenge is not only technical or financial, it is also political. Therefore, investments in the energy sector must be accompanied by better governance, i.e. better support from public authorities for infrastructure development, while fighting corruption and better management of natural resources.

The dynamism and economic optimism that are spreading in Africa have not left investors indifferent. Having understood the importance of infrastructure development in Africa, it is private equity funds that seem to be the most interested in investment opportunities in major development projects. The main ones are foreign funds such as Blackstone or Abraaj Group, which have created teams dedicated to project financing in Africa. In 2014, the Carlyle fund, another mastodon of private equity, managed to raise $690 million for its first fund dedicated to sub-Saharan Africa. At the beginning of 2015, it was the precursor of private equity on this continent, Helios Partners, that completed a $1 billion fundraising campaign.

The amounts of these fundraising events are unprecedented for this continent. In addition, the law firm Allen & Overy estimated that the total amount of transactions carried out by private equity funds in Africa in 2014 was $8.1 billion (compared to $4.3 billion in 2013). These figures highlight investors’ interest and confidence in these African opportunities, particularly in infrastructure projects.
However, they seem very small, when a World Bank study estimates the infrastructure financing needs of the African economy at 90 billion dollars per year by 2020.

It is therefore thanks to the participation of a range of public and private actors, better management of natural resources and infrastructure development, that African countries’ growth will be able to continue and catch up with Western economies. Nevertheless, there is still a long way to go, given the scale of the task ahead.

 

References Modern GhanaAfrica Progress Panel

Alexandre NTUMBA


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