Investors look beyond negative headlines of chaos in Africa

Money Markets

Foreigners keen on infrastructure, power projects in countries like Nigeria, Ivory Coast. 

By REUTERS

In Summary

• Most investors in Africa now had enough sophistication to discern long-term opportunities despite a flurry of negative news.

Investors in Africa are increasingly able to see beyond negative headlines of violence in nations like South Sudan, Nigeria and Kenya, but they also seek more protection against risk for their business ventures, a senior World Bank official said.

“There was a time when Africa for many investors was just like a big, big country,” Michel Wormser, vice president and chief operating officer of the World Bank’s Multilateral Investment Guarantee Agency (Miga), said.

“When something happened in one side of Africa, it seemed to affect perceptions of the whole continent,” he said in Johannesburg during a visit to South Africa and Namibia.

“This is not the case today. Many investors understand the difference between countries and even understand the difference within a country between regions and sectors,” he said.

The World Bank agency provides political risk insurance and credit cover for investors in developing nations often emerging from years of conflict.

Mr Wormser said most investors in Africa now had enough sophistication to discern long-term opportunities despite a flurry of negative news, ranging from civil war in the world’s newest nation, South Sudan, to bombs by suspected Islamist militants in Kenya and the abduction of more than 200 schoolgirls in Nigeria by Islamist group Boko Haram.

“There is more understanding of the riskiness and more ability from investors to distinguish between what is media hype and what is the reality on the ground, and the likeliness of their investment to yield what they expect,” he added.

“Africa continues to be a land of great opportunities.”

In Nigeria, for example, where President Goodluck Jonathan has sought international help to combat a five-year-old Boko Haram insurgency in the northeast that has killed thousands, private investors were participating in ground-breaking power generation expansion projects made possible by recent reforms.

Miga, its sister arm the International Finance Corporation and the World Bank itself were helping to mobilise nearly $1.7 billion (Sh149 billion) of private financing for projects to expand Nigeria’s electricity generation.

This involved more than $600 million (Sh52.6 billion) of guarantees for the Azura Edo power plant near Benin City in southern Nigeria.

The country, which recently replaced South Africa as Africa’s largest economy through a rebasing of its GDP, only had an installed generating capacity of 4,000 MW—10 times less than South Africa, Mr Wormser said.

“Nigeria has to catch up. It’s absolutely critical for its competitiveness and its growth prospects and the World Bank Group has opened the way for new IPPs (independent power producers) to come to the country,” he added.

Mr Wormser said Miga could consider supporting investments in Nigeria’s violent northeast, where the government has sought World Bank backing for a programme to combat the poverty seen as a factor fuelling the Boko Haram rebellion there.

The agency did have a special facility for Conflict-Affected and Fragile Economies, which it had used to support investments in Democratic Republic of Congo, for example.