Africa: The Final Investment Frontier
Africa: The Final Investment Frontier
Contrary to the popular view of Africa in constant crisis perpetuated by foreign aid workers — whose reason d’etra hinge on Africa’s dependence – along with the western media, Africa is on the move (See latest World Bank Development indicators here). That is the essential message of Richard Dowden’s compelling new book, but with an umm… interesting jacket photograph quite contrary to the books larger message. There is a new view of Africa emerging in the popular psyche: one of a ‘New Africa,’ on the cusp between its painful history and an increasigly hopeful future. There are three primary drivers of this change, argues one new book (see below): Chinese foreign direct investment (FDI); expanding wireless internet & mobile telecom infrastructure; and the emergence of a new middle class fueled by governing technocrats educated in the West, and an imaginative small or micro business entrepreuneur class. I would add another: with the inflation of commodity pices in recent years, the continent’s plentiful natural resources have helped to fuel investments (e.g., by China) and project development in resource-rich nations. And although African markets and aggregate growth have contracted somewhat in the advance of the global economic crisis, adverse economic impacts, so far, have been relatively mild. Generally speaking, it is also worth noting that Emerging Markets like Brazil and China, among others, have outperformed Developed Markets in the midst of this economic crisis.
Charting Africa's future
Yet, from an investor’s perspective, this spells opportunity. And that’s the reason so-called ‘Frontier Markets‘ (e.g., Botswana, Nigeria, Kenya, et al) stocks, exchange traded funds (ETFs) and ’Frontier Investing’ — the biggest driver of FDI — by private equity, venture or hedge funds – are one of the fastest growing asset class allocation on the Global Markets. Think, if you had invested $10k ten years ago in the top 25 Chinese companies, what would it be worth today..?? Now multiply that by at least a factor of two: Africa is tomorrow’s China, today — the next great, and final investment frontier. Even the vaunted global firm, Morgan Stanley, publishes the asset class’ tracking index, called the MSCI Frontier Markets Indices, widely tracked by portfolio and hedge fund managers.
If that isnt enough, measured by aggregate GDP growth, Africa has been the fastest growing region in the world for the last five years — growing at an average rate of 5.6% per anum. And there’s more. You can read about below in today’s NY Times Book Review of Richard Dowden’s “Africa: Altered States, Ordinary Miracles Listen to NPR Audio clip here.
3 May 2009, By Nicholas Kristof (for the NYT)
Mention Africa in polite company, and those around you may grimace, shake their heads sadly and profess sympathy. Oh, all those wars! Those diseases! Those dictators!
Naturally, that sympathy infuriates Africans themselves, for the conventional view of Africa as a genocide inside a failed state inside a dictatorship is, in fact, wrong. In the last few years, Africa over all has enjoyed economic growth rates of approximately 5 percent, better than in the United States (although population growth is also higher). Africa has even produced some “tiger cub” economies, like Botswana and Rwanda, that show what the continent is capable of. (A new Web site, See Africa Differently, specifically aims to present a more positive image of the continent.)
The bane of Africa is war, but the number of conflicts tearing apart the
continent has dwindled. The murderous old buffoons like Idi Amin are gone, and we’re steadily seeing the rise of highly skilled technocrats, who accept checks on their power and don’t regard the treasury as their private piggy bank. The Rwandan cabinet room is far more high-tech than the White House cabinet room, and when you talk to new leaders like Ellen Johnson Sirleaf of Liberia you can’t help wondering about investing your 401(k) in Liberian stocks.
Dowden’s book aims in part to correct the negative stereotypes. Dowden, a veteran British journalist who now heads the Royal African Society, has been bouncing around the continent since 1971 and covers a great deal of ground. Much of the text is travelogue that I found a yawn. But Dowden is at his best when looking at grand themes — like the degree to which Africa is more promising than journalists or aid workers often acknowledge. “The media’s problem is that, by covering only disasters and wars, it gives us only that image of the continent,” Dowden writes — and 90 percent of the Africans reading this are now nodding at that line. “Persistent images of starving children and men with guns have accumulated into our narrative of the continent.”
“The aid industry too has an interest in maintaining the image of Africans as hopeless victims of endless wars and persistent famines,” Dowden continues. “However well intentioned their motives may once have been, aid agencies have helped create the single, distressing image of Africa. They and journalists feed off each other.” In particular, Dowden lets loose at celebrities like Bob Geldof and politicians like Tony Blairwith their “messianic mission to save Africa.” As Dowden writes: “That set teeth on edge. It sounded like saving Africa from the Africans.” Read more here.
My Bestseller’s List
To understand Africa today, in the context of history, Basil Davidson’s book is a must read: Black Man’s Burden: Africa and the curse of the Nation-state.