News / Africa

Shaken Global Financial Markets Prompt Look at African Economies

Economists say more outside investment is needed to boost Africa's recent economic growth
Economists say more outside investment is needed to boost Africa's recent economic growth
TEXT SIZE - +
Nico Colombant

As shaken stock markets, slumping national economies and dented credit ratings create economic fears around the world, many international investors say now is a good time to take a closer look at an often forgotten continent, Africa.  

Anthony Carroll, a U.S.-based trade and investment consultant who has worked more than three decades in Africa, says now is a good time as any for individual and corporate investors to place money in Africa.

Carroll points to major banks saying the same thing.

"Africa is growing at a pace that it has not seen since really the post-independence period," said Carroll. "Annual GDP [gross domestic product] rates are well above five percent.  [Global investment bank] Goldman Sachs predicts that eight of the top 11 growing economies in the next 10 years are going to be in Africa.  The World Bank reported that about 4.7 [percent] of global investment now goes into Africa, which is up sharply from less than one percent in 2000."

The African Development Bank predicts a 6.5 percent average growth rate on the continent next year, despite the recent global market downturn.

Accounting firms are also giving Africa high marks.  A report recently released by U.S.-based Ernst & Young predicts that foreign direct investment in Africa could reach $150 billion by 2015, compared to only $84 billion last year.  

Ugandan-born Larry Seruma is the chief investment officer for Nile Capital Management in New York.  His company has created for individual American investors the Nile Pan Africa Fund, which is focused on African companies.

Seruma says that although the major global financial markets closely follow each other, including on significant downward trends, the more than 50 national economies in Africa have much less of what he calls "correlation," which, he explains, is a good thing.

"It has the potential to provide a high return with a lower volatility," said Seruma. "That is the opportunity that is very unique for Africa.  The diversity of Africa makes it possible that a portfolio investment in Africa has a lower volatility or a lower risk profile compared to say a portfolio stock in Latin America or in Europe or in the United States."

Noah Greenhill, a senior general manager at the Johannesburg Stock Exchange, says that during the 2008 economic downturn, the impact was extremely limited in South Africa, the continent's leading economy.

"Not once was there even a discussion about a bank closing down, about a bank experiencing a liquidity crisis," said Greenhill. "We were one of the only exchanges in the world, when other exchanges in First World markets that we all respect were considering banning short selling, we did not even consider it.  And yet when you look at South Africa, when you look at Africa, guys are going, 'That is small and irrelevant.'  And yes we are small, but small does not necessarily mean bad."

Short selling is a practice by which an investor can make a profit by predicting a decline in the price of an asset.  It increases volatility, but it is also seen as helping markets by uncovering future problems.

The recent global stock market decline affected Africa's major stock markets.  But many economists say that even though some the world's major economies will continue to struggle in the near-term, there is no sign of a slowdown for Africa's economies.

These economies are driven by natural resources, including gold, which is selling at record highs.  Africa holds an estimated 40 percent of the world's gold reserves as well as other important commodities such as cobalt, platinum and oil.

African economies are also being driven by a need to expand infrastructure and a growing middle class seeking to purchase more and higher quality consumer goods.  Challenges to investment include political instability and security weaknesses in many parts of the continent as well as a lack of market transparence and logistical hurdles.

You May Like

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

John the XXIII and John Paul II will be made saints in a ceremony at St. Peter’s Square on April 27 More

Thailand Reacts to Plots Targeting Israelis

Authorities hope arrest of two Lebanese suspects will disrupt plot to attack young Israeli tourists More

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

'Once Upon a Forest' takes viewers deep into heart of tropical rainforest More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pope Francis Hopes Dual Canonizations Will Reconcile Churchi
|| 0:00:00
...
 
🔇
X
Jerome Socolovsky
April 22, 2014 4:14 PM
On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Robotic Mission Kicks Up Lunar Dust

A robotic mission to the moon was deliberately crashed onto the lunar surface late last week, but not before scientists had collected data gathered by the spacecraft which was designed to self-destruct. VOA's Rosanne Skirble reports on the preliminary findings of the craft, called LADEE - an acronym for Lunar Atmosphere and Dust Environment Explorer.
Video

Video Boko Haram Claims Responsibility for Bombing in Nigerian Capital

The Nigerian militant group known as Boko Haram has claimed responsibility for a bombing in the capital on April 14th that killed 75 people. In the video message, Abubakar Shekau, the man who says he ordered the bombing, says nothing about the mass abduction of more than 100 teenage girls, most of whom are still missing. Heather Murdock has more for VOA from Abuja.
Video

Video Ukraine Developments Hang Over Obama Trip to Asia

President Barack Obama's trip to Asia this week comes as concerns over Beijing's territorial ambitions are growing in the region. Those concerns have been compounded by Russia's recent actions in Ukraine and the possibility that Chinese strategists might be looking to Crimea as a model for its territorial disputes with its neighbors. VOA's Bill Ide has more from Beijing.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid