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
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

India PM Modi's Party Distances Itself From Religious Conversions

BJP under fire for being slow to rein in hardline affiliate groups allegedly trying to promote Hindu-dominant agenda by luring Muslims and Christians to convert More

Anti-Whaling Group Found in Contempt of Court

Radical environmentalists who threw acid and smoke bombs at Japanese whalers in the waters off Antarctica continue their campaign to disrupt Japan's annual whale hunt More

UN's Ban Urges End to Discrimination Against Ebola Workers

Ban was speaking in Guinea on the second day of a whistle-stop tour aimed at thanking healthcare workers of the countries at the heart of the epidemic 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.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid