To Progress, Africa Must Take Ownership Of Opportunities

Hubert Danso is the chief executive officer and vice chairman of Africa’s voice for investment in the continent, Africa investor (Ai) Group. Apart from being the managing editor of the Ai magazine, Danso also has responsibility of advising institutional investors, governments and development finance institutions on major infrastructure and private equity investments in Africa. Danso spoke on the impact and benefits of the summits, among other issues with GREGORY AUSTIN NWAKUNOR.  

Tell us about the Africa investor summits 
AFRICA investor will be hosting, in partnership with Thomson Reuters, 8th Ai CEO US-Africa Investment Roadshow. The summit will hold on September 24 and is designed to highlight and enhance Africa’s investment climate, trade competitiveness and job creation agenda, facilitate action and shed light on Africa’s investment success stories.

On September 25, Ai will then host the Ai CEO Institutional Investment Summit, which will focus on facilitating transactional investment partnerships and co-investments between select African and US institutional investors, and sovereign wealth and pension funds, to invest in Africa’s fastest growing sectors and capital markets.

Through these summits, we are pursuing some very specific agenda, including the mobilisation of new, non-traditional sources of capital for the development of Africa’s capital market and infrastructure sectors. These sources include, sovereign wealth and pension funds, as well as private equity firms. We will use the summits to showcase the best in capital market opportunities to these sources and other institutional investors, and facilitate a series of one-on-one meetings around specific transactions, allocations, direct and co-investment opportunities.

For Africa to realise its economic potential, it is critical that long-term industries, such as infrastructure, energy and transport, provide the groundwork for capital market and private equity market growth and job creation in Africa.
Is it deliberate that the summits are holding alongside the UN General Summit on the Sustainable Development Goals?

Yes, Africa investor has a long-standing partnership with the United Nations, which draws on our high-level convening power to bring together institutional investment partners to dialogue and advise African Heads of States on major investment themes, challenges and solutions.

These summits form an important step in forwarding the African private sector’s agenda in terms of the UN Sustainable Development Goals (SDGs), which will take over from the UN Millennium Development Goals (MDGs). Africa will be crucial to the global economy going forward and its private sector voice needs to be heard in developing and implementing the post-2015 SDGs agenda, and importantly, in ensuring African leaders are aligning global development commitments with homegrown development agenda such as, the African Union’s Agenda 2063.

In which sectors are investment opportunities more profitable?
Today’s investment climate is quite different from even a year ago; commodities and oil prices have tumbled and recent global factors have negatively affected Africa’s stock markets. The Africa investor (Ai) 40 investor’ Index, which tracks the performance of Africa’s blue chips, has fallen more than 25 per cent over the past year.

That said; there are many profitable investments to be pursued, especially, in the infrastructure space in the transport and energy sectors. Trade and consumer goods are an excellent sector, particularly in anticipation of the Continental Free Trade Area (CFTA). Once established, the CFTA will offer a market of over one billion people and a GDP of $2 trillion. The technology and ICT sectors are booming and the US Department of Commerce, for instance, recognises the IT sector as one of the fastest and potentially most profitable sectors in Africa.

Construction and real estate should be noted too. With a strong economic growth rate and an increasing urbanisation, more houses, offices, etc., will be needed. Financial services also represent a great opportunity. 80 per cent of the continent is still unbanked and the possibilities are endless, especially when you consider that most of the population own mobile phones, which link back to technology. These are just some of the many profitable opportunities on the continent.
What are the opportunities and challenges of investing in Africa?

The opportunities are endless. A strong economic outlook, a young and growing population, a rapid rate of urbanisation, a growing middle class, an opportunity to leapfrog technology, untapped resources, unused arable land – all these are opportunities.
As for challenges, there are also plenty of these but, the beauty, of course, is that the challenges themselves represent opportunities. Africa’s logistics network, for example, is poor, so goods may be more expensive to transport at the moment. But it represents an unparalleled growth opportunity for logistics developers, infrastructure investors, trade financiers and business as a whole.

Human capital mobility is another challenge: we need to make it easier for Africans to move goods, capital and staff across the continent and here a pan-African business passport is a good starting place, as espoused by the Continental Business Network.
There needs to be an unrelenting coming together of the public and the private sectors to address these challenges.

To realise Africa’s economic potential, African governments and development partners should focus on making it easier to tap private sector human and financial capital to accelerate procurement and approvals to implement projects. Underpinning that is the urgent need to reform and simplify trade policies, regulatory environments and intra-African investment and risk management rules for pension and sovereign wealth funds investing in critical industries such as, infrastructure and capital markets.

We need to streamline and centralise the negotiation, approval and permitting process for projects, which could cut the timeline for the financing and implementation of projects by as much as 50-75 per cent of their current timelines.

Land rights are also a big challenge to be addressed for both domestic and global investors – especially in trade and transit-related transport infrastructure projects. Rights and a predictable and transparent redress and enforcement of legal judgments regarding claims must be decisively addressed.

However, the right steps are being taken. The launch of the Continental Business Network in pushing the Programme for Infrastructure Development in Africa (PIDA) agenda was a vital step, and the Ai CEO Infrastructure Investment Roadshow was essential in bringing project development to the fore.

What changes in private equity deals have you seen over the last few years?
The sector has evolved; there is no doubt about that. It is much more mature. Ten years ago, there was a small field of generalist funds with relatively low levels of funding at their disposal. Today, the number of funds has grown in number and size, and many of them are now more specifically targeted in terms of region and sector (healthcare, real estate, agriculture, etc.). There are now also more local general partners entering the field.
Private equity is now also entering a space vacated by more traditional sources of funding.

Africa’s private equity industry is, however, still far from meeting its potential. Large potential pools of African and global pension and sovereign wealth fund capital are not being accessed, due to their inability to evaluate Africa’s investment and fund manager risk profile. Professionalising a ratings culture and making it easier for owners of capital and institutional investors to assess and compare the risk profiles of custodians of capital in Africa, such as African fund managers and brokers, is essential and the reason why we have pioneered the Ai Fiduciary Ratings global methodology in Africa to assist institutional investment allocators and gatekeeping consultants better assess fund manager and government fiduciary risk and trustworthiness.