New Telegraph

76% investors to grow African investments

Global investors are set to see a significant increase in their African investments, with 76 per cent either studying the markets, preparing for entry or readying to deploy additional investments into the continent according to the “World to Africa” report.

The report is an industry-wide study conducted by Standard Bank Group and the ValueExchange, in cooperation with the Bank of New York Mellon, Africa Venture Capital Association (AVCA), South African Venture Capital Association (SAVCA), Global Custodian and MiDA. According to the report, investing in Africa is already a core activity for almost half of all global investors, particularly those in Europe.

It also states that a further 36 per cent of global investors are readying themselves to enter African markets – either through planned market entries or account activation in the region – highlighting the growing appeal of African markets to overseas investors.

The report notes that the fact that this development is driven mostly by long-term, institutional investors is evidence that this growth is strategic more than opportunistic. Although volumes of Africa- bound investments are yet to return to pre-pandemic levels, the study reveals that 34 percent of investors plan to increase their investments into Africa in 2022 – creating a major injection of liquidity into key markets. Whilst the majority of investors are focusing on South Africa, Nigeria and Kenya for these increased flows, sub-Saharan markets such as Botswana, Zambia and Namibia look set to benefit from growing investor confidence. In addition, the study shows that while projected investment returns from African markets is the key driver for foreign investment flows, the appeal of Africa as an Environmental, Social, and Governance (ESG)-friendly destination is also driving increased interest. European investors and those from the Asia-Pacific region, who see ESG as the second-most important driver of Africa flows today, lead the way in this trend.

“This survey draws on views from over 220 institutions to give a uniquely comprehensive view of the drivers, challenges and triggers that Global Portfolio Investors face when looking at African markets. Ghana’s capital market is steadily developing and increasingly playing a pivotal role in attracting long-term capital for financing economic activities,” said William Sowah, Head, Investor Services, Stanbic Bank Ghana. According to the report, whilst portfolio investors are focused on government bonds and a basket of technology, infrastructure and natural resource stocks, the appeal of fintech as the main target for all profiles of investment is clear – particularly for large North American investors seeking global diversification.

However, the report states that despite the increased attention on Africa, not all global investors are ready to turn to the continent. 41 per cent of new investors to Africa (and 27 percent of existing Africa-investors) see the current state of the continent’s foreign exchange regimes as being a core obstacle to investing. It clearly establishes the fact that global investors will be strongly drawn toward countries that take action to drive local market reforms to increase and stabilise liquidity in the near future.

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