AFRICA: Investors\' Haven

Published on 17th May 2005

In a world of good investment destinations, Africa has proved to be the best of all. According to various researches, the continent gives the highest returns on investment in each of its diverse sectors. And very few, if ever, burn their fingers whenever they pump their money in many her countries, save in states perpetually engulfed in civil wars.

Only relocations by companies from country to country in search of the ‘best’ business environment or due to political instability have been recorded. Businesses are always expanding and creating the need for more.

Yet this is not the Africa many people, investors even, outside there know.  A majority of them know the continent of hunger and starving children, war and HIV-Aids. All these attributes, while negative, fog lucrative investment opportunities that have kept companies in business for years and continues to attract more, year in year out.

It’s not just supplying relief agencies or other humanitarian organizations. We are talking about real and hard deals ranging from manufacturing, mining through to the Internet and mobile communication.

Most economies here are powered by agriculture, giving companies in the sector ready market and the demand required to keep them not only running, but doing so at a handsome profit. Sugar and coffee millers, tea processors, edible oil manufacturers, just to mention a few, have little to complain about, high taxes in some countries notwithstanding.

The Internet, like mobile telephony, is penetrating to areas never envisioned five years ago. Internet Service Providers are coming up every day, as are innovative products. Nearly half of the employed population in most countries either has an email address or uses the Internet to do one or two things – be it research or getting news. Nearly all college students use the Internet, but the right products are lacking.

Mobile telephony is the latest big thing in this continent trying to catch up with the rest of the world. Indeed it’s the fastest growing market around the world. GSM operators have snapped up the urban market and are headed for the rural areas where they are defying infrastructural constraints to get farmers, primary school teachers and housewives talking on cell-phone.

Experts in this sector predict that mobile telephony will continue growing at a phenomenon rate in the foreseeable future. Call rates are still high, though, and increased competition would not only open opportunities for new companies, but, most importantly, lower charges and increase access to the services. This will expand the market, and thus revenues for service providers.

Kenya, for instance, has only two mobile phone operators, which control over three million subscribers in a country with a market potential of 14 million. This has created a duopoly, keeping rates high.

African governments should fully liberalize its sectors to encourage competition, which will result in quality and affordable products and services. With this should follow incentives for indigenous investors who shouldn’t, by all means, be left out of the party. Granted the high capital required for most investments, governments should come up with ways of helping local business people and other willing foreign investors fund their operations with cheap credit.

Also, local people should also be encouraged to participate in the ownership so that they will see the companies as part of their society rather than people out to mint money and run away.

With a growing market of 800 million people, coupled with scantly exploited opportunities and emerging ones, money is safe in Africa. The risks of bursts are low and counterfeiting is not as rampant as it is in Asia.  No wonder every country that considers itself serious in the world economy is talking Africa these days.



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