Africa Investors Lose ‘Lunatic’ Tab as Rising Wealth Attracts Mainstream

Africa Investors Lose ‘Lunatic’ Tab as Rising Wealth Attracts Mainstream

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Booming demand for its minerals and improved governance meanAfrica is beginning to attract mainstream investors, delegates to the World Economic Forum in Africa said this week, highlighting a turnaround in the continent’s fortunes.

“We feel the pulse of African business from the ground up,” Simon Harford, a partner at Actis Capital LLP, a private equity firm with $1.5 billion of assets in 18 African countries, said in an interview at the conference in Cape Town today. “We felt at times rather out on the frontier. Now Africa is more mainstream. We’re not getting questioned about whether or not we’re lunatics for investing.”

The three-day meeting, the 21st held by the Geneva-based World Economic Forum on Africa, brought together more than 900 business and government leaders. The International Monetary Fund estimates sub-Saharan Africa’s economy will expand 5.5 percent this year and 5.9 percent in 2012, and that seven of the world’s 10 fastest-growing economies over the next five years will come from the region.

“Discussion of Africa’s potential is now per se,” South African Trade and Industry Minister Rob Davies said in an interview. “Africa has clearly been identified as part of the growth story of the world.”

Africa’s population reached 1 billion last year and after economic growth averaging 4.9 percent from 2000 to 2008, the number of families with an income of more than $20,000 a year has exceeded India’s, according to a report by McKinsey & Co. Inc. With China investing in African mineral and infrastructure projects and the continent’s population rising by more than 2 percent a year, that market is set to expand.

No One-Off

“Across the continent there are countries that are on the move,” Hannah Tetteh, Ghana’s minister of trade and industry, said in an interview. “That is not just a one-off thing because they have been experiencing consistent economic growth. People’s living standards have changed as a result.”

Even so, the continent remains overly reliant on minerals, which account for more than 80 percent of exports, and suffers from “poor-quality” growth that often does not translate into poverty reduction, the Africa Progress Panel, a grouping that seeks to promote development on the continent, said in a report released at the forum yesterday. It highlighted that trade between African countries accounted for less than 10 percent of the continent’s total commerce.

Making the Transition

“There’s no reason to believe that Africa can’t make the transition from a commodity boom to building solid foundations for sustainable growth,” Robert Greenhill, the World Economic Forum’s managing director, said in an interview.

Actis sees investment potential in financial services, consumer businesses, real estate and infrastructure, Harford said.

“Africa has a lot of opportunities,” Aliko Dangote, chairman of Dangote Cement Plc, Nigeria’s biggest company by market value, said in an interview. “The only thing we have to do is sit down and harness those opportunities. Aside from the few issues in North Africa, things are much, much better. You have less corrupt leaders, we are having elections all over the place. I’m not saying we’re 100 percent there, but we’re getting there.”

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net; Nasreen Seria in Johannesburg at nseria@bloomberg.net; Renee Bonorchis in Johannesburg atrbonorchis@bloomberg.net.

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