Africa - From Wasteland To Frontier Market
5/9/2012 9:07:14 AM -
A continent that was once described as an economic wasteland is today showing tremendous gains as a vibrant emerging market with proven success of high rate of returns.
This is because, some investors who have invested heavily in Africa for more than a decade now, have kept quiet about the astonishing returns, preferring to keep the investing world’s final frontier to themselves - until now.
Now is the time to tell the African story loud and clear that the continent has great prospect to attract equity investors to promote development and economic growth, discussants at the 9th African Venture Capital Association (AVCA) conference have observed.
“Africa has not performed badly and is now in its prime time, but most often risk perceptions are overpriced.”
Panelists at the Ninth Annual African Venture Capital Association (AVCA) Conference have observed that Africa needed to tell her story better to enable investors make informed decisions about the continent.
They contended that Africa had not performed badly and was now in its prime time but most often risk perception were overpriced and some countries were termed no go areas.
Speaking at the annual Africa Venture Capital Association conference in Accra under the theme ‘Africa, The Rising Giant’, Mr. Seth Terkper, a Deputy Minister for Finance and Economic Planning said: “Africa is regarded as an important investment destination and the next frontier in emerging terms.
He added: “Africa is also benefitting from sluggish economic performance in the advanced west while investors from an emerging East take a second look at the continent.” Mr. Terkper observed that the continent is attracting more permanent sources of investment funds to lubricate the wheels of commerce through the various stock exchanges and private equity initiatives, and through new and existing commercial and investment banking.
“As Africa begins a journey to catch up with the emerging world, it must be aware of these opportunities as well as several pitfalls in order not to be complacent in a fiercely competitive world,” he said, and called on investors to see and categorise the 50-plus African countries on a league or rating table to differentiate the good and stable performers from the bad ones beyond notions and re-colonisation of the continent.”
He advised that Africa must learn from the global crisis that has brought many advanced countries on their knees, and that countries such as Ghana cannot sacrifice their macroeconomic successes on the altar of poor monetary and fiscal policies.
The conference provided an opportunity for key players in the private equity investment industry to converge and discuss important topical issues. It was both insightful and thought-provoking, with exciting roundtable discussions leading the debate on Africa Rising in a World of Crisis.
It also covered diverse topics such as: Getting Africa ready for primetime; perspectives on investing in Africa; a current overview of private equity in Africa; fundamentals of private equity in Africa, and regional perspectives on private equity across the continent.
Mr Daniel Duku, Chief Executive Officer of Venture Capital Trust Fund, co-host of the conference said the fund was established by government as a means of providing alternative financing for Small Medium Enterprises (SMEs) which led to a VCTF ACT in 2004.
It has since partnered five indigenous funds which have invested in more than 46 SMEs in all sectors of the economy, and had increased the total pool of funds available for SMEs by up to three times its initial endowment to US$62 million.
The VCTF is expected to outdoor its new strategies aimed at providing appropriate vehicles for both local and international investors to participate in Ghana’s booming economy through private equity fund investing.
“It is a fact that existing private equity investment has proved challenging across Africa, although several efforts have been made in the past through innovative deal structuring.'
To address this challenge, VCTF in collaboration with the Ghana Stock Exchange is supporting the establishment of an alternative market for SMEs, which would serve as an efficient and more efficient means of exist for private equity funds.
For new investors to the continent, Mr Duku was optimistic that they might be seeking to explore the great continent in the next few months and that existing investors could attest to the development of the African continent and added that the rising Africa would be incomplete without mentioning Ghana, a country among its fastest growing economies.
Ms Michelle Kathryn Essome, Chief Executive Officer of Africa Venture Capital Association, explained that the prime target of the conference was to showcase opportunities in Africa through in-depth discussion and analysis examining risks -- macroeconomic, currency, political and rule of law which needed to be address and mitigated to create an enabling environment for private equity and venture capital in Africa, with the goal of attracting a broader range of investors from around the world.
AVCA is an industry association supporting African private equity and venture capital investors through conferences, training, research, and information dissemination.