MINING IN FOCUS
INVESTING IN AFRICA:
NIGERIA AND ETHIOPIA
Despite a constrained global economic climate, investors are once again
looking at Africa, writes Itumeleng Mukhovha.
O
ne can easily assume that international investors are deterred
from investing in Africa given the growing need to weather a
global financial crisis which has been distorted by Brexit – the
rising geopolitical tensions, the tightened global liquidity
conditions, leveraged loans and sketchy debts that continue to riddle
bank systems, idiosyncratic governments and the bond yield curve that
is trending toward inversion. However, this is not the case. Conversely,
the global financial crisis and the desperate search for growth, yield and
solvency, has led investors to pay more attention to emerging markets
in Africa, and in particular frontier markets with favourable growth
paths, moderate debt levels and high returns on investment.
On a bull run
The stock markets across Africa have reportedly exceeded a market
capitalisation of USD100-billion and are substantially larger than those in
Central Europe and Russia in the mid-1990s, when they first opened up to
foreign investors. According to the International Monetary Fund, the African
markets have been in a strong bull run and shown a compound annual
growth of 3.5% in 2018 and are projected to pick up to 3.9% in 2019. There
are many factors that make the African continent an attractive destination
for institutional investors, including the economic prospects, a favourable
demographic profile, high urbanisation and the rise of the African consumer.
The acceleration in growth has also been driven by cyclical improvements
and supported by favourable regional conditions. These favourable
conditions include the restoration of oil production in Algeria, Angola and
Nigeria, the improved external financing conditions, the moderate increase
in commodity prices, surging foreign direct investments and the narrowing
current account deficit in certain jurisdictions. In Ethiopia and Nigeria, this
growth has been spurred by partial privatisation of state-owned companies
and high commodity prices, respectively.
Construction in Abuja, the capital of Nigeria. Nigeria’s economy is slowly growing after a period of stagnation.
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