Investor rush turns to Africa

WASHINGTON – Africa is attracting unprecedented private-sector interest, especially in commodity producing countries and those benefiting from recent debt relief, Standard Chartered Bank’s Africa expert said on Tuesday.

“On the customer side we are seeing a great deal more interest in Africa and a lot of funds in particular who previously were perhaps looking at other emerging markets are now looking at Africa in a new way,” Razia Khan, Standard Chartered chief economist for Africa, said in an interview. Khan was in Washington to talk with US Treasury Secretary John Snow ahead of his planned trip to Africa this week, which was postponed indefinitely on Monday.The London-based economist said the growing investor interest in Africa was mainly due to successful economic reform that has created more stable economies with lower inflation and annual growth rates around 6 per cent in some states.But she said the main interest in the continent was driven by high global commodity prices for oil, gold and metals.”Given the low base of a lot of African economies there is still a lot of growth potential before they catch up to other emerging markets and that suggests that the growth rates in Africa are going to remain higher than other parts of the world,” she said of African growth that has outpaced the global average since 2001.Khan said investors had long chased returns in high yielding emerging Asian markets but Africa now posed as a new and potentially lucrative market.”Africa provides investors with potentially far higher yields than are available in other markets,” Khan said.”Suddenly with Africa having benefited in a big way from the debt relief, it has focused that renewed attention on the markets in the continent,” Khan said, adding, “Everything seems to be falling into place.”She said oil producer Nigeria, copper producer Zambia and gold-rich Tanzania and Ghana had seen the bulk of the interest from global investors now looking farther than South Africa.Under a July agreement led by the Group of Eight industrial countries, 13 African countries will receive debt relief from the International Monetary Fund and World Bank.Among the African nations to benefit are Benin, Burkina Faso, Zambia, Mozambique, Niger, Senegal, Tanzania, Ghana, Uganda, Ethiopia, Mali, Madagascar and Rwanda.Khan said the agreement had helped raise the interest of mainly European and Japanese banks now looking more closely at corporate finance opportunities in the countries.”Suddenly sovereign credit ratings look a lot better in these countries and as a result banks would become more comfortable with African risk,” said Khan.She said African markets were traditionally regarded in major financial centres such as New York and London as too small to be of interest.But that was changing, she added.”What we are now seeing is such a great appetite for yield that a lot of investors are willing to consider those relatively illiquid markets where they hadn’t been active in a very big way before,” Khan said, adding, “Yes, the typical deal size is a lot smaller than what they have been used to but the yield is so attractive that it almost compensates for that.”- Nampa-ReutersKhan was in Washington to talk with US Treasury Secretary John Snow ahead of his planned trip to Africa this week, which was postponed indefinitely on Monday.The London-based economist said the growing investor interest in Africa was mainly due to successful economic reform that has created more stable economies with lower inflation and annual growth rates around 6 per cent in some states.But she said the main interest in the continent was driven by high global commodity prices for oil, gold and metals.”Given the low base of a lot of African economies there is still a lot of growth potential before they catch up to other emerging markets and that suggests that the growth rates in Africa are going to remain higher than other parts of the world,” she said of African growth that has outpaced the global average since 2001.Khan said investors had long chased returns in high yielding emerging Asian markets but Africa now posed as a new and potentially lucrative market.”Africa provides investors with potentially far higher yields than are available in other markets,” Khan said.”Suddenly with Africa having benefited in a big way from the debt relief, it has focused that renewed attention on the markets in the continent,” Khan said, adding, “Everything seems to be falling into place.”She said oil producer Nigeria, copper producer Zambia and gold-rich Tanzania and Ghana had seen the bulk of the interest from global investors now looking farther than South Africa.Under a July agreement led by the Group of Eight industrial countries, 13 African countries will receive debt relief from the International Monetary Fund and World Bank.Among the African nations to benefit are Benin, Burkina Faso, Zambia, Mozambique, Niger, Senegal, Tanzania, Ghana, Uganda, Ethiopia, Mali, Madagascar and Rwanda.Khan said the agreement had helped raise the interest of mainly European and Japanese banks now looking more closely at corporate finance opportunities in the countries.”Suddenly sovereign credit ratings look a lot better in these countries and as a result banks would become more comfortable with African risk,” said Khan.She said African markets were traditionally regarded in major financial centres such as New York and London as too small to be of interest.But that was changing, she added.”What we are now seeing is such a great appetite for yield that a lot of investors are willing to consider those relatively illiquid markets where they hadn’t been active in a very big way before,” Khan said, adding, “Yes, the typical deal size is a lot smaller than what they have been used to but the yield is so attractive that it almost compensates for that.”- Nampa-Reuters