Africa’s evolving
investment landscape
An FT Live report
africa.live.ft.com
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Table of contents
1 Economic strain and
declining investment 2 Geopolitical
landscape and
China’s retreat
3 Opportunities
for growth
4 Changing the
narrative
1 Economic strain and declining investment
2023 proved to be an economically challenging year for Africa. According to revealed that in 2023 the largest Europe-focused fund held more money
the IMF, the continent's overall economic growth was a modest 3.2 per cent, than all Africa-focused funds combined. Moreover, Partech's annual survey
compared to Asia's robust growth rate of nearly 5 per cent. In countries such shows that venture capital investment in Africa plummeted by 46 per cent
as Nigeria and Kenya, currencies tumbled, while the average consumer price from 2022, with $3.5bn raised from 547 deals. This represents a decline in
inflation rate surged to 17.8 per cent, the highest in more than a decade, both value and volume from recent years. Liquidity issues continue to be a
according to the African Development Bank. These factors created a gloomy significant hurdle, with Fidelity International's fund manager Chris Tennant
economic climate, discouraging both foreign and domestic investors.
highlighting the persistent challenge of “getting your money back out” as
the main reason behind faltering investment in a lot of African countries.
The declining investor sentiment was reflected in the significant downturn
in private capital activity. According to research published in April 2024 by The perception of risk remains the most significant obstacle to investment
the African Private Capital Association, there were 450 private capital deals in Africa, despite its potential. Many still view Africa as an underdeveloped
in Africa, with a combined value of $5.9bn, marking the largest decline in and high-risk region, further dampening investment prospects. More
deal volume in 11 years and a stark 22 per cent drop in value from 2022. specifically, investors cite widespread political instability as a key factor
Compounding the issue were rising debt levels and a slowing average behind falling confidence. Since 2021, six countries—Guinea, Mali, Burkina
growth rate, raising concerns about the potential for another debt crisis on Faso, Chad, Niger, and Gabon—have experienced coups. These nations are
the continent.
often critical exporters of essential commodities. Niger, for example, is a
leading exporter of uranium, while Gabon is a producer of manganese, a
Africa faces the risk of falling even further behind wealthier regions unless vital component in battery manufacturing. Political upheaval has frequently
it can attract more capital. Despite this urgent need, investor interest in the resulted in disruptions to business operations, discouraging investors from
continent remains tepid compared to other regional markets. Refinitiv data committing substantial capital.
2 Geopolitical landscape and China’s retreat
Investment patterns across Africa have been undergoing significant
changes. Over the past two decades, China has emerged as the most
prominent investor in the region. As of 2022, Chinese banks accounted for
about one-fifth of all lending to African nations. Lending has been
particularly concentrated in strategic or resource-rich countries such as
Angola, Djibouti, Ethiopia, Kenya and Zambia. Data from the China-Africa
Research Initiative at Johns Hopkins University indicates that Chinese
lending to Africa hit its peak in 2016, with annual loans reaching $29.5bn.
The massive scale of lending and other investment activity is reflective of
China’s influence on the region, surpassing the US as Africa’s foremost
trading partner.
However, China is gradually scaling back its presence in Africa. In 2021,
President Xi Jinping announced a reduction in financing, pledging $40bn
over the next three years — a cut of one-third. This decision comes amid
concerns over the poor performance of African economies and the
mounting difficulties in debt repayment, marking China’s first overseas debt
crisis. By 2022, the International Monetary Fund had identified over 20
African countries as being in, or at high risk of, debt distress. Private
Chinese lenders are also growing increasingly cautious as several nations in
Africa approach borrowing limits and the spectre of defaults looms larger.
As a result, Chinese lenders are adopting stricter lending terms, and
redirecting lending from infrastructure projects to SMEs and other private
investment flows.
China is moving away from this high-volume, high-risk paradigm into
one where deals are struck on their own merit, at a smaller and more
manageable scale than before.
Chatham House analysis
The retreat of Chinese lending has created a gap in the African market,
which other nations are poised to fill. In 2022 and 2023, the United Arab
Emirates pledged $97bn in new investments across a range of sectors,
including renewable energy, ports, mining, real estate, communications,
agriculture, and manufacturing. This is three times the amount invested by
China, according to fDi Markets, the Financial Times Group’s online
database of crossborder greenfield investments. This significant capital
influx has allowed the UAE to not only influence the economic landscape of
the African continent but also shape its political dynamics.
What’s driving this for the UAE, and of course for other Gulf countries
as well, is the energy transition and the hard push for economic
diversification . . Africa really is this huge untapped market [with]
minerals and agriculture.
Anna Jacobs, senior Gulf analyst, Crisis Group
While the reduction in Chinese lending has created opportunities for
investors from other regions to expand their presence in the African dependency may shift in the long-term as other nations move to fill the gap
continent, China has maintained its dominant position as the top lender, left by China’s retrenchment. Meanwhile, the EU and the US continue to see
allowing it to wield significant economic and political influence. However, their influence on the continent diminish.
3 Opportunities for growth
Despite economic challenges, numerous companies in Africa are exhibiting
strong potential for long-term growth. The 2024 FT-Statista ranking of the Alot of my friends . . . in Silicon Valley were getting FOMO [fear of
continent's fastest-growing companies showcased a broader geographical missing out] about Africa . . . They were starting to put money to work
spread than in previous years, indicating growth potential in a wider array on the continent, flying in and out and pushing up valuations.
of countries. Morocco, Mauritius, South Africa, Nigeria, and Kenya emerged
as the nations with the highest concentration of well-performing Steve Beck, co-founder of Novastar Ventures
companies. This development is promising for investors who are looking to
capitalise on emerging markets early for better returns on investment.
One sector emerging as a focal point of interest in Africa is fintech and
digital services. The 2023 FT-Statista ranking underscores the ongoing
Much of the private sector, particularly the private sector that’s not advancement of digital and related industries, with a large number of IT
directly reliant on government business, has shown incredible resilience.
and fintech companies present on the list. Despite economic setbacks due
to a challenging fiscal environment, Lexi Novitske, general partner at
Abebe Selassie, director, African Department at the International Monetary Fund Norrsken22, an Africa-focused tech growth fund, observes that the market
appears to have bottomed out. Illustrating this is the fact that, since
November 2023, venture capital firms have raised over $650mn for African
ventures, with Norrsken22 itself securing $205mn. This surge in funding
highlights the optimism of investors in Africa's burgeoning fintech and
digital services sector.
African companies are not only solving local or regional problems but Anyone can tell you electricity is a huge problem in South Africa . . . So, if
global ones . . . If you figure it out in Africa, you can take it to other markets
you solve that problem, you must have a winner.
Aniko Szigetvari, partner, Atlantica Ventures Stéphane Bacquaert, managing partner, Adenia
Renewable energy and cleantech are emerging as key areas for substantial
returns on investment. Renewable energy companies, particularly those in
the solar power sector, have experienced rapid growth as Africa strives to
tackle its electricity challenges. Moreover, Africa has an abundance of
resources that could help expand the availability of electricity on the
continent and reduce energy poverty. A study commissioned by the
International Finance Corporation highlights that Africa has the potential to
generate 180,000 terawatt hours of electricity from wind annually — 250
times more than Africa’s current electricity demand. Yet, despite a global
surge in wind energy investments, Africa accounts for only 1 per cent of the
world’s installed wind capacity. This disparity reflects the opportunity for
early investment in green energy, which could offer significant returns as
the continent's renewable resources remain largely untapped.
4 Changing the narrative
A major reason behind faltering growth in Africa is the impact of the
structure of international finance. Despite the pressing need and potential
for growth, high debt pressures are stalling economic progress. The burden
of increased debt servicing costs has been particularly severe, rising by 62
per cent since 2014, having a severe negative effect on the continent’s
economies. African leaders are calling for funds to be re-channeled towards
de-risking the continent from the effects of climate change. They argue
that enhancing Africa’s capacity to adapt is in the interest of wealthier
nations, as it would boost global renewable energy production and have an
overall positive effect on the global climate. Investing in climate resilience,
they contend, is not just a moral imperative but a strategic economic move
for rich countries.
Debt recovery is crucial in the fight against climate change, a global
issue with particularly stark consequences for economic progress in
Africa. The Nairobi Declaration, endorsed by the 54 nations of the
African Union, presents a unified stance on the urgency of addressing
climate change. It emphasises the principle of "common but
differentiated responsibilities," acknowledging the shared goal while
recognising each nation’s different capacities.
The declaration urges developed countries to accelerate their carbon In a bid to mobilise private capital, African governments are increasingly
reduction efforts. It emphasises the insufficient climate finance coming into leveraging blended finance to stimulate investment across the continent.
Africa from developed countries. In 2009, rich nations made a commitment According to data from Convergence, a global platform for blended
to send at least $100bn a year in climate finance to developing countries by finance, Egypt has emerged as the most active blended finance market in
2020. Out of $11bn actually disbursed, only $3bn has reached sub-Saharan the MENA region, accounting for nearly 24 per cent of all deals. The top
Africa as of 2023. The declaration also underscored the need to overhaul the three sectors targeted by these transactions are financial services, energy
global financial system, which, it argues, condemns countries to perpetual and infrastructure. Moreover, The African Development Bank has backed
indebtedness and deprives them of the resources necessary to adapt their the Nairobi Declaration with a $50mn fund and a $250mn blended finance
economies. Moreover, it suggests a tax on fossil fuel trade, maritime facility for the ambitious "Desert to Power" solar project in the Sahel
transport, and aviation, as well as a global financial transaction tax.
region. This initiative aims to generate 10GW of solar power, providing
electricity to 250 million people across 11 countries, including 90 million
Some African countries are individually taking a more assertive approach to who will gain access to power for the first time.
economic development, localising production within the continent. The
Democratic Republic of Congo, for instance, is reviewing all of its mining In summary, the potential for growth in Africa remains substantial,
joint ventures with foreign investors. The aim is to retain more jobs, particularly for investors who enter the market early. However, those
revenue, and higher-value mineral activities within the country, bolstering looking towards Africa face significant challenges in managing and
local economic benefits and fostering sustainable growth.
addressing the continent's development needs, especially in green energy
transition and climate adaptation. African leaders are making
commendable progress in laying the groundwork for economic growth
and helping investors realise Africa’s potential. The future performance of
the region will depend on the sustainability of these developments along
with factors such as the shifting geopolitical landscape.
Africa remains hope eternal for global investors . . . A continent rich in
resources, commodities and people [that] still struggles to live up to the
aspirations of the people and international investors.
Gary Dugan, chief investment officer, Dalma Capital
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