We have heard that many investors are now strongly considering investing in Africa. Also, we have all heard that Africa is the world’s second largest investment destination in terms of foreign direct investment.
We have all been told that from $10 billion dollars in 2010, Foreign Investment portfolio in Africa has risen to over $60 billion as at 2016.
What we’re not told however is that investment by Africans themselves is going in the reverse direction.
Do you know that while Africa is wallowing in darkness with 645 million people without access to electricity, African millionaires and billionaires are setting up world class energy utilities in Europe, Asia and Middle East countries?
What about Africa’s Sovereign Wealth and Pension Funds as well as Insurance Pool of Funds?
Do you know that Africa has over $700 billion in such funds, but rather invests them in foreign market instruments? Ridiculously, the same Africa later posts Eurobonds and borrows its monies back at a higher interest rate.
In fact, do you know that even the Pan African Parliament is now being funded by foreigners? Africans themselves aren’t putting down the cash.
So, why are Africans scared of investing in Africa?
The simple answer is that most Africans are very shortsighted.
Without prejudice to our dear continent, most Africans don’t think long term. They are not ready to make long term investments. That’s why long term investment portfolios such as #infrastructure and digital technologies are gradually being taken over by foreign portfolio investors.
Yes, there are challenges of insecurity, policy and regulatory issues here and there which create investor fatigue. But the fact is that short term mentality is the core challenge around investment in Africa by Africans.
Otherwise, how come that in the same very unpredictable African continent, China’s investment is increasing and as at 2018 stood at $204 billion?
Investment in well structured and highly organized markets and investment environment like those in Europe and America are way perfect for short term investments and that’s why Africans are thronging such markets, abandoning the African market which has been labeled “unpredictable”.
While shortsighted African investors complain that Africa’s infrastructure gap is huge, $68-108 billion per year, long sighted non-African investors say Africa’s infrastructure investment opportunities are huge, over $1 trillion in 10 years.
One says half empty, the other says half full.
Africa holds the highest return on investment on the planet, but needs patient capital, not hot money that leaves immediately. Investing in Africa therefore requires patient investors.
The question however is: how many African investors are willing to commit to investing in Africa for the long term?
Think About it and leave your thoughts in the comments section below.