Author: Antonio Guerrero

INVESTORS FALL FOR AFRICA’S CHARMS

By Antonio Guerrero

Foreign direct investment into Africa will reach $150 billion a year by 2015, according to a May report by global accounting firm Ernst & Young.

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Africa’s consumer goods boom to attract foreign investors

The report says the continent, which received $84 billion in FDI last year, is becoming a magnet for investors seeking higher returns as local governments work to improve risk perceptions. Over 40% of the 562 global executives Ernst & Young polled said they were considering increasing investments in Africa over the next decade. Consumer goods, construction, telecommunications, financial services and mining are among sectors perceived to have the greatest potential. Ernst & Young expects African GDP to rise from $1.6 trillion in 2008 to $2.6 trillion in 2020.

The country’s trade and industry minister Rob Davies predicts South Africa will welcome $17 billion in new investments by 2014. Mounting investor concerns over corruption and rigid labor regulations, which raise production costs, have kept the investment pipeline slim in recent years. Authorities expect new investments to come principally from other emerging markets, particularly BRIC countries. FDI flows to South Africa were an estimated $4 billion in 2010.

Nigeria’s Dangote Cement, the country’s largest company by market value, will invest $3.9 billion over the next three years to more than double cement production. The company, which produces some 20 million metric tons per year, plans to expand capacity to 50 million metric tons by 2013.

Rwanda is preparing to tap international Eurobond markets within the next two to three years. It has initiated talks with Standard & Poor’s for a second sovereign rating. Fitch already rates Rwanda at “B,” equal to ratings granted to Uganda, Mozambique and the Seychelles, but lower than Zambia’s “B+.” After a bloody civil war and genocide in the 1990s, the country is now lauded by the World Bank for its economic progress.