But should anybody want to put money into Africa at a time the global financial crisis and falling prices for export commodities, on which the continent is so reliant, have discouraged investors who had begun to see some African countries as promising frontier markets?
“Africa is going to overtake the Middle East to become the second fastest growing region in the world after emerging Asia. It will be affected by the global financial crisis but it is much less exposed than many places,” Katharine Pulvermacher, chief executive of business consultancy African Rainbow said this week on the launch of its Star of Africa index.
The index’s creators told my colleague Peter Apps that potential growth in energy, water and communications consumption could amply reward investors taking the risk in Africa. South Africa, Mauritius and Tanzania took third, fourth and fifth place respectively on the index. Somalia, Chad and Eritrea were the least appealing countries for investors.
The International Monetary Fund’s most recent forecast of economic growth for Africa this year was 3.3 percent – much slower than the 5-6 percent of recent years but good by the standards of Western countries in recession. A senior IMF official noted recently, however, that African growth could be sharply lower than its forecasts.
“Remittances, tourism revenue and even aid, we feel could fall further,” said the IMF’s Africa Department Director Antoinette Sayeh.
The African markets that had attracted most foreign investment in recent years – not only developed South Africa but also countries such as Nigeria and Kenya – are among those that have so far been hardest hit, while smaller economies that may not have had so far to fall have been less touched.
Despite the global woes, bulls still cite long term changes in Africa such as improvements in political and economic openness, a decrease in the number of conflicts, new technology, emerging middle classes and long term investment from Asia as reasons for optimism. Zimbabwe’s stock exchange restarted on Thursday after a three-month halt and a still shaky power-sharing deal has brought some hopes of economic revival in what used to be a strong performer.
For some, looking to the long term is not enough, though. UK asset manager New Star – being bought by a rival - said this month it was winding up its Heart of Africa Fund due to deteriorating market conditions on the continent.