Forgotten billions will drive Africa's growth: Stanlib

The US$700 billion US bank bailout and rescue packages to prop up Western financial sectors have diverted investor attention from multi-billion dollar funding that in relative terms may have even greater economic effects - not to limit losses, but unlock substantial value across the continent of Africa.

The billions the world forgot have been revealed by Stanlib, the asset manager that runs the only UCITS-approved Africa Equity Fund, status that enables this investment product to be marketed across all EU jurisdictions.  Stanlib calculates that in 12 months global companies have announced deals in African nations with a total value of more than US$300 billion.

"That's almost half the US bailout figure," says Dylan Evans, Director: Global Investment Marketing at Stanlib's London operation. "This investment will be heading towards a continent-wide economy only a fraction the size of the US. The multiplier effect of so much money hitting such a small economy is likely to be truly galvanising."

Stanlib arrived at the US$300 billion figure by totting up all the corporate deals announced since it launched the Standard South Africa Equity Fund a year ago. The figure excludes foreign aid, which would take the total appreciably higher.

Evans adds: "The magnitude of the deal-flow is one reason Stanlib remains so confident of Africa's medium-term growth prospects. The International Monetary Fund still predicts 6% GDP growth for Africa in 2008 and 2009, despite looming recession in many developed countries."

Nigeria, targeted for incoming investments of US$89 billion, is the No 1 recipient, hardly surprising given the size of its oil and gas industry. But Tunisia was a less predictable No 2 (US$56 billion), mainly a result of real estate and tourism investment. Egypt, Africa's largest economy, came in at No 3 (US$33 billion). Mozambique, a nation with a low investment profile in Western capitals, was fourth on the list with deals totalling US$32 billion.

Evans says investors are drawn to Mozambique by prospects in the fields of oil and gas, bio-fuels, hydro power and infrastructure development.

He notes: "On a regional basis, resource-rich West Africa has been considerably more successful in attracting investment than East Africa, with its lack of resources. On a per capita basis, tiny Namibia, with a population of about a million, has excelled in securing US$7 billion, mainly headed towards its uranium and cement industries."

The most attractive sectors proved to be real estate, oil and gas and other natural resources, claiming US$242 billion of the incoming investments. Infrastructure, electricity generation and cement accounted for a further $50 billion.

"Investment into sectors like this should be positive for Africa's future productive capacity," says Evans. "Investment into consumer goods is just 1% of the total at US$3 billion. Unlike much of the Western world, Africa looks wisely intent on producing before it consumes!"

China leads the Afro-investment charge while Russia seems positioned for a leading role in Nigeria's gas industry. Indian investment has been spread between resources, telecoms, software and manufacturing. In contrast, the Gulf States are big investors in North Africa's real estate and tourism sectors.

Portugal and Brazil are notable investors in Portuguese-speaking Angola and Mozambique. France has a bias toward French-speaking West Africa. The US has targeted West Africa's oil industry.

Evans concludes: "Not all this investment will be made in one year and if commodity prices fall further some investments could be scaled back. Having said that, there's no sign of the deal-flow slowing."