Forget ‘Africa’: focus on the key markets

More than simply investing in a continent, delivering successful partnerships in Africa is about knowing the key growth markets, says Paul Hinks, founder and CEO of Symbion Power and the US Chairman of Invest Africa’s Advisory Board

Those of us who are investing in Africa are exhausted by over used rhetoric. The term ‘Africa Rising’ was coined at the end of 2011 in a now famous story published in the Economist. A year later it re-appeared on the cover of Time magazine. Enthusiasm was partly spurred by the now legendary explosion of the mobile phone sector and the apparent maturity of new democracies that had emerged after the demise of the Soviet Union in 1991.

But we now know that “Africa” did not rise. Some countries rose, but many reeled. Others rose for a few years and then they reeled. Some continue to rise and are likely to reel. The lesson is that thinking about “Africa” as an investment destination is a mistake. We have to be more focused because many countries do not meet the minimum acceptable criteria that serious investors demand. In fact, perhaps only about 8 countries are truly investor ready and investor friendly. Another 10 might be considered as frontier markets and worth a flutter if you can stomach the risk. Forget about the others for now, just observe them.

But, despite the challenges that are prevalent, and notwithstanding the risks that exist, some investors have made fortunes in Africa. The markets are huge. Ten countries have populations in excess of 40 million and 4 exceed 80 million. Nigeria and Ethiopia alone are home to 300 million people. It’s these demographics that are the foundation for all the optimism and excitement that exists and with mobile phone connections topping 367 million in 2015, anything seems possible.

I recall the days when Africanists were reticent to promote the introduction of modern day gadgets to the rural African. Conversations about development were often like that in the eighties and nineties. So often I would hear “They don’t want TV’s and mobile phones, they want to keep their traditional lives”.

Boy how wrong they were! Africans want everything developed countries have. Now, we see home pay as you go solar power systems being installed on a massive scale in rural areas and they are buying DC televisions, radios and other appliances to utilize the power. Previously unseen ATM’s are everywhere and the credit and debit cards I was once told would never work in rural Africa because they local people would lose them are commonplace now. Mobile payment systems have transformed how payments are made.

In many countries infrastructure has improved dramatically, thanks in a large way to the timely intervention of China. Without their help the improvements that we’ve seen in many African countries wouldn’t have been possible. In the west China is often maligned for its investment in Africa because it is based on the extraction of resources. But many mines and a large proportion of oil and gas concessions are also owned by firms from the US, Canada, Europe, South Africa and Australia. China has been good for Africa and the infrastructure it has built there has improved the climate for investment for all of us. For Africa and China, it has been a win-win partnership.

Some countries on this incredible continent are great investment destinations. Choosing the lowest risk, least uncertain places on the continent is though the key to success. Think narrow in Africa, not far and wide. It will pay off.

And no, I will not name them here.