African countries are looking for investments, do not want to stand idly by

Henry

From South Africa to Nigeria and Rwanda, African countries want to put on a show of power at the World Economic Forum this week and transform their image by grabbing private investment, rather than development aid.

This year in Davos there is no panel discussion on development aid and African policy makers at the Swiss resort instead discuss free trade, investment and the energy transition.

With the population of young people growing the fastest, African officials and business people believe the continent offers unparalleled opportunities for investors.

“This is the story of all the challenges and risks, but there is also a formidable story of the incredible investment opportunities that the continent offers,” says Marie-Laure Akin-Olugbade, a senior executive at the African Development Bank.

“We think we have to tell that story,” she said at a gathering of business people and political influencers.

“By telling the story of what the continent has to offer, is already a good step to get the private sector on board.”

Others share her enthusiasm.

“We are in a position to really benefit from the digital revolution in the world,” said Kashim Shettima, deputy president of Nigeria, during a discussion of the Pan-African Free Trade Area.

This area consists of 47 countries with a population of 1.4 billion people.

“People are beginning to understand the importance of Africa’s place in history over the next 10 or 20 years,” said Ajay Banga, president of the World Bank.

Benin singer Angelique Kidjo also believes things are changing. “It’s been changing in the last decade in music and art in general. Why wouldn’t the business side change?”

More funding needed

The United Nations Development Program (UNDP) launched a new initiative called “Timbuktoo” at the forum; a plan to invest $1 billion (about R19 billion) in public and private capital in innovative new companies on the continent.

“Africa will increasingly emerge as an investment destination,” says UNDP administrator Achim Steiner.

Today’s value of young companies in Africa represents only 0.2% of young companies worldwide. However, most capital injections into new African companies come from abroad, with 83% going to businesses with operations in just four countries: Egypt, Kenya, Nigeria and South Africa, according to the UN.

“So many ideas die an early death, simply because no one wants to take a chance on them,” says Steiner.

Rwandan President Paul Kagame said at the launch of the UNDP initiative that new companies on the continent need the financing to “compete at the international level”.

Kagame announced that Rwanda will contribute $3 million (about R57 million) to the fund.

Under the banner of the project, the money will be used to set up eight innovation centers in eight African countries, including Ghana, Morocco and Senegal.

Investors reassured

“One of the fundamental challenges to achieving development goals in Africa is the ability to mobilize significant resources for financing,” says Nana Akufo-Addo, President of Ghana.

Because most African economies have little room for maneuver to spend more, “investment from the private sector will play a significant role”, said Akufo-Addo.

Anne Beathe Tvinnereim, Norwegian Minister of International Development, says “humanitarian situations are increasing – in volume and scope and the needs are increasing” while the financial space to deal with them is increasingly “shrinking”.

Tvinnereim says there is a “perception of risk” that can be absorbed by public money.

Norway and the USA have recently launched a program that will provide financing to small and medium-sized enterprises in Africa’s agricultural industry.

The money will not be redirected directly to the companies, but in funds that will include money from private financiers.

“This can be done if we set up the guarantee mechanism in the right way,” says Tvinnereim.