Africa-Economy: Investors wary of continent's political risk
Tag: Africa-Economy risk, Africa Economy
Summary: According to experts, countries like Rwanda that have enjoyed relative stability and a good business environment will attract more investments than others, thus boosting their Gross Domestic Product.
According to experts, countries like Rwanda that have enjoyed relative stability and a good business environment will attract more investments than others, thus boosting their Gross Domestic Product (GDP).
Africa has become one of the fastest growing regions globally and is positioned as a global investment destination of choice.
But despite investor dash to seize opportunities across Africa driven by insatiable demand for the continent's resources, unprecedented rise in consumer demand and related infrastructural development, experts believe many investors are still wary of the risks of putting money into the continent.
"We are aware that people worry about political risks and change of legislation in different African countries...the African story still has elements of political and economic uncertainty but overall, business opportunities are greatly improving," said Tim Bashall, Head of Strategy at KPMG Africa, an audit, tax and advisory services firm.
He says that improved stability in most African countries and public sector reforms aimed at improving the business landscape and a regulatory framework will pave a safe way to enhance investments on the continent.
"Overall, business opportunities are greatly improving and investors are, therefore, thinking in cycles of 15-20 years."
KPMG's Dapo Okubadejo believes that buying and building existing companies, investing in value-chains while adopting partnerships in the logistics and distribution sectors and engaging proactively with regulatory institutions, among others, will address the risks.
Henri Obi, Chief Operations Officer of Helios Investment Partners added that: "Doing business in Africa requires a lot of patience and time but the rewards can be very high. It is important to understand the local cultures in African countries where companies want to invest."
In addition to political and economic uncertainty, the continent still faces limited skilled human capital, suggesting the need to build a work force suited to the business environment and having local presence that creates relevant and adequate capacity to deal with the prevailing realities and challenges.
"We pursue a strategy of hiring global business as leaders for our African operations who have proved themselves elsewhere. To us, it is not important where the talent comes from as long as we get the talent we need," Obi said.
Rwanda registered a Real Gross Domestic Product (GDP) increase of 8.6 per cent in 2011, up from 7.2 per cent in 2010, according to the National Institute of Statistics of Rwanda (NISR).
According to estimates by the International Monetary Fund, Sub-Saharan Africa alone will grow by 5.4 percent this year. Africa's GDP is expected to reach US$2.6 trillion by 2020.