Summit Notebook

from Africa News blog:

Africa: Not just about commodities

High commodity prices have certainly helped African producers both because it means they get paid more for their exports and it encourages  investment to increase production.

But almost all the speakers at the Reuters Africa Investment Summit have agreed that the change in Africa is driven by more than just digging minerals out of the ground, pumping oil or growing crops for foreigners to consume.

“The Africa growth story is much bigger than a pure commodity story,” said J. Kofi Bucknor, Managing Partner of private equity firm Kingdom Zephyr Africa Management.

“It’s about disposable income growing, improving government, improving economic environments that have allowed investments to generate growth. I think that trend will be sustained irrespective of commodity price volatility.”

Like many other investors, Kingdom Zephyr is seeking to benefit from what it sees as Africa’s growing middle class.

For African countries that don’t produce oil, high commodity prices also bring the pain of higher import costs.

Zambian President Rupiah Banda, whose country relies heavily on copper exports for income, pointed out that even when copper prices tumbled in 2008, it didn’t stop growth.

from Africa News blog:

Send us your investment bankers

Not so long ago, anyone with the talent and means was heading out of Africa in search of better paid and more fulfilling professional work.

That’s all changing and the emotional appeal of a return to the home country is playing a less important part in the Back to Africa decision than the jobs and opportunities suddenly opening up thanks to fast economic growth and expanding financial markets.

As came out of the Reuters African Investment Summit, banks need talented and experienced staff who also understand Africa and there just aren’t enough of such people on the ground to meet the needs.

There are lots of suitable people in the world’s big financial centres, where African professionals who left in search of better lives have now honed their skills in senior jobs.

While there might be an excess of investment bankers for the likes of some in sluggish Western economies, there is lots of demand in Africa.

"The biggest competition we see here is the competition for people," John Coulter, JP Morgan Chase's CEO for sub-Saharan Africa, told the Summit.   While many African countries have plenty of experienced retail and commercial bankers in their domestic markets, investment banking skills are rare.

"There is a very strong need for strengthening skills in project finance, in capital markets, in investment banking, even asset management," the governor of Nigeria's central bank, Lamido Sanusi, told the Summit in Lagos.

from Africa News blog:

African turmoil? Zambian president doesn’t think so

One of the big questions at the Reuters Africa summit has been what impact the turmoil in North Africa is going to have south of the Sahara - something we’ve looked at on this blog too.

Zambian President Rupiah Banda doesn’t expect much on the political front, at least not in his country.

As he put it to us at the Reuters offices in Johannesburg: "We have gone through that period long before.”

“In 1991, the Zambian people removed the one party state, they moved towards multi-party democracy."

"If someone stood up today and said let’s remove this government, I think the Zambian people would say ‘Why do we have to run the risk of burning this country when we are going to have elections this year?’”

Zambia was one of the first countries to take the multiparty route when protests to demand democracy erupted across the continent after the Cold War.

It is widely seen as one of the better examples of a functioning multiparty system. There are plenty of examples of countries south of the Sahara where reforms didn't really happen in the early 1990s or since.

from Africa News blog:

U.S. banks push harder in Africa

Two of the world’s biggest banks told the first day of the Reuters Africa Investment Summit that they planned to strengthen their presence in the continent as their own customers see their businesses here grow.

Citi’s Africa CEO, Naveed Riaz, said it may expand into three new African countries over the next 18 months to strengthen its corporate and investment banking business. He didn’t say which, but interestingly a return for Citi to Angola didn’t appear to be among the top targets despite its oil wealth.

Rival JP Morgan Chase said it was targeting representative offices in Ghana and Kenya this year and a full branch in Nigeria by next year. The bank’s sub-Saharan Africa CEO, John Coulter, said its business in Nigeria was already good but needed to be deepened.

Plenty of others see the opportunity in Africa’s giant too, as highlighted by the head of the Nigerian unit of South Africa’s Standard Bank. Chris Newson, head of Stanbic IBTC, told the summit he saw 20-25 percent loan growth over the next three to five years as demand for consumer and infrastructure finance increases.

Is the Africa story being pushed too hard? Not according to Washington-based private equity firm Emerging Capital Partners, which has raised more than $1.8 billion for African investments over the past 10 years.

"I can assure you there's no bubble in Africa at the moment. Every guy in the elevator's not pitching a deal here yet," co-Chief Executive Hurley Doddy told Reuters in Lagos. "A fast-growing African economy can suck up a lot of capital unlike Asia or China. There are maybe too many private equity dollars chasing deals there, which is just not the case here."

We'll hear more during the week.

from Africa News blog:

More graft means less money

You can’t discuss investment in Africa without looking at the risks and there is no doubt that corruption is among those.

Patrick Lumumba, director of the Kenya Anti Corruption Commission, has plenty of experience of trying to fight graft and has the death threats to show for it. He spoke to the Reuters Africa Investment Summit and had some harsh words for the continent’s leaders – including those in Kenya.

"We have perfected the art of telling on camera that which is nice to hear, but immediately we recede into the inner sanctums of power we connive and go to bed with the corrupt and that is the tragedy of African double speak,” he said.

Analysts say graft has choked growth in Kenya, deterring potential investors. There is growing frustration that senior officials get away with flagrant theft, which has tarnished Kenya's image.

Lumumba said conservative estimates showed corruption takes up to 35 percent of Kenya's gross domestic product, or up to 55 percent if you include wastage -- and a third of the country's procurement budget.

The danger is not only that corruption administration - and perceptions of it – can damage business and investment, but that it can fuel political discontent too.  Just ask the former rulers of Tunisia and Egypt.

from Africa News blog:

Can South Africa grasp Africa’s opportunity?

While Africa becomes ever more attractive for local and foreign investors, the biggest danger for its biggest economy is that it fails to seize on the opportunities it has in the changing world, South African Finance Minister Pravin Gordhan told the first Reuters Africa Investment Summit.

Plenty of short term money has flowed into South African assets – something of a headache for its policymakers as a strong rand currency makes its exports less competitive even if it helps keep inflation under control.

But Gordhan reiterated the importance of the longer term changes South Africa needs to agree upon if it is to thrive.

“The current transition and structural changes that are happening around the around the world offer South Africa huge possibilities and the risk is that we miss that opportunity,” Gordhan said, when asked about the biggest risks facing South Africa.

Central to success, he believes, is a dialogue between government, business and other interest groups such as powerful unions – who were instrumental in bringing about the end of white-minority apartheid rule nearly two decades ago – to agree a way forward.

Everyone would have to give ground, Gordhan said.

Whether that happens - and happens quickly enough – is another question.