An international finance expert and top executive of Nedbank of South Africa, Mr. Dennis Dykes, has explained why Africa would continue to attract more foreign investment than other regions in the world.
According to him, the reduction in external debt of African countries, coupled with the comparatively lower cost of capital and improved transparency, were some of the reasons why the region is doing well.
Dykes also affirmed that the African region was still facing several challenges in spite of attracting so much foreign investment.
He stated this in his presentation during the Economic Briefing session at the Emerging Markets Showcase hosted by the Old Mutual Group, Nedbank and Property & Casualty in Cape Town, South Africa recently.
“Greatly reduced external debt burdens imply better sovereign rating, lower cost of capital and increased availability of capital. Linked with this have been better policies and improved transparency,” Dykes said.
According to him, higher commodity prices and lower manufactured goods prices gave a boost to the region’s terms of trade, particularly considering the ratio of export to import prices. He also noted that commodity potential increased Chinese interests and investment in the region while acting as a catalyst for other foreign investments.
The Nedbank boss said growth in the African continent has become more diversified, particularly regarding financial services, transport, construction and tourism just as there were considerable potentials in agriculture and other areas of business.
He equally observed that the broader growth in the African region has helped to create a growing middle class with the associated longer term demographic dividends.
Dykes also pointed out some of the challenges facing the region including the fact that infrastructure was still under-developed and not geared to intra-regional trade. He noted that energy and transport infrastructure constituted significant constraints to the regional economies just as there were few development corridors within and between countries
He recalled that African share of total African trade peaked at 11 per cent, while Latin America, Asia and Western Europe’s shares were 21 per cent, 38 per cent and 60 per cent respectively.
On some other challenges facing the region, he said “there is little in the way of regional cooperation, plethora of trade agreement but barriers is still high, lack of skills impede competitiveness and health problems hurt performance.
“Organisational capacity is lacking – ability to conceive, plan and execute projects is a problem. Politics and policy remain deterrents in many countries as corruption levels are still high and patronage a problem,” Dykes added.
According to him, policy predictability is lacking even as there is a limited scale for operators in the economies within the continent.
Meanwhile, the Chief Executive Officer of Old Mutual Plc, Mr. Julian Roberts, has confirmed that his group has set aside $5 billion to be invested across Africa, adding that out of this figure, only a little over $1 billion was spent buying a life and another general insurance companies in Nigeria.
According to him, the group fell back on its skills and experience in African to create financial products and services that would meet the needs of the people, particularly at the lower end of the market.
He also assured stakeholders that the group would help to bridge the knowledge gap in the Nigerian insurance industry, particularly in the area of training and retraining of Actuarial professionals as part of its value-added services to the industry.
Before now, the Old Mutual Group made an in-road into the West African finance market, acquiring controlling interest in Oceanic Life Insurance Company Limited and almost concluded arrangement for acquiring another non-life insurance business in the country.
Old Mutual Nigeria provides a range of insurance solutions for its customer, with emphasis on credit life and group life assurance products and seeks to work with existing insurance companies and the regulator to broaden and deepen the insurance market in Nigeria.