Investing in Africa.

Short report on KIT seminar on participations on 10 November 2010.
By André Vording
The seminar was held as part of the 100th anniversary of the Royal Tropical Institute in Amsterdam. There were three key not speakers, Prof Dr Ewald Engelen from Univ of Amsterdam, Drs Nanno Kleiterp from FMO and Mr Ezra Musoke from InReturn in Tanzania.
Prof Engelen argued that the way institutional investors are now doing business they will never shift to investing in to Africa. This is not because of lack of growth perspective in Africa, in the coming decades expected growth will range between 5 and 20% per annum as compared to anticipated growth in Europe and the US of less than 3% per annum. No, it because investors look for four key issues: transparency (can you easily see with one press on the button how your investment is performing), liquidity of investment (can you sell it easily), risk versus return (rendement) ( compared to what is acceptable).
The transparency is a constraint for investments in Africa, liquidity as well unless more investors get interested. Risk and return are perceived to be higher in Africa, though in reality investments over the past few years performed better than the stock in Europe and US. However, because of endless financial product development one can sell/buy investments in Europe and US which have a high leverage on the real returns (remember the ICT bubble and others).
Current investments worldwide are 50,000 billion USD, only some 20 billion is invested in Africa.
According to Mr Kleiterp FMO invests some 5 billion, of which 1,5 billion in Africa. According to the Director a mindshift is needed in development cooperation, as markets should be more in the lead rather than political objectives.
Mr Musoke from InReturn based in Tanzania discussed the challenges of SMEs in Africa, of which access to funding is one of the main ones: 150-200% collateral is needed in (unmovable) assets such as land or buildings.
Debaters were Nanno Kleiterp (FMO), Bert Koenders (PvdA), Eric Smaling (senator SP), J Seohan Pieter van Tuyll van Serooskerken (E+Co), Marise Blom (Mango Capital), Sietze Montijn (Heineken), Fred Zaal (KIT), Anna Pot (AGP), Ewald Engelen (UvA), Martin De La Beij (BuZa DDE), Jeroen Blum (Shell Foundation). Each statement was defended by one and attacked by another, public was after a discussion of 7 minutes given the opportunity to vote. Several different statements were discussed ranging from the lack of impact of social investements on economic growth (yes/no) to the Chinese approach as model for development (most did not agree).
Other issues which came up during the discussions: the pension funds manage 600 billion euro, so far little is invested in Africa. They would like to increase but they need large scale investment opportunities.
Examples of investment funds were given Mango Capital , E+co, others.
It was agreed that Africa is implicitly perceived as one entity, while in practice differences between countries and regions are huge. Also Africa suffers from a negative image partly caused by charity fund raising.
Though some stressed the need for economic development as base for development, other such as the Director of DDE Martin de la Beij as well as former minister of Development Cooperation Bert Koenders stressed a wider approach which also pays attention to education, health and human rights.
All in all an interesting content , well organized, lively debates which were well facilitated, also nice network event.