Thursday, 14 November 2013 00:48
-
- {{hitsCtrl.values.hits}}
By Cheranka Mendis
Investments into Africa from Asia have largely been driven by China and India, followed by Malaysia. Some of the largest M&A deals in to Africa have been in resorts, followed by telecom, for which Airtel almost singlehandedly takes credit.
The session that discussed trade between Asia and Africa was chaired by Herbert Smith Freehills UK’s Chairman Indian Practice Chris Parsons, who listed the growing middle class, attractive demography, urbanisation and increasing GDP growth of Africa as advantages for investment.
“Some of the biggest deals over the last 10 years include Airtel and ICBC from India,” Parsons said. He also noted that Sri Lanka’s investments into the continent includes a fish manufacturing business in Nigeria as well as two hydro projects in Nigeria and Uganda, while most investment has been directed towards South Africa.
South-South axis
Abraaj Group UK Partner Sev Vettivetpillai is a Sri Lankan who left the country in 1977. Now part of a network that has been identified as one of the largest public investors in global growth markets of the future, investing across the South-South axis over the last two decades, Vettivetpillai noted that out of 300 transactions of their company globally, 170 have been in Africa.
Having tagged the South-South axis as a key growth market for the future, he indicated that a 15-25% YoY growth has been experienced in trade in this category. India-Africa trade has increased by 32% in the last three years, he said. China and ASEAN trade numbers resemble similar figures. “Africa, India and the ASEAN region are coming up with trade agreements where tariffs will be removed. The three largest M&A sectors that hold great potential are consumer, financial service and industry.”
Vettivetpillai noted that there is a large capital base sitting in the South-South hemisphere that is yet to be invested in and that Africa could benefit from it.
Opportunities in Africa
ABAX Corporate Services Mauritius CEO Richard Arlove commented that with Africa holding 60% uncultivated land of the world and with 54 countries in the region, Africa is a golden egg of opportunity.
However, the flipside can also be taken as opportunities for investment. “Only one quarter of the sub-Saharan Africa has access to power, less than 10% of the people are banked. We see opportunity in resources, infrastructure, health, and pharmaceutical.”
In this backdrop, Mauritius can play the role of an international financial centre acting as the bridge between Asia and Africa. “Mauritius can be used for headquartering if you want to invest in Africa. The taxation regime is conducive for companies to invest in Africa,” he said. A number of Asian multinationals use Mauritius for trading with Africa.
Funding alternatives into Africa
Africa has some 17 credit ratings for sovereigns across Africa, with a developing credit space and a growing regional bond market.
AfrAsia Bank Mauritius CEO James Benoit noted that over and above the debt capital markets and banking, equity markets – in particular private equity – is growing, creating a new model and facilitating the flow. “There are also alternatives or hybrid models now in the system that support investment opportunities. The yields in these are high and the operating margins are attractive,” Benoi said. “There is a range of capital and sources available for investors.”
China-Africa story
Fosun Group China Managing Director Pan Song noted that China has been facilitating Asian investment into Africa, with success. He also noted that China is now looking at using the Indian model of investment in Africa
Airtel experience
Bharti Airtel’s success in Africa has been key in developing the telecom sector in the region with a presence in 17 countries.
Bharti Airtel India CEO and Managing Director Manoj Kohli noted that their attention on Africa was due to the growing youth population with a low median age of 18 urbanisation and the growing middle class. “Today we have invested US$ 13.5 b in Africa.”
Some of the key challenges are to identify the different needs of the countries within Africa, without looking at it as one, the infrastructure and logistic issues, very small power grid, high cost structures, low skill sets and currency differences. One has to be very careful,” he noted.
He also acknowledged that Africa is the final frontier of global growth.
