Investors Forced to Rethink Africa

When I initially began Appfrica one question I asked myself was: “Why is the world VC community at large ignoring a continent with nearly a billion people?” Of course there are a number of reasons:

• Perceptions
• Lack of Faith
• Ignorance
• Failed Prior Attempts

All of those are valid concerns but only one of them is a realistic reason for making a decision about investment. However, none of them are reasons to ignore Africa forever. The main reason? Africa is progressing and even the smallest bit of progress among a billion people equals huge potential for returns and profits.

Emeka Okafor echoes this thought. This report from Bloomberg confirms it and cites evidence that investor attitudes about Africa are changing. Some are desperate for new opportunities after the recession crisis wreaked havock across western financial markets, some are boldly foraging new frontiers, and some are afraid of the rate at which China and India are engaging African markets and don’t want to be left out.

Safaricom Ltd., Celtel Zambia Plc and Dangote Flour Mills Plc are helping turn Africa into the world’s hottest source for initial public offerings.

“Africa is the last frontier in terms of stock markets, emerging economies and underdeveloped capital markets,’” said Joseph Rohm, 38, London-based fund manager at T. Rowe Price Group Inc., which oversees $25 billion in emerging-market equities and bought Kenyan mobile-phone company Safaricom shares in a sale that ended in April. “That’s why it’s a great opportunity.”

The S&P Africa Frontier Index climbed 27 percent in the past year through last week, versus a 3.6 percent decline in the MSCI AC World Index tracking 48 countries. The 46 percent gain in Ghana’s benchmark index this year was the biggest in dollar terms among 89 indexes tracked by Bloomberg.

African markets are “extremely untapped and have huge potential to grow,” said Nicolas Clavel, London-based chief investment officer at Scipion Capital, a hedge fund manager with $100 million in emerging-market assets that bought shares in Safaricom’s IPO. “Investors are realizing they need to move into these markets before they miss the most rapid growth phase.”