While Africa continues to be an increasingly attractive investment destination, this has not resulted in comparative increases in foreign direct investment, with India for example receiving more foreign direct investment over the last four years than the whole of Africa combined. As the largest private investor in Africa, Old Mutual Investment Group is well positioned to capitalise on its unique advantage as a market leader on the continent and will continue to implement strategies in line with the projected future impact of Africa’s growing economies on investment returns.
Against this backdrop, we continue to see that improving perceptions of Africa as an investment destination are being underpinned by strong GDP growth, favourable demographics through a rapidly urbanising population and rising middle class, reduced political risk and improved corporate governance.
As such, the world is finally awakening to the emergence of Africa and its exciting GDP as the next big regional growth story.
China continues to expand its investment on the continent, while figures show there is also an increasing appetite for investment from the Middle Eastern economies, Asia, Latin America, the rest of Europe and the UK.
This growing interest is being driven by significantly positive prospects for the continent over the next decade. It’s not merely a matter of resources, but also about providing the structures and systems required by the burgeoning growth in the middle class, which is now larger than that of India.
The real story remains that of the developing consumer market across the continent, driving the growth of the retail sector. These consumers are increasingly accessing services in banking, insurance and mobile telecoms. Housing and infrastructure development also remains a key theme as well as the substantial opportunities in agriculture.
Figures show that 10 years ago, there were 116 million people constituting the middle class in Africa. Currently, this figure stands at over 326 million people, about a third of the continent. This compares to about 54 percent of the population in Asia and 77 percent of the population in Latin America.
The corporate, governance and political landscape has also transformed significantly for the better over the last decade.
From a global viewpoint, Africa continues to offer high growth opportunities, while risk diminishes and fundamentals remain solid.
Our investment focus is largely directed at sustainable projects around key development themes, which also go beyond listed equity. These include alternative investment and fixed interest arenas such as low carbon energy, education, affordable housing, infrastructure real estate, agriculture, and unlisted debt, diversified across countries, asset types, managers, and economic/inflation cycles.
By investing in schools, housing and infrastructure, we are not only supporting the development of the continent and making a lasting, positive impact on the social landscape, but also ensuring sustainable returns for investors. While private equity investments on the continent remain long term and illiquid, they are giving us net real returns of 2% to 3% above listed assets.
Hywel George, Director of Investments, Old Mutual Investment Group