beyondbrics

The publication of a new report from Tony Blair’s Commission for Africa on Monday coincided with the launch of the latest in a string of new investment funds focused on Africa, this one with $100m of capital from the United Arab Emirates and Japan.

The Blair report “celebrated” a quadrupling of foreign investment in Africa from 2003 to 2008. But it also made an important point: the vote of confidence in Africa that foreign investment represents should not be mistaken for a sign that the lives of most ordinary Africans are getting better.

The commission report, which followed on from its first tome five years ago, said:

Both domestic and international businesses have seized the opportunities presented by the improvements made in the investment climate.

However, the lives of most Africans remain unaffected by Africa’s growing economic power. Many Africans’ incomes have not improved. Poverty remains widespread, the region’s share of international trade remains tiny, and climate change and the global economic crisis are threatening to undermine progress made.

The latest addition to the ranks of Africa investment funds comes from the unusual pairing of Invest AD, a financial services group from Abu Dhabi, and SBI Holdings, a counterpart from Japan that has struck deals in other emerging markets.

The $100m fund will invest in Nigeria, Ghana, Egypt, Tunisia and Morocco and a range of sectors including banking, mining, consumer products and manufacturing. It will invest through a mixture of private equity deals, IPOs, and shares already listed on Africa’s stock markets.

Nazem Fawwaz al-Kudsi, its chief executive, told Reuters:

Fundamentals in the region are strong … There is improved stability and we see immense future wealth potential – not only as a supplier of raw materials, but also in the growth of consumerism and in manufacturing bases.

The fund could find itself rubbing shoulders with Sir Bob Geldof, the Irish aid campaigner and former rock star, who is seeking to raise $1bn from institutional investors for his own private equity fund, which has the enigmatic name “8 Miles”. Sir Bob happens to be a member of the Commission for Africa.

Funds investing exclusively in Africa attracted a net inflow of $660m in the past twelve months, nearly four times more than the previous high set in 2007, according to EPFR Global, which tracks fund flows.

The new Blair report – titled “Still Our Common Interest” – noted that Africa had posted average economic growth rates of 6 per cent between 2003 and 2008 and that there had been substantial progress over the past five years in getting African children to school, preventing the spread of malaria, and treating HIV/Aids.

But in its conclusions it said:

To accelerate growth, African governments need to continue to improve the investment climate and expand regional trade as well as their share of global trade. Investment in infrastructure, though already vastly improved, must also continue to expand and must include increased attention to those areas that have been particularly neglected, such as sanitation and irrigation for agricultural land.

And then, noting that the private sector has a vital role to play in all this, it went on:

Growth in Africa has to be inclusive if it is going to contribute to poverty reduction, development and stability. It is therefore vital that African governments put in place the strategies required to ensure that growth leads to opportunities for all – including Africa’s ever growing population of young people, who are one of its main economic assets.

The “disconnect” between Africa’s growing economic power and the lives of ordinary Africans is striking, and it’s a subject that deserves attention at a summit on the Millennium Development Goals next week in New York.

Related reading:
Why Africa won’t be the next Bric, beyondbrics
Brics in Africa: adding it up, beyondbrics