Africa’s handling of COVID-19 pandemic, which has lessened the impact of the crisis on the continent’s economies, has put it in a good position to attract foreign investment, according to investment experts.
Faizal Bhana, director Middle East, Africa and India at Jersey Finance, said on Tuesday that at the start of the COVID-19 crisis in Africa, fund managers saw massive outward capital flows as businesses in the continent suspended or reduced their operations.
But as the pandemic unfolded, African economies successfully showed a good record of dealing with health emergencies and pandemics.
“We are now witnessing international multilateral institutions direct funds into African countries, co-investing in healthcare and emergency infrastructure,” Bhana told Xinhua in an interview on COVID-19 pandemic and investment in Africa.
According to him, foreign direct investment (FDI) has returned steadily in Africa, although volumes still remain at pre-crisis levels.
“Anecdotally, we understand FDI is largely focused on tech start-ups and successful tech businesses, especially in countries such as Kenya and Nigeria. Impact investment and sustainable finance into businesses in line with the UN’s Sustainable Development Goals (SDGs) is also evident from international institutions and Development Finance Institutions (DFIs),” said Bhana.
He observed that private equity and venture capital activity is also starting to pick up, with analysts expecting to see FDI returning to significant levels during the first half of 2021.
“Africa still provides a significant investment opportunity in key sectors, such as technology, education, healthcare, agriculture, infrastructure and housing. The returns and potential are higher than those in more mature markets, despite the inherent perceived risks,” he said.
In a recent survey by the African Securities Exchanges Association (ASEA) and the African Development Bank, African fund managers said they were optimistic about prospects of the continent’s economies and investment opportunities.
This confidence arose from the fact that the continent has not been badly affected by the COVID-19 pandemic.
“Coupled with approved treatments and vaccinations being developed, working with international multilateral organizations like the World Health Organization (WHO), African economies will be primarily placed to contain the spread and control the crisis.
This preparedness and experience, buoyed by a young increasingly educated population, places African economies in a good place,” he said.
As African economies emerge from the crisis, Bhana noted that local and traditional sources of finance and investment will not be enough to fuel and grow economies.
“Governments will have to deploy and use different methods and sources of investment to return to the growth trajectory. Financial and other incentives will need to be ramped up to make African economies more competitive to attract the international capital that will inevitably be looking for a home to invest in,” he said.
The financial analyst observed that China is among countries shaping FDI in Africa, providing a valuable investment partner, particularly when it comes to infrastructure across the continent.