Global investors seek more investments in Africa - How ready is Ghana to attract them
In the last few years, Ghana has been struck with a myriad of problems.
Aside from the COVID-19 shock that hit the economy so hard and efforts to recover from the shock, the country is debt-ridden because its total debt is more than 80 per cent of Gross Domestic Product (GDP).
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Just when the government was trying hard to put measures in place to recover from the challenge, the international rating agencies such as Fitch and Moodys downgraded the country’s credit worthiness.
The challenges are teething and the impact is being compounded by the rising crude oil prices which have forced prices of petroleum products above the pockets of many.
To a large extent, the situation looks gloomy but it presents a phenomenal opportunity for the government to be more strategic and innovative to position itself in a manner that makes it attractive for foreign investors who are looking to pump their money in Africa.
Africa is a fertile ground for these investors and each and every government on the continent is doing their best to attract them.
Much as Ghana seems to be the most attractive in the West Africa sub region for now, more needs to be done to either sustain that or even do more.
Standard Bank report
A new report from the Standard Bank has indicated that global investors are planning to significantly increase their investments in Africa.
The report highlighted that 76 per cent of these investors were either studying the markets, preparing for entry or readying to deploy additional investments into the continent.
The report, titled: “World to Africa” report, is an industry-wide study conducted by Standard Bank Group and the Value Exchange, in cooperation with the Bank of New York Mellon, Africa Venture Capital Association (AVCA), South African Venture Capital Association (SAVCA), and the Global Custodian.
If further indicated that investing in Africa was already a core activity for almost half of all global investors, particularly those in Europe.
“A further 36 per cent of global investors are readying themselves to enter African markets – either through planned market entries or account activation in the region, highlighting the growing appeal of African markets to overseas investors.
“The fact that this development is driven mostly by long-term, institutional investors is evidence that this growth is strategic more than opportunistic,” the report noted.
Although volumes of Africa-bound investments are yet to return to pre-pandemic levels, the study reveals that 34 per cent of investors plan to increase their investments into Africa in 2022, creating a major injection of liquidity into key markets.
Whilst the majority of investors are focusing on South Africa, Nigeria and Kenya for these increased flows, sub-Saharan markets such as Botswana, Zambia and Namibia look set to benefit from growing investor confidence.
Projected investment returns from African markets is the key driver for foreign investment flows, but the appeal of Africa as an ESG-friendly destination is also driving increased interest.
European investors and those from the Asia-Pacific region, who see ESG as the second most important driver of Africa flows today, lead the way in this trend.
Ghana’s market
Commenting on the report, the Head, Investor Services at Stanbic Bank Ghana, Mr William Sowah, said the survey draws on views from over 220 institutions to give a uniquely comprehensive view of the drivers, challenges and triggers that Global Portfolio Investors face when looking at African markets.
He said Ghana’s capital market was steadily developing and increasingly playing a pivotal role in attracting long-term capital for financing economic activities.
“To continue on the upward trajectory, stakeholders from the industry need to collaborate to discover new horizons that will deliver prospects for Ghana’s Capital Market. The survey findings awaken our market to the need to focus on removing liquidity impediments and hasten the pace of reforms,” he stated.
He said the investments were being directed into Africa’s rapidly growing technology and fintech sectors.
“Whilst portfolio investors are focused on govt bonds and a basket of technology, infrastructure and natural resource stocks, the appeal of fintech as the main target for all profiles of investment is clear – particularly for large North American investors seeking global diversification,” he stated.
FX liquidity a core challenge
The report also highlighted that despite the increased attention on Africa, not all global investors were ready to turn to the continent.
About 41 per cent of new investors to Africa (and 27 per cent of existing Africa-investors) see the current state of the continent’s foreign exchange regimes as being a core obstacle to investing.
Way forward
It is obvious from the report that although the appetite is there for the investors to come in, there are lingering issues that Ghana has to seriously consider as mentioned in the report.
Foreign exchange regimes, profit repatriation, contracts agreements, among other things are key indicators that attract them only if they are well outlined to avoid ambiguities and the government must watch and leverage to attract those ready to come.
According to the report, whilst the majority of investors are focusing on South Africa, Nigeria and Kenya for these increased flows, sub-Saharan markets such as Botswana, Zambia and Namibia look set to benefit from growing investor confidence. This is why Ghana must work hard so it is not left out.