US firms showing increased interest in Africa's fiscal growth

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Eager public and private equity investors from the United States are looking to various indices for an indication on where to invest in Africa.

“South Africa gains great interest due to its inclusion in the MSCI Emerging Market Index, with the MSCI Frontier Index including Nigeria, Kenya, Mauritius and a couple of others. That’s drawing a lot of interest by virtue of being part of an index, which many focus on from a public perspective and that will continue to be the case as those markets develop,” Ashley Bendell, an African investments advisor told CNBC Africa.

“From a private equity perspective, I think it’s the usual big countries that are going fastest and that are the largest in the continent – Nigeria, Ghana, Ethiopia, Kenya, the East African community and some countries in Southern Africa as well.”

The IMF has indicated that the economy of sub-Saharan Africa will probably grow 6.1 per cent, the fastest pace of any region in the world, after Asia which is fuelled by China’s demand for gold, copper and oil.

US public and private equity companies, in particular, are entering Africa aggressively, looking to invest in this economic growth.

“If we take it private, there’s certainly been a lot more interest post-crisis, building up towards today – there are a handful of sizeable billion-dollar African-focused firms. You’re also seeing a number of smaller firms, sector focused, launching, both in the United States and elsewhere,” Bendell explained.

“From what I hear in the private equity world, those bigger funds are looking at larger infrastructure projects. There’s a lot of opportunity within the five to 20 million dollar space and not enough money to chase it.”

Public equity firms are more focused on foreign inflows and Bendell believes that there is smarter conversation and visible action at the moment, and that this needs to continue.

“From a public equity perspective, we’re seeing more and more launches of sub-Saharan products and frontier products around the world – out of South Africa, out of Europe. I focus more on the United States – there’s been a big trend towards sub-Saharan and frontier launches,” he said.    

“I just think the discussion needs to continue and there needs to be interest from both parties to sit down and do that.”