Africa constantly receiving diverse investment interest

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“China and India are involved. We’re seeing Brazil and some of the Lusophone countries, Turkey has been involved and, of course, the traditional US, European countries. This week, the Japanese prime minister is on a tour of Africa – he’s also looking at investment opportunities. It’s really wide-ranging interests,” Citi Research’s Africa economist, David Cowan, told CNBC Africa.

In a bid to strengthen Japan’s ties with Africa, the country’s Prime Minster, Shinzo Abe, visited several African countries this week, including Mozambique, Cote d’Ivoire and Ethiopia, the headquarters of the African Union (AU).

Abe reportedly told the AU that Japan would pledge 320 million dollars to Africa in order to respond to conflicts and disasters on the continent, with 25 million dollars of the pledge going towards addressing the crisis in South Sudan.

This visit is the first to the continent by a Japanese prime minister in eight years and is expected to boost Japanese investments on the continent as well.

“What it reflects is that if you look at the global pattern of growth, Africa, behind developing Asia, is now the second-fastest growing region in the world. The world is looking around at Africa, focusing in and seeing how they can take advantage of that,” Cowan said.      

He also indicated that, since 2008, there has been a rebalancing of investment into emerging markets rather than a ceasing of investment altogether.

“People are going to start to run a more balanced portfolio going forward rather than necessarily a withdrawal of any sort of significant funds.”

While there are increasing concerns about the growth outlook for emerging markets, Cowan stated that Africa remains a likely investment destination.

“Africa is quite interesting in this space because the reality is that Africa isn’t really an emerging market, it’s still a frontier fund, apart from South Africa. If you look at Africa, you can see the difference between South Africa, where the rand’s been under pressure in the last year and in [the] early part of this year, and inverse to the rest of Africa where the currencies haven’t been under such pressure, with perhaps the exception of Ghana,” Cowan explained.

“One way to think about that is African countries have been able to run relatively tight monetary policies but still grow fast which has attracted inflows into their debt market. In addition if you looked at equity flows into Africa, what you’d see is that the launch of frontier funds has meant that those equity flows have continued to come into Africa.”