Global investors look to grow African portfolios

Global investors look to grow African portfolios

According to a new study by Standard Bank and the ValueExchange, about 76% of global investors are looking to grow their African investments.

Global investors are set to see a significant increase in their African investments, with 76% either studying the markets, preparing for entry, or readying to deploy additional investments into the continent.

This is according to the “World to Africa” report, an industry-wide study conducted by Standard Bank Group and the ValueExchange, in cooperation with the Bank of New York Mellon, Africa Venture Capital Association (AVCA), South African Venture Capital Association (SAVCA), Global Custodian and MiDA.

Investing in Africa is already a core activity for almost half of all global investors, particularly those in Europe. A further 36% 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.

Although volumes of Africa-bound investments are yet to return to pre-pandemic levels, the study reveals that 34% of investors plan to increase their investments into Africa in 2022 – creating a major injection of liquidity into key markets. Whilst most 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.

ESG and Fintech seen as major drivers

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.

“In Africa the opportunity to do right through investments is widespread. We see significant opportunities for global investors to support Africa’s long-term growth through investments in green-field projects that drive financial inclusion and social benefits as well as investment returns”, says Hari Chaitanya, Head: Investor Services for Africa Regions at Standard Bank.

These investments are being directed into Africa’s rapidly growing technology and fintech sectors. Whilst portfolio investors are focused on government 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.

FX liquidity a core challenge

Despite the increased attention on Africa, not all global investors are ready to turn to the continent. About 41% of new investors to Africa (and 27% of existing Africa-investors) see the current state of the continent’s foreign exchange regimes as being a core obstacle to investing. The research is clear that global investors will be strongly drawn toward countries that take action to drive local market reforms to increase and stabilise liquidity in the near future.

“The results of this research show that there are substantial investment opportunities that will drive Africa’s growth, and the global investment community has recognised this and is ready to realise Africa’s potential,” says Chaitanya.

The key findings from the World to Africa research campaign are available for download at

https://thevx.io/campaign/the-world-to-africa/

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