Private investment will strengthen fragile African states

Fragile regions in Africa will benefit from private investment. Image credit: LM Louw WhyAfrica

By LM Louw for WhyAfrica

23 November 2020 – Private investment, in tandem with other forms of funding, can strengthen fragile African states and improve the outlook of its people.    

The competition between developing countries to attract foreign direct investment (FDI) and the private sector is fierce. In the aftermath of Covid-19, FDI is an effective strategy to start rebuilding devastated African economies.

To attract investment, governments need to establish a stable regulatory environment and ensure that potential investors feel safe and secure in order to create value for their shareholders. Most investors feel comfortable when the risks are limited, even if the returns are only moderate.

However, there are a few investors who venture into unchartered waters and choose the road less travelled. They prefer doing business in countries where the risks are exceptionally high. It is a gamble, but if the strategy pays off, it is extremely rewarding, and the returns much higher than the average. As developing economies, most countries in Africa fall within the high-risk, high reward category. As a result, they have to work harder at selling their country to attract potential investors than countries in the developing world. It is especially fragile and post-conflict countries and regions that get scoffed at and ignored, often to the detriment of the country and its people, desperately in need of some form of development and stability.

What we often forget is that the private sector and foreign investors, contrary to popular belief, can play a key role in rebuilding traumatised post-conflict states while still achieving their financial goals. New companies play a primary role in strengthening the economy, but also, through using their influence, can be an important partner in the state building process and in strengthening institutions and civil society. Political stability and confidence in democracy often follows. In a recent interview, I asked the CEO of an early stage mineral exploration company why he decided to risk so much by investing in Africa. He replied that it is more than just the bottom line and potential profits that matter. “First of all,” he said, “the geology is exceptional. Secondly, we have the opportunity to be part of rebuilding the economy, the country, and empowering the local people through creating jobs and arming them with new skills”.

At Why Africa we believe that through credible and reliable information and analysis about the high risk countries in Africa, and about those projects and investments that has made, or could make, a significant impact on their development trajectory, those investors that do take the road less travelled, will be better informed. In this way we hope to play a significant role in moving Africa forward. It is our aim to assist companies that want to be part of the African growth story. Covid-19 has presented Africa with unthinkable challenges, but it has also created enormous opportunities for African countries to do introspection and to attract foreign investors who see the big picture. Through sharing the challenges and opportunities of Africa in general, we hope to contribute towards rebuilding some economies and strengthening others. Without knowledge and accurate information, solutions are not possible, and what Africa needs, now more than ever, is solutions. If you regard yourself as part of the African solution, give us a call and tell us why you would invest in Africa and how would you solve the problems, and we will happily share your story.

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