Sections

Germany leads G20 initiative to boost investment in Africa

Related Categories

The refugee crisis in Europe has lent impetus to a new initiative to foster private sector investment in Africa, according to an official in the German finance ministry.  

Compact With Africa (CWA) is an initiative of the world’s 20 largest economies (G20) to promote private sector investment in Africa, including but not limited to infrastructure.

The objective is to de-risk private investment for sustainable growth by way of country-specific agreements between individual African countries, international organisations and other partners. 

CWA was initiated by the German presidency of the G20 in March. 

Speaking at a recent OECD Global Forum on Private Pensions in Mauritius, Holger Fabig, head of division for G7/G8, G20, world economy, monetary and currency issues at the German finance ministry, said investment opportunities in Africa were “truly stunning”.

He also addressed challenges for pension funds interested in investing in Africa, saying the compact would benefit investors by “play[ing] its part in overcoming both hesitation and hurdles” to such allocations. 

Compact With Africa would be different from the many other African initiatives that have come before it because of the European experience of the refugee crisis, according to Fabig.

“It is very easy to be cynical, in particular about Africa,” he said. “So my answer to the critics is simple. In Europe, we have witnessed a refugee crisis of historic dimension. Even those finance officials who have been very reluctant to engage with Africa now agree that we cannot just stand by, but that we have to do more to support African countries on their way to sustainable development.”

In addition, CWA had a focus on income and private investment rather than development aid and government intervention, said Fabig.

“And finally, this time is different because the German finance ministry, a ‘bastion of fiscal caution’, is behind it,” he added. ”This does herald a new era, if not a paradigm change. Let’s hope it stands at the beginning of a truly African take-off.” 

Speaking at a responsible investment conference in September, Jason Mitchell, a sustainability strategist at Man Group, said the migrant crisis was often viewed in terms of its impact on Europe, but that the flow of migrants, particularly from sub-Saharan Africa, also reflected diminishing economic opportunities in frontier markets such as parts of west and central Africa.

“Generally when we think about the literature of migration it’s been driven by wage differentials [and] income differentials, but now what we’re seeing is different structural factors start to drive that,” he said.

Mitchell noted that, at one point before the fall of Muammar Gaddafi, Libya had hosted millions of Ghanaian migrants who lived there in a relatively safe environment with rule of law and jobs, and sent remittances back to their home country.

“Those jobs there, and to a certain extent in Iraq, Syria and Egypt, no longer exist – at least not in the same format,” he said.

Mitchell suggested that investors needed to consider the implications of a potential withdrawal of critical multilateral development funding by major donors. Also, many African countries were highly indebted. 

“Ghana is at 70% debt to GDP [ratio], Zambia and Angola at 60%, Mozambique is in technical default,” said Mitchell. “When our emerging market debt team looks at sovereign debt, the first thing they go to into in terms of understanding country risk and governance risk is the World Bank world governance indicators, which measure institutional strength, transparency and accountability.”

Related images

  • Makola market Accra Ghana

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • DS-2382

    Closing date: 2017-12-14.

  • QN-2383

    Asset class: Residential Property.
    Asset region: Ireland.
    Size: EUR 10m.
    Closing date: 2017-12-18.

  • QN-2384

    Asset class: Equities Switzerland (Large Caps).
    Asset region: Switzerland.
    Size: CHF 550 – 600 mn.
    Closing date: 2017-12-15.

  • QN-2385

    Asset class: Liability Driven Investment.
    Asset region: Europe.
    Size: Size: EUR 1 Billion, Liability size: EUR 3 Billion.
    Closing date: 2018-01-08.

  • QN-2386

    Asset class: Fixed income.
    Asset region: Global developed markets.
    Size: CHF 500 -1000m.
    Closing date: 2018-01-15.

  • DS-2392

    Closing date: 2017-12-21.

  • QN-2393

    Asset class: All/Large Cap Equities.
    Asset region: Europe.
    Size: EUR 200m.
    Closing date: 2017-12-21.

  • QN-2394

    Asset class: Real Estate Industrial.
    Asset region: Europe.
    Size: EUR 10m.
    Closing date: 2018-01-04.

Begin Your Search Here