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Investors in Africa look beyond negative headlines – World Bank

By BusinessNews Staff on May 22, 2014

Investors in Africa are increasingly able to see beyond negative headlines of violence in nations like South Sudan, Nigeria and Kenya, as they seek more protection against risk for their business ventures, a senior World Bank official has said.

“There was a time when Africa for many investors was just like a big, big country,” the Vice-President and Chief Operating Officer of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), Michel Wormser said.

“When something happened in one side of Africa, it seemed to affect perceptions of the whole continent,” he told Reuters yesterday in Johannesburg during a visit to South Africa and Namibia.

“This is not the case today. Many investors understand the difference between countries and even understand the difference within a country, between regions and sectors,” he said.

However, Wormser said MIGA could consider supporting investments in Nigeria’s violent north-eastern region, where the government has sought World Bank backing for a programme to combat the poverty seen as a factor fueling the Boko Haram rebellion there.

The World Bank agency provides political risk insurance and credit cover for investors in developing nations often emerging from years of conflict.

Wormser said most investors in Africa now had enough sophistication to discern long-term opportunities despite a flurry of negative news, ranging from civil war in the world’s newest nation, South Sudan, to bombs by suspected Islamist militants in Kenya and the abduction of more than 200 schoolgirls in Nigeria by Islamist group Boko Haram.

“There is more understanding of the riskiness and more ability from investors to distinguish between what is media hype and what is the reality on the ground, and the likeliness of their investment to yield what they expect,” he added.

“Africa continues to be a land of great opportunities.”

In Nigeria, for example, where President Goodluck Jonathan has sought international help to combat a five-year-old Boko Haram insurgency in the northeast that has killed thousands, private investors participated in ground-breaking power generation expansion projects made possible by recent reforms.

MIGA, its sister arm, the International Finance Corporation and the World Bank itself were helping to mobilise nearly $1.7 billion of private financing for projects to expand Nigeria’s electricity generation.

This involved more than $600 million of guarantees for the Azura Edo power plant in Edo State.

The country, which recently replaced South Africa as Africa’s largest economy through a rebasing of its GDP, only had an installed generating capacity of 4,000mw – 10 times less than South Africa, Wormser said.

“Nigeria has to catch up. It’s absolutely critical for its competitiveness and its growth prospects and the World Bank Group has opened the way for new IPPs (independent power producers) to come to the country,” he added.

The agency has a special facility for Conflict-Affected and Fragile Economies, which it had used to support investments in Democratic Republic of Congo, for example. But Nigeria is not on the World Bank’s current list for this facility.

Nigeria is not on World Bank list for special facility for conflict-affected and fragile economies. Wormser said the “huge increase” in investment flows to Africa in recent years had been accompanied by greater efforts by investors to insure their equity and loans against political and commercial risk, both with private and public insurance providers and multi-lateral insurers like MIGA.

Wormser said this kind of intervention by the World Bank’s political risk insurance arm in support of critical private investments could have an influential “demonstration effect” in rekindling job-creating economic activity in states emerging from the chaos and destruction of internal conflicts.

[This Day]

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