Flying Under the Radar: Strategies for Investing In Africa

Japan is the most active Asian project finance sponsor in Africa. According to a report released by Linklaters LLP, Japan’s investors accounted for $3.5 billion of the $4.3 billion of project funds that Asian nations poured into Africa last year to improve infrastructure, water and sanitation and build oil and gas pipelines.

Andrew Jones, the head of Linklater’s African unit, noted that Japan’s investment is almost three times as much as China, which is often regarded as the most active Asian investor on the continent. A significant amount of Japan’s investment went to Morocco last year where the country is providing the majority of funds needed to build a coal-fired power plant in the city of Safi.

Nigeria, South Africa and Mozambique have attracted the most project financing from Asian investors over the past 10 years.

Read more on Japan’s Investment Activity in Africa

With Africa widely perceived as the next frontier for emerging markets, foreign direct investment is set to grow rapidly across the continent, alongside increasing commitment from local investors. In private equity alone, a total investment of $50 billion is possible over the next decade. The level of investment will however vary between countries and industries. For a continent that is still putting together the building blocks for robust, sustained economic growth, the more risky infrastructure investment opportunities and mid-size private equity investments might yield the highest returns on investment in the long run. Given the associated risks, foreign investors seeking need to be strategic about managing their entry into key African markets. Developing trust-based relationships with credible partners and conducting focused research in target countries can help investors more effectively determine what to fund or develop and how to best position their entry into a particular market.AAG Perspective

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