Nigeria Content Online

Africa could
attract billions of dollars in new investment over the next few years
as emerging market investors search for higher returns and foreign
perceptions of risk improve, Ernst & Young said on Tuesday.

The global
accounting firm said in a report titled “It’s time for Africa” that
foreign direct investment (FDI) into the continent was forecast to
reach $150 billion by 2015 from $84 billion in 2010, driven by strong
growth in new projects from next year.

Ernst& Young
surveyed over 562 global executives on where they would invest over the
next decade and 42 percent of them were considering investing further
in Africa while an additional 19 percent confirmed maintaining
operations in the region.

The report said the
continent was becoming increasingly attractive to international
investors planning new developments and expanding existing ones and
that perceptions were becoming increasingly positive over the longer
term.

It identified Asia as the only continent ahead of Africa in terms of investors’ perceptions.

“While Africa’s
challenges are well documented, there is an increasing recognition that
the continent is on an upward trajectory; economically, politically and
socially,” Ernst & Young’s said in its 2011 Africa attractiveness
survey.

It projected GDP to
grow to $2.6 trillion by 2020 from $1.6 trillion in 2008 and consumer
spending to increase 62 percent to $1.4 trillion over the same period.

Investors’ interest

Key sectors
targeted by investors include consumer products, construction,
telecoms, financial services and mining and metals — perceived to have
the highest growth potential over the next few years.

The survey showed
emerging market investors were positive about Africa’s attractiveness,
viewing the region as critical to their own growth, while developed
markets investors were cautious, saying that the region still needed to
develop further.

The African
continent, home to one billion people, had long been ignored by
international investors who only thought of the region in terms of
political instability and corruption.

But as the majority
of the 54 countries which make up Africa embrace democracy and install
reform-minded governments, analysts say the world’s poorest continent
and least tapped frontier markets could fast become a diamond in the
rough.

Ernst& Young
said investments in the continent by African countries grew 21 percent
between 2003-2010, but actual amounts were less than invested by other
emerging economies.

It highlighted the
high levels of risk involved in investing in Africa but said the
profitability levels compensated for the risk and that some sectors had
little competition.

“Despite the
improving perceptions of Africa, it is in competition for the
international capital and resources that will help drive and sustain
growth and social development,” it said.

“It is currently ranked in the same category as Latin America and Eastern Europe in terms of attractiveness for investors.”

REUTERS