Paul Busharizi, interviewed Dr Ahmed Heikal, founder and chairman of Qalaa Holdings, the continent's biggest investment company, which runs RVR, about his thoughts on investing in Africa --- its challenges and prospects.
The theme of the
conference continues with the narrative that Africa is on the rise. However, in
recent years we have had multinationals express concern that the continent's
rising is still many years down the road,
what
is your experience?
As far as Africa is concerned, you have demographics
that are favourable. You have resources
that are available. You have better
governance: that is – by and large –taking hold, with more or less much better
governance across the entire African continent. And, finally, you have a
reverse brain drain. You have a lot of
people who are coming back from Europe into Africa. Those four factors mean that Africa is going
to continue to do well – although it will be challenged because of low
commodity prices across the board, and a much reduced debt capacity of
governments as a result of lower commodity prices, causing pressures on
currencies throughout the continent.
Something that we’re already seeing starting from Nigeria, Angola,
Kenya, Uganda, and across the board, you have pressure on currencies for
commodity-producing countries across the continent.
My view is positive, on the short term you would be
surprised, because whether it be the pressures in the Middle East or the
pressures in Africa, this is a dynamic whereby the competitive landscape will
be less competitive. Meaning that people
who are already established with businesses inside this part of the world will
find themselves with relatively low competitive pressures, and businesses will
be able to grow in the confines of their existing businesses. I’m sure that is not positive in the
long-term for the region as a whole, or for Africa as a whole. But I think that there is a dynamic at this
point in time whereby the existing businesses will be able to benefit and get
larger within the confines of their existing investments. We have a region that
is growing at very healthy levels. It is just that political risk is high thus
affecting capital availability.
About $100b is
required annually in new investment for the continent to bridge its
infrastructure deficit soon. Some people argue that money can be raised on the
continent, we have just not invested enough in resource mobilisation. What is your take on this and what would it
take for us to raise this monies on the continent?
With the continent set to become home to the world’s largest
working-age population at about same the time as China’s population begins to
decline, there’s never been a better — or more important — time to invest
in infrastructure. You would almost-literally be buying in at the bottom of the
market. The question is, how?” And the answer is to raise funding beyond the
“usual” suspects. We are now witnessing the increased involvement of Development Finance Institutions (DFIs) in
the region. Because there is very little growth globally, everybody wants to
encourage growth, particularly in Africa so you will find a lot of the existing
DFIs – I’m speaking here about the IFC, European Bank for Reconstruction and
Development, FMO, China Exim, NEXI, JBIC, Korean Exim Bank, the US Exim Bank,
etc. – all of whom want to get in on financing the region’s development are
interested in financing the right opportunities in Africa. The prospects for
the global economy are very low growth in the coming period. This is why we are
seeing people go outside their normal geographies. As a result, financing will
be available for Africa and the more stable parts of the Middle East.
In our experience however, attracting these types of investors is
only possible when you de-risk the investment first and show your potential
financial backers not just that you’re serious by committing from your own
balance sheet, but that the project is one that could fly. You need to bring in
the right expertise to run the project, abide by international environmental
and sustainability standards, and make sure that the infrastructure project in
question presents a win-win scenario that allows governments and regulators to
back it from the word go.
As a businessman
from the continent what would you say is
the biggest challenge doing business on the continent and how can this
challenge be resolved?
Obviously there are enormous challenges that people
need to be on the lookout for. One is
the direction of money in emerging markets in general. Obviously with the expected rise in interest
rates in the US, money flows out of emerging markets. That cannot be good for emerging markets as a
whole, or for our company specifically, that’s not something we like to
see. The demographics of the region are
extremely worrying especially with high unemployment. The social stability, the social fabric of
society are going to be stretched thin. Unemployment is very high. Income inequality is going to rise even
further than it is right now. So I think there are certain dynamics that are
cause for worry. So, the risks in this part of the world are definitely there,
the key to success is to try to minimise and manage the associated risks.
