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Private sector

“Manageable risks”

by Peter Hauff

In brief

Ethiopian market women crossing a bridge

Ethiopian market women crossing a bridge

Experts expect African economies to grow, but companies’ productivity is hampered by poor infrastructure. Many investors, however, overestimate risks in Africa. By Peter Hauff

Developing countries need about $ 850 billion a year for water and power supply as well as good roads. That is the estimate of Roland Berger, a German business consultancy. Around the world, 145 countries with low and middle incomes cannot fund such matters, the experts reckon. They argue that the productivity of developing economies would be about 30 % higher if the infrastructure was good. In “Profit through progress”, a recent Roland Berger publication, they argue that private investors are needed.

Foreign investors, however, tend to shy from the risks of major projects, the authors also state. In their view, the perception of these risks is often distorted, and exaggerated investor fears mean that Africa misses growth worth about an an-nual $ 9 billion. Roland Berger states that it is relatively easy for private investors to manage the risks of infrastructure investments. Options include insurances and financial guarantees by donor governments.

Dave King of Johannesburg-based Global Credit Rating similarly believes that business risks in Africa have become manageable. Speaking during the first “Africa Business Week”, which was organised by Maleki Group in cooperation with the Afrika-Verein, an umbrella organisation of German companies, in Frankfurt, he pointed out: “The real problems are the lack of capital and the lack of appropriate local partners in Africa.”

But that may be changing too. Christophe Bourland works for the Ecobank, which was established in Togo in 1984 on behalf of chambers of commerce from several countries in the context of ECOWAS (Economic Community of West African States). “Our managers are Africans, and we are operating successfully in more than 30 countries,” Bourland reports. The bank claims to have more branch offices in Africa than any other financial institution, and it plans to expand further. Currently it is negotiating for financial-services licences in Ethiopia and Angola, and it will soon open a Beijing office. (ph)