Bloody conflicts in South Sudan and the Central African Republic continue to grab headlines. But war, famine and political instability in Africa overall have receded while economic activity has surged, making the continent attractive for foreign investment despite the still-high security and logistical challenges.
Since 2002, despite a tough global economy, the overall African economy has more than trebled, Ernst & Young said in its "Africa 2013" report.
The rapid growth is expected to continue. The International Monetary Fund forecasts 11 of the world's 20 fastest-growing economies through to 2017 will be in Africa. Some 27 African nations have already reached "middle income" status, and at current growth rates as many as 40 (75%) could achieve that by 2015.
Foreign direct investment inflows to sub-Saharan Africa will set records in each of the next three years, reaching $54 billion by 2015, the World Bank predicted. FDI was $37.7 billion in 2012, up 5.5%, when FDI flows for developing countries fell on average by 6.6%.
A growing number of global honchos, some with controversial pasts, are saying "jambo" — Swahili for hello — to Africa. Some have billionaires helping in the background.
Ex-Barclays (BCS) chief Bob Diamond said on Dec. 7 that he was trying for a comeback via a shell company on the London exchange to invest in Africa's financial sector. Diamond, ousted from the British financial powerhouse in 2012 over the Libor rate-rigging scandal, is in the process of listing Atlas Mara. Ashish Thakkar, Ugandan-born founder and CEO of Mara Group, is backing the investment firm. Mara is a conglomerate with extensive interests in Africa.
Erik Prince, founder of the world's biggest private military services firm, Blackwater Worldwide, announced Nov. 24 that his wholly owned Frontier Management sold its Africa-focused aviation and logistics firm Frontier Services to DVN. The price was $3 million plus the grant of an option for up to 205.116 million new shares of DVN. DVN is an investment company whose major shareholders include Hong Kong tycoon Johnson Ko and China's state-owned investment company CITIC.
Marriott (MAR) CEO Arne Sorenson in November acquired hotel chain Protea Hospitality of Cape Town, South Africa, in a deal reportedly worth $200 million. That gives Marriott 10,000 hotel rooms in various countries in Africa and makes it the continent's largest hotelier.
Another billionaire, Thomas Pritzker, chairman of Hyatt Hotels (H), told India's Economic Times in October that he's placing his future bets on Africa. "(Africa) will spring a real surprise on the world," Pritzker said.
Chinese President Xi Jinpeng unveiled a $10 billion port investment project in Dar es Salaam, Tanzania, in March.
Risks Fuel Rewards
Why are China, Diamond, Prince and others setting up shop in sub-Saharan Africa
"Of all the world's continents (Africa) has been the last to attract investors' attention. It has a middle class numbering in the hundreds of millions. A third of African countries have GDP growth of over 6%," said David Goldman, a managing director of Hong Kong-based Reorient Financial Markets. "But the continent lags behind in infrastructure investment, services and other preconditions for growth. These investments offer excess returns for investors who can manage the risks.
Reorient's investment banking team facilitated Prince's Frontier Services deal. Ko owns Reorient.
"Africa is a place where those starting over can retell their story, wipe the slate clean and start afresh in a frontier region," said Gary Kleiman, an emerging markets specialist who runs Kleiman International in Washington, D.C.
Blackwater over the last decade has been awarded billions in U.S. government security contracts that included private guards for U.S. embassies and bases abroad, including in Iraq and Afghanistan. Controversy erupted in 2007 when Blackwater personnel were involved in an incident in which 17 Iraqi civilians were shot.
Prince, who sold Blackwater in 2010, will continue to oversee Frontier Services for DVN. Frontier owns 49% of Kijipwa Aviation, a Kenya-based aviation and logistics firm. Prince says Kijipwa will serve as the foundation for Africa-wide support services, including security, as well as ground and maritime transport and explorations services.
"Africa is the real bright spot in terms of emerging markets this year," said Kleiman. "Frontier stock markets like Ghana, Nigeria and Kenya are up double-digits .
But deep problems persist. Corruption and social instability are still issues in Nigeria, one of the richest African countries.
South Africa will soon lose its status as sub-Saharan Africa's largest economy amid sluggish growth, labor strife, high inflation, a weak currency and high unemployment.
South Sudan, the world's newest country and projected to be Africa's fastest growing this year, is rapidly falling into a full-blown civil war.
The region lacks railways, highways and airports.
Greenfield investments, or foreign direct investments where a parent company starts a new venture by building operations from the ground up, slumped by 12% in Africa in 2012, though Ernst & Young says this was part of a global decline in such projects.
Some of Frontier Services' biggest customers are expected to be Chinese mining, energy and other resource-based companies that operate in remote parts of Africa.
China's government says Chinese investment in Africa has soared 30-fold since 2005.
China is hungry for resources to feed its economy and is keen on exploiting a large share of the continent's natural wealth. But they face labor unrest and are desperately in need of security, transport and logistics services.
"The Chinese are in some sensitive areas. They have stirred local resentment and have come under literal attack. That implies a role for security services generally," said Kleiman.
Prince said in a press release announcing his Frontier Services venture that "Chinese businesses are expected to make over a trillion U.S. dollars in loans and investments in Africa over the next 15 years.
Ex-military types, some Americans, will be providing armed escorts, flying helicopters and building facilities for the Chinese.
But outside of recent deals involving Prince and Marriott, involvement by big U.S. multinationals and other publicly traded companies in Africa still falls short of a major stampede.
Most interest is on the consumer side. Procter & Gamble (PG) is spending $450 million upgrading and building factories in Africa, including a $250 million baby care products plant in Nigeria. Wal-Mart (WMT) became one of the first big U.S. investors when it paid $2.4 billion in 2011 to buy South African retailer Massmart. New entrants are joining U.S. oil and gas companies that have long been involved in energy exploration in the region.
European multinationals like Nestle and Unilever (UN) are also beefing up their Africa operations.
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- sub-Saharan Africa
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