The World Economic Forum (WEF) African regional meetings in Nigeria this week emphasized that a major push on infrastructure is underway in Africa. In order for Africa’s recent economic turnaround to continue, large scale investment activities including energy, transportation, housing, and telecommunications are essential.
The amounts required are staggering. According to McKinsey CEO Barton investment of some $2.6 trillion will be needed. At the WEF, international institutions and governments committed to invest over $68 billion with a substantial share for infrastructure and development.
Similarly, the potential rewards for private businesses are also enormous. African leaders have recognized that there is a pivotal role for business organizations working along with governments and NGO’s. As the President of Kenya stated, “For business, the infrastructure deficit in Africa is an opportunity to do well by doing right.”
Private investors are quickly realizing this opportunity. Their interest in Africa is strong and rising; infrastructure is the focal point. For example, last month the Carlyle Group closed its maiden private equity fund targeting sub-Saharan Africa at almost $700 million—40 percent above target. Singapore’s Temasek investment agency invested $150 million in an oil and gas group in Nigeria. The European Investment Bank has mobilized $15 billion for Africa.
With these opportunities come considerable risks. Many African governments recognize the need to improve their regulatory regimes and policies toward investors. This is a step in the right direction. However, any investment in fast growing Africa requires a comprehensive approach including a careful analysis of legal, regulatory, and policy issues.
This post can also be found on Cov Africa, the firm’s blog on legal, regulatory, political and economic developments in Africa.