The Regional Director, South B of the African Bank of Development for Africa. offers an insight of the various opportunities of investment in Africa. Dr Chiji Ojukwu believes that Mauritian private sector should take davantage of its expertise in the sugar and in the tea industries.
What justifies that Mauritian economic operator should try to take advantage of all existing opportunities for investment in Africa ?
Africa is rich in opportunities and potential. It is home to seven out of ten of the world’s fastest growing economies. The International Monetary Fund (IMF) is predicting that no continent will grow more strongly over the coming years. With Governments across Africa working to improve the business climate, there has never been a better time to invest. By investing, Mauritian private operators and companies will not only grow their own balance sheets but create jobs, support local businesses and strengthen local communities across the continent.
Furthermore, the global economic slowdown and its impact on the Mauritian economy have reinforced the need for the country to look beyond its traditional markets in the Eurozone. One key lesson emerging from the crisis is that if the Mauritian economy is to recover and sustain high growth rates and make a quick transition from a Middle Income to a High Income country, the African market presents an opportunity for diversification.
What are those very opportunities containing real profitable investment where Mauritian investors can take advantage of ?
Mauritian investors looking to invest in Africa and reap high returns should be looking at the following areas for profitable returns:
i) Profitable companies: There are a number of well-known companies that are based in Africa, including South African Breweries (a subsidiary of SABMiller) and the telecom company MTN. Africa''''s total stock market capitalization now exceeds $1 trillion. A recent study by two economists, Paul Collier and Jean-Louis Warnholz, found that from 2003 to 2008, the average annual return on capital of African companies was 65 percent to 70 percent higher than that of comparable companies in China, India, Indonesia, and Vietnam.
ii) Commodities markets: 10 percent of the world''s oil reserves and 40 percent of the world''s proven gold reserves are found in Africa. As African countries  industrialize and as demands for their commodities continue to grow in countries such as the BRICs (Brazil, Russia, India and China), there is already a surge in demand for commodity transactions and the trend will only continue to be upwards.
iii) Infrastructure investments: This is an area of boundless opportunity especially infrastructure of a regional or cross-border nature – including investments to help bridge Africa’s large energy deficit. Half a billion Africans currently without access to reliable and affordable power can either be seen as a problem (by the short-sighted investor) or as an opportunity (by the investors who want to take the bet on African energy generation that ICT firms took on its telecom sector just about a decade ago). The continent needs to build its network of roads, rail and water ways that will foster trade – notably intra-African trade. Then there are infrastructure needs in water and sanitation in building the infrastructure for a rapidly urbanizing continent and in irrigation projects needed to boost agricultural yields, create jobs and guarantee food security, among others.
iv) Agriculture and agribusiness: Ventures in agriculture in Africa have a lot of room for expansion given low productivity, low irrigation levels and the vast expanse of uncultivated arable land, estimated at 60 percent of the world’s uncultivated arable land. Investments in agricultural start-ups, agri-businesses and agro-processing in Africa will not yield some of the most rewarding profits at a time of rising global food prices, but with the continent’s internal markets growing, there are definitely high dividends to be reaped from this sector. For instance, Nigeria alone imports $10 billion worth of food each year, meaning it has a $10 billion food market waiting for investors. Mauritian private sector expertise in the sugar and tea industry would be worthwhile opportunities to explore on the continent.
v) Manufacturing: Light manufacturing is a fifth area that can address some of the unmet needs of Africa’s emerging middle class. Any manufacturer and investor who is unaware of the aspirations of Africa’s fast-growing middle class should take note that the continent already has a middle class that’s almost as big as the entire populations of Russia and Brazil. With 70% of its population under 35, Africa will enjoy an extraordinary demographic dividend as their energy and talents drive economic growth and development.
VI) The Mauritian financial sector which is one of the four pillars of the economy is  emerging as hub in the region. The Banking sector in particular has stood the global economic downturn well and remains healthy, profitable and well capitalized even above Basel III requirements. The share of non-performing loans remains low and returns on equity remains high despite low leverage ratios. The high proportion of unbanked population in Africa is an opportunity that Mauritian banks could exploit.
VII) The tourism sector- The hospitality sector for most of African countries is still in its nascent stage. But there are huge opportunities to be exploited for Mauritian operators in the hospitality sector.
As a partner how can the African Development Bank assist Mauritian investors to enter those sectors where none of them has ever ventured into up to now ?
As Africa’s premier development financial institution, the AfDB can tap into its extensive knowledge and network bases, and of course long experience of doing business on the continent, to facilitate entry points and business transactions for Mauritian investors into sectors such as financial services, trade facilitation, oil and gas exploration, infrastructure, ICT, renewable energy, hospitality, education. The AfDB provides a range of financial products for the private sector to complement its traditional lending to governments.  Standard financial products consist of senior/subordinated debt, guarantees (partial risk), equity and quasi-equity, risk management products and technical assistance. All of these instruments are available for use by Mauritian investors as they look to venture into these sectors and others on the continent. The Private Sector Department of the AfDB administers the AfDB’s non-sovereign operations and Mauritian investors interested in partnering with the AfDB would collaborate closely with investment officers with extensive experience in finance, SME banking, trade finance facilitation, engineering and business consulting. Currently, the Bank is assisting Mauritius as financial advisor in the structuring of PPP operations through the Ministry of Finance and Economic Development. The Bank is also discussing strengthening its presence in Mauritius with posting of a Lead Infrastructure Expert to assist the country in structuring its US$10 billion Infrastructure Programme.
What are the underlying conditions of this partnership?
There are criteria which an enterprise/project must meet in order to be eligible for non-sovereign financing from the AfDB. Firstly, the enterprise/project must be located and incorporated in one of the  Regional Member Countries (RMCs) of the AfDB, whether promoted by an African or non-African investor. Secondly, the enterprise/project must be majority owned (51%+) by private sector investors, or publicly owned with strong financial standing and proven managerial autonomy. Thirdly, the submitted project proposal should clearly state whether project is for the establishment, expansion, diversification and modernisation of productive enterprises. Finally, the investment size will be determined by Single Obligor Limit and other prudential considerations. Of course, the operation must be commercially viable, provide substantial additionality in terms of value out outcomes. For further information and details regarding eligibility for non-sovereign financing and assistance from the AfDB, please refer to the organization’s website: www.afdb.org.
Can you give one or two examples of concrete example where partnering is possible and possibly explain what will be the benefits of such initiative ?
Investors can benefit from the AfDB’s financial products and advisory services in order to facilitate their private investments on the continent. The AfDB can provide the partial guarantees they need for projects that might be deemed risky but innovative. Investors can also  count on the AfDB in resolving investment disputes in areas of the AfDB’s competencies. Furthermore, these investors can trust the Bank to be the partner that continues to encourage governments of its RMCs to do more each year to improve the environment for doing business and meet standards of international best practices.  The Mauritian investor would benefit from this partnership by having an honest and highly reputable ‘broker’ in the form of the AfDB, deepening of his/her knowledge of the African market, learning and benefiting from the AfDB’s best practices, ‘crowding in’ of further private investment and shared responsibility of sound due diligence and appraisal of investment schemes and projects.