During Renaissance Capital’s Third Pan-Africa 1:1 Investor Conference Rencap’ s CEO West Africa, Yvonne Ike and Chief Economist, Charles Robertson, spoke on Africa as an attractive investment and economic frontier among global economies.
Q: Which sectors of the economy will drive the growth Africa desires in the coming years?
A: For the type of transformation that Africa needs, there must be partnership between the private sector, the public sector, Africa dealing with Africa and Africa dealing with the rest of the Western world on the critical sectors like power, agriculture, finance, oil and gas and infrastructure. These are the key area we want to focus on.
Q: What does the future hold for emerging markets?
A: In the next 15 to 20 years, it is not going to be so much Europe, China or India. It is going to be sub-Saharan Africa and frontier markets. The fact is that African economies remain one of the most transformational phenomena we see in recent times. There is already a global shift in emerging markets. At a time when the headlines in Greece and Spain are frightening, it is very nice to come here and see growth of 7% and an outlook which is very strong.
Q: What improvements have you seem in Africa’s business model that signals that the continent is getting better?
A: The time it takes to register a property in Nigeria was 270 days nine months ago. That has been slashed to 85 days. It is easier now to register a company in Nigeria than it is in Germany. This ease of doing business trend is spreading. Governments in sub-Saharan Africa are getting it right.
Q: What is your view about Eurozone economic crisis?
A: The worst investment decision will be to loan money to the UK government or the US government. They have had less than 2% yield in the last 10 years. But in Nigeria, the possibility of making 14 to 15% returns or more is huge. We feel much safer here, telling clients to invest their money here than in Europe.
Q: Are there areas that Africa needs to improve to further consolidate its growth potentials?
A: There is very low level of intra-regional trade between Africa. One of the things we have done recently was to convince South Africa’s Public Investment Corporation (PIC) to invest $250m in Ecobank Transnational Incorporated (ETI). It is the first time that PIC has invested outside of South Africa. We also provided help for ETI and Oceanic Bank merger. We are not here to wait for the breaking deal to happen, we are creating the breaking deal for our clients.
Q: What are the things that caused the euro crisis and what can the Nigerian government do to avoid such crises?
A: The government debt ratio in Nigeria is around 10% of GDP and in most of the West it is around 100% of the GDP. The private sector debt in the West is about 250% of the GDP, and in Nigeria it is around 30%. In Spain, the debt ratio doubled from 100% of GDP to 200% of GDP. I think among the lessons are that you have to watch your borrowing.
Q: What is your view about ongoing fiscal reforms in Nigeria?
A: The Finance Minister is trying to tighten fiscal structure of Nigeria. The removal of fuel subsidy is one thing that could assist the growth of the GDP from 7% to over 10%.
Q: What other reforms do you think are necessary in the continent?
A: In Rwanda, it takes three days to start a company. In Nigeria, it takes 31 days. In Rwanda, they have got rid of bureaucratic processes and Nigeria needs to do more in that.
Q: What are those ways?
A: Power is one of the biggest game changers you have in the region. So if we can get power, simply by doubling the capacity we have today, the 7% growth Nigeria has can easily turn to 10%. Sixty per cent of uncultivated land in the world is in Africa and we need to develop that.
Q: How do you see investment banking in Africa?
A: It is very challenging, like across the world. In Africa, if you are prepared to do the work, opportunities are immense.