Abuja — African countries should adopt an aggressive marketing strategy to sell the investment opportunities that abound in continent, a speaker at the conference on capital markets said here Friday.
"Africa has a great story to tell, which could be marketed well," Dr Ayo Salami, an equity analyst with Nomura Securities in London, said on the second day of the conference of African Stock Exchanges Association.
He said because the story had not been told as it should be, the high returns on investment in Africa - the highest among the emerging countries of the world - have failed to attract the attention of investors.
Foreign direct investment in Africa currently receives an average return of 50 percent, compared to 35 percent return which a similar investment in Asia "struggles" to make.
In the area of portfolio investment, the Nigerian stock market was last year rated the market with the highest rate of return among the emerging markets.
"Despite potential for high returns there is limited evidence that African stock markets are attractive to foreign investors," he said.
The stories about investment opportunities, he said, abound in various countries and sectors across the African continent.
The stories are in such countries as Botswana, Uganda, Nigeria, Tunisia, Egypt and Guinea, among others, "where the economies have been changed by government policies, and have become more open and have achieved real growth," he told AllAfrica in an interview.
These counties have undertaken reform measures, but Salami said they have not reaped the benefits of such reforms in the forms of investor inflows.
He said the opportunities are also in the telecommunications, housing and banking industries, as well as fast-moving consumer goods, which he said are currently under-developed in Africa.
Salami said the poor response by international investors to such profitable investment opportunities in Africa is because the understanding of the continent by these investors is "poor."
Salami said part of this problem is due to the practice of the international investors to group Africa into one monotonous region, where events in one part affect the rest.
This "poor neighbourhood effect," he said, makes potential investors feel that 'if they are shooting someone in the streets of Uganda, they must be doing so in other places."
He noted that countries in Africa differ in terms of population growth, growth of the gross domestic product, level of indebtedness and the stability of the political system.
It is therefore "erroneous to draw general conclusions about overall economic performance and prospects across the whole region," he said.
Incidentally, some people expected to participate at the conference, holding here in Abuja, Nigeria's inland capital, failed to attend as a result of ethnic clashes that took place in south-west Lagos, Nigeria's former capital and financial center.
Ndidi Okereke-Onyuike, Director-General of the Nigerian Stock Exchange, told participants Thursday that two such people had requested a guarantee of their safety during the conference.
Such stereotypes, said Salami, make Africa a hard sale. He gave an example of the Nigerian case, which he said is known among fund managers for two things: oil and corruption.
"Once you mention oil, the next thing is corruption, " he said. "It's difficult changing that perception," he noted, but added that despite this, "there is am audience ready to listen."
Salami also blamed the poor attitude of foreign investors to Africa on credibility problems faced by the reforming countries. In some of the countries undertaking such reforms, he said, the governments have been in power for up to 20 years.
He said there was also in some cases the problem of fear by potential investors of policy reversals by governments, borne out of past events in some countries.
In Zimbabwe, he said, the government has undertaken a lot of policy reform measures in recent times, "but investors believe it's the same government."
Liquidity problems - difficulties with selling off securities and getting out of the market by an investor - also constitute part of the constraints on African stock markets, Salami noted. Apart of the markets in South Africa, and Egypt, "liquidity represents a barrier to entry for foreign investors."
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However illiquid markets could offer high returns. An investor who invested on the Zimbabwe stock market at the beginning of the year would by now have made a 50 percent return, Salami said. But due to the problems in that country, many investors bypassed it and invested on the Johannesburg Stock Exchange, where their investments have fallen by 25 percent.
But Salami also blamed the international capital markets' "irrational bias" against Africa for the poor response to the opportunities in the continent. This bias, he said, is responsible for the inability of the international capital markets to respond to changes in fundamentals of some African countries.
Salami gave the example of Nigeria, whose revenue inflow has increased as a result of the increase in the price of oil. Despite this, Salami said the spread on Nigerian debt has increased on the international bond market, a development he said "does not reflect the macroeconomic fundamentals."
