Attracting Private Investment in Sub-Saharan Africa

Friday, Apr 20, 2018 | 12:30 PM - 01:45 PM

Location: Meeting Halls A&B, HQ1-3-430A&B

Overview

With debt levels rising, attracting more private investment to Sub-Saharan Africa has become more important than ever. By bringing together representatives from various parts of the private sector, the seminar will highlight the variety of available capital and point the way to policies that would facilitate its increased flow to Africa. This seminar ties in with the Sub-Saharan Africa REO planned for spring 2018, which focuses on private investment, and with the Group of Twenty Compact with Africa.

Seminar Report

Contributors: Aric Maiden and Maria L. Guerra Bradford, Secretary's Department

Opening Remarks:

Mitsuhiro Furusawa, Deputy Managing Director, IMF
Ken Ofori-Atta, Minister of Finance, Ghana
Ludger Schuknecht, Co-Chair, G20 African Advisory Group (AAG)

Moderator:

Nancy Kacungira, News Anchor, BBC Africa Business

Panelists:

Mame Khary Diène, Founder and CEO, Bioessence Laboratories, Senegal

Zhi Yong Heng, Head of Special Situations Group, TLG Capital

Jingdong Hua, Vice President and Treasurer, International Finance Corporation

Thomas Schaefer, Chairman and Managing Director, Volkswagen Group South Africa

Against a background of rising debt in sub-Saharan Africa (SSA), panelists discussed the need to attract a higher level of private sector investment (PSI) and the related challenges. They discussed the perception of risks and highlighted the importance of improving confidence in the business environment. They also underscored the role of small and medium enterprises (SMEs).

Key Points:

The “Missing Middle”. SMEs are often “missing” because lack of confidence combined with lengthy waits on returns make it difficult to attract investors (Heng). However, SMEs are key for development (Diène), including for the creation of jobs (Hua). Local currency financing is important for SMEs; developing a local currency capital market is a necessity (Hua).
Local markets and regional trade. Foreign investors need to understand local market peculiarities, but government policies must also be in place to ensure that investors’ interests are legally safeguarded (Heng). Fintech and infrastructure solutions can contribute to increasing confidence in transactions (Hua). It is important for Africa to move up the value chain from exporting commodities and raw materials to processing those materials. Integration and trade with other countries in the region would strengthen markets and growth, and create a unified African continental economy that is more attractive to investment. The African Continental Free Trade Agreement could aid this effort. Technology transfer can also be accomplished through south-south exchange (Diène).
Risk perception. There is often a difference between the perception of risk and the reality – investing locally requires a more granular approach and understanding of the market. External credit rating agencies provide an assessment with the interests of foreign investors in mind, whose ultimate goal is to repatriate profits (Hua). There is a lack of historical economic data to support investor confidence, but interested investors should be bold and blaze a trail (Schaefer). The Compact with Africa is a trusted brand bringing more focus, accountability, and policy influence, which goes far to boost market confidence and make countries attractive to investors (Schuknecht, Schaefer).
Role of government. It is advisable to finance projects with PSI if possible to prevent an increase in government debt, but often the regulatory framework is the bottleneck that renders PSI non-viable (Hua). Foreign investors rely on government policies to protect their interests. It is difficult if monetary or fiscal policies contribute to the reliability and volatility of investments (Heng). Standardization of application processes would help offer more attractive terms to investors, but also remove barriers to entry for SMEs (Hua).

Quotes:

“An African proverb says: ‘If you want to go quickly, go alone. If you want to go far, go together.’” Ken Ofori-Atta

“Business and risk go hand in hand. […] But there is … not enough looking beyond risk and at opportunity in the African continent.” Nancy Kacungira

“You have to have a local key to open a local lock. You cannot make private equity decisions in an African country out of Washington, D.C.” Jingdong Hua

“We have to put the private sector in the front and center because in SSA we are talking about several hundred million jobs that need to be created. […] Growing local SMEs can create 80 percent of those jobs.” Jingdong Hua

“The Compact with Africa is a game changer that will change the way we do business in Africa. There is a focus on changing policies and introducing an environment for investment. It’s not a spot business to sell 2000 cars and leave.” Thomas Schaefer

Moderator

Nancy Kacungira
News Anchor, BBC Africa Business

Ms. Kacungira is a multi-award-winning journalist from Uganda. As a speaker and moderator, she has presented on some of the world’s biggest platforms including the World Economic Forum, TEDx, and a Presidential Debate. Also an entrepreneur, Nancy co-founded the Blu Flamingo digital agency, which now operates in four African countries. She has worked as a presenter and news correspondent in East Africa for more than ten years and currently presents weekly editions of the TV programmes “Focus on Africa” and “World Business Report” on BBC World News.

Panelists

Mame Khary Diène
Founder and CEO, Bioessence Laboratories, Senegal

Ms. Diène is the founder and CEO of the Bioessence Laboratories, Senegal. Together with her mother she founded the company in 2005. The company has specialized in the extraction of oil and natural plant extracts with a high concentration of active properties for the human body and health. It has currently 21 employees, and more than 4000 women collaborate with the supply chains for Bioessence’s organic products, which are distributed to Senegalese and international markets. Mame Diene holds a business school degree from Dakar, Senegal.

Zhi Yong Heng
Head of Special Situations Group, TLG Capital

Mr. Heng is the Head of TLG’s Special Situations Group, sharing responsibilities for all of TLG’s revenue-generating and investing businesses. TLG’s Special Situations Group is a multi-asset class business, specialising in principal investing and lending across the capital structure on a risk-adjusted return basis. Zhi Yong is also a member of the firm’s Credit Investment Committee and is responsible for spearheading the special situations effort with a focus on Financial Institutions across Sub-Saharan Africa. Prior to joining TLG Capital, Zhi Yong worked for Davide Leone & Partners, focusing on special situations and event-driven strategies. Zhi Yong has had past experience working in the Investment Banking and Investment Management divisions of various global financial institutions including Goldman Sachs. He holds a Bsc (Honours) in Economics and Statistics from the University College London. He also served with Distinction in the Singapore Military Force.

Jingdong Hua
Vice President and Treasurer, International Finance Corporation

Mr. Hua is Vice President and Treasurer of IFC. He is responsible for managing IFC’s financial position, safeguarding its international triple-A rating and maintaining its standing as a premier issuer in the global capital markets. He oversees liquid assets, market borrowings, and risk-management instruments totaling over $100 billion. Mr. Hua is also responsible for IFC’s loan syndications and co-investment program, which has mobilized over $50 billion for private sector development. He oversaw the creation of the IFC Managed Co-Lending Portfolio Program. Prior to joining IFC, Mr. Hua served as Deputy Treasurer at the Asian Development Bank in Manila. He previously held a number of positions in the treasury departments of ADB, the United Nations Development Program in New York, and the African Development Bank in Abidjan. Mr. Hua, a Chinese national, started his career in 1983 with China National Chemical.

Thomas Schaefer
Chairman and Managing Director, Volkswagen Group South Africa

Mr. Schaefer has been Managing Director of Volkswagen of South Africa at Volkswagen AG since January 1, 2015. Prior to this, Mr. Schaefer served as the Head of Group Overseas Manufacturing at Volkswagen AG until January 1, 2015. Mr. Schaefer began his career in 1991 at Daimler AG. He held various positions in production and quality assurance since 1998 initially in South Africa, served as Vice President of Production Plants in Malaysia in 2002, and assuming responsibility for overseas production and planning operations in 2005, before moving to the Volkswagen Group to take charge of Group Overseas Manufacturing. Mr. Schaefer joined the Volkswagen Group in 2012. He serves as the Chairman of Volkswagen South Africa (Pty.) Ltd. Mr. Schaefer holds a Degree in Engineering.