Despite facing economic challenges such as inflation and climate change, Africa continues to experience substantial growth. According to the International Monetary Fund (IMF), the continent remains a promising market, particularly for young investors.
However, investors in Africa encounter significant obstacles, especially in addressing the continent’s development needs related to green energy transition and climate adaptation. African leaders are making notable progress in laying the foundation for economic growth and helping investors tap into Africa’s potential.
The future economic performance of the region depends on the sustainability of infrastructure developments and factors like the shifting geopolitical landscape. The IMF reports that Africa’s overall economic growth was a modest 3.2%, compared to Asia’s impressive growth rate of nearly 5%.
In countries like Kenya and Nigeria, currencies have depreciated, and the average consumer price inflation rate has surged to 17.8%, the highest in over a decade. This decline in investor confidence is reflected in a significant drop in private capital activity.
Data reveals that some African countries are adopting more proactive approaches to economic development by localizing production within the continent. For example, the Democratic Republic of Congo is currently reviewing its mining joint ventures with foreign investors.
The goal is to retain more jobs and revenue domestically, enhance the value of mineral activities within the country, and promote sustainable growth.
To attract private capital, African governments are increasingly utilizing blended finance to stimulate investment across the continent. According to Convergence, a global platform for blended finance, Egypt has emerged as the most active blended finance market in the MENA region, accounting for nearly 24% of all deals.
The top three sectors targeted by these transactions are financial services, energy, and infrastructure.
Additionally, the African Development Bank has supported the Nairobi Declaration with a $50 million fund and a $250 million blended finance facility for the ambitious “Desert to Power” solar project in the Sahel region.
This initiative aims to generate 10GW of solar power, providing electricity to 250 million people across 11 countries, including 90 million who will gain access to electricity for the first time.
Research published in April 2024 by the African Private Capital Association indicated that there were 450 private capital deals in Africa, with a combined value of $5.9 billion. This marks the largest decline in deal volume in 11 years and a significant 22% drop in value compared to 2022.
Africa faces the risk of falling further behind wealthier regions unless it can attract more capital. Despite the urgent need, investor interest in the continent remains subdued compared to other regional markets.
