RENEW Strategies

Compelling Incentives to Invest - Is a Tipping Point Near?

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Matthew Davis, CFA
| January 4, 2010

As Western investors slowly begin seeing potential in Africa, we'll probably begin seeing more articles like Ethiopian Farms Lure Investor Funds as Workers Live in Poverty coming from main-stream investment publications like Bloomberg. As African leaders shift their focus from aid to investments, they hope that market drivers will help take their economies up the World Bank rankings, and flood their markets with foreign direct investment. Africa's leaders can now be found as frequently on Wall Street asking for investments, as they can in Washington, D.C. asking for aid. The Fortune article, Investment in Africa Starts to Pay Off, reads, "...virtually every country, their presidents, and even the leaders of the opposition parties, have gotten on the same page regarding the primacy of the private sector, the need to deregulate, and the importance of attracting foreign investment. Centralized planning, state control of assets and socialistic rhetoric, for the most part, are dead. Market forces have won."

The U.S. only has a handful of funds actively investing in Africa, while India, China, the Middle East and Europe are moving in to take advantage of the handsome social and financial returns Africa is offering. So, although considerable amounts of perceived and actual risk exist, the questions is out there: is a tipping point near?

Let us know your thoughts.