The structural economic and political landscape of this astonishingly rich mineral and energy region is changing for the better, enabling African economies to catch up with their Asian counterparts and compete for greater shares of global trade and investment. Due to the lost decade of the 1980s, a tarnished world image of Africa still remains in the minds of many investors even though Africa, given the opportunity, has much to offer the world. The past few years have witnessed a marked progress in sovereign governance, the benefits of which is evidenced by buoyant economic growth and a more business conducive climate.
CDC Group, the UK government-owned fund of funds has remarked: "The trend is definitely positive as the likes of Ghana and Nigeria are far better run today. We are still not sure where on the economic curve Africa lies at the moment. People were still worried about investing in Asia five years ago and Africa is about five years behind that story, but it is heading in the right direction."
John Niepold, who manages $800m in frontier African markets for Washington-based Emerging Markets Management, is similarly upbeat. He says: "There have been significant improvements in debt levels, current accounts and foreign exchange reserves, which means many African countries are no longer swimming against the tide."
In fact, Africa's total external debt has declined from over 100% to roughly 20% of GDP since 2005 thanks to the enhanced Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).
Of equal importance to debt relief has been the spread of democracy and market liberalisation across Africa. Complementing these developments has been the building of sound institutions upholding law and order, democratic accountability and good governance.
The number of African democracies has increased from 10 in 1980 to 33 in 2006. Today, two-thirds of the African Union's 53 member-states are elected governments with a strong emphasis on fiscal probity and service delivery. Professor Calestous Juma of Harvard University has pointed out: "Africa has done in 10 years [on electoral changes] what it took Latin America 40 years to do. Africans are embracing changes as the new order." Thus, political risk in the region has reduced, which should broaden appeal and confidence in sub-Saharan Africa's fledging capital markets.
According to US-based...