‘Africa should be growing at double digits’

Speaking at AVCA’s conference in London, industry insiders argue the current growth model in Africa isn’t working

Africa may be boasting higher growth figures than those found in developed markets, but that is no reason for the continent to rest on its laurels, according to Arnold Ekpe, chairman of Atlas Mara, the London-listed African bank co-founded by former Barclays head Bob Diamond.

Speaking at the AVCA conference in London, Ekpe said that if the continent really wants to catch up with the rest of the world then it needs to start growing at double digits, as China did for several decades.

“The major challenge we face is the macro challenge, because currently there’s a certain acceptance that five to six percent growth is acceptable,” Ekpe said. “I think that’s completely wrong. Africa needs to raise its game and make a step change. It should be growing in double digits.”

Ekpe said that recent catastrophic events such as the Ebola epidemic and the deaths of African migrants in the Mediterranean, combined with high levels of youth unemployment prove that the current growth model isn’t working.

Although private equity has a role to play in Africa’s growth story, the impetus needs to come from governments.

“Countries develop because there is the financing to develop. The public sector plays a significant role, and then foreign investments – including private equity – support that process,” Ekpe told PEI. “You cannot outsource your development to foreign investors.”

Investors looking to deploy capital on the continent have the opportunity to get behind a “wider and bigger objective to try to inform the governments that they need to put infrastructure and systems in place”, Ekpe said.

Avril Stassen, senior partner at Sub-Saharan Africa-focused firm Agri-Vie, which invests in the food and agribusiness sectors, agrees that African economies need to be growing at a much higher rate to have a substantial impact on unemployment rates.

“We are not seeing a meaningful change in unemployment in most countries,” Stassen told PEI.

To jump-start growth rates, governments must “invest money for the future”, as well as put in place “a framework of development that supports, that is pro-business, that is pro-investment”, Stassen said.

Agri-Vie is currently raising its second fund, targeting $175 million, and is aiming to hold a first close on $75 million during the second half of the year. Stassen believes the severe lack of infrastructure in certain parts of the continent is constraining for private equity firms that are looking to develop local markets for their goods rather than just produce for export.

“There needs to be investment in infrastructure,” Stassen said. “It is a big limiting factor, depending on where you operate.”

As well as developing industries, due attention must be paid to key elements such as transport links and power supply, Ekpe told PEI.

“The largest employers of people in most markets [are] agriculture and manufacturing,” Ekpe said. “Without the roads, without the power, without the rail and all that, it’s an issue.”