Maximising growth and minimising risk

AdobeStock 188477308At AFSiC 2021 Simon Gray, head of business development & marketing at BVI Finance, moderated a formidable panel of financial experts to discuss the unique opportunities posed by the African continent, and how funding can be secured to unlock this potential

Agnes Gitau, partner at GBS Africa, began by explaining some of these investment opportunities on the continent. She commented, “For me, the unique opportunities lie in African’s recovery post Covid-19. Sectors investors are interested in are those aimed at addressing society needs like healthcare – which does have a huge gap and requires funding. Africa requires over US$100bn in health infrastructure and, in the last six months, we have seen venture capital, private equity and private financing institutions which are funding tech start ups focused on the healthcare sector. 

“Other unique areas are in fintech. There are a lot of innovations and great ideas coming out of the continent and they need financing. The governments alone will not be able to finance these and so it is an opportunity for the private sector.”

The African Continental Free Trade Area (AfCFTA), which commenced at the beginning of 2021, represents one of the biggest opportunities for Africans and international investors alike. While the panellists noted that there is still a lot of work to be done for it to reach its full potential (and it is still too early to assess its impact) governments and the African Union have provided some protocols in trading services and dispute settlement for people to have confidence in cross-border trading. By 2050 AfCFTA could facilitate US$540bn just from exports and create about 30 million jobs. 

Gray commented, “Remember that the EU began as an iron, steel and coal trading operation and everyone accepts that is has been very successful.”

Stanley Osuide, CEO at Africa Investment Gateway Group, added that if AfCFTA is done right it will slow trade with China, USA and others but it will provide other opportunities for these countries as well. He said, “It is new, it will take time but it is important to get this right. In three years we can assess more rigorously to see if it is working.”

Gray then steered the conversation to international jurisdictions, such as the BVI, that can facilitate investment into the continent to capitalise on these bountiful opportunities.

Matthew Gilbert, partner at Maples Group, said, “One difficulty with trading blocks is that people come from different backgrounds and systems which can cause problems. Investment platforms provide a level playing field and neutral vehicle where co-investors, joint venture partners, etc can invest and trade.

“I don’t think that this can be underestimated in terms of its ability to attract investment and attract leverage on a cross-border basis from global institutions. The fact that 30% of international investment flows through them speaks for itself.”

Thomas Dugdale, counsel at Harneys, added, “The BVI has a good robust level international playing field based on the fact it is a British overseas territory with English law as a foundation. This gives it credibility with investors and anyone using it knows and can be confident that investor rights will be protected and contracts will be enforced.”

Gray noted that three years ago the BVI introduced an arbitration centre. While this is relatively young (and has not been helped by Covid-19) it is very much operational and provides another route for arbitration.

Scaling businesses

Gitau discussed the challenges restricting African businesses from scaling, pointing to a lack of finance which remains the biggest barrier. She said, “The continent needs partners who are in the continent for the long run. If we can get more international investors who have confidence in our market as they start to open up that will help businesses scale up.”

Hindering finance reaching the continent is the unpredictability of African markets and investors need to know that contracts will be honoured and that they have a solid arbitration foundation to fall back on should disputes occur. Once again, this is where BVI and other jurisdictions can really benefit the African continent, mitigating the risk factor for investors and therefore giving them the confidence they need to invest in the continent which can be used for businesses to scale up. 

Osuide also added that “One of most important things is the lack of knowledge. If there is not the knowledge to scale business, there is no point receiving investment. Africans are well read but the knowledge to get projects from start to finish is not there. Let’s get that knowledge in and that will help get the businesses to scale. Knowledge translation is a very crucial element for scaling businesses in Africa.”

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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