In the past year, a Tanzanian airstrip has welcomed over a dozen planes filled with potential investors, not aid workers. This shift reflects a broader trend in Africa, where foreign investors are taking a closer look at the continent's natural resources, economic outlook, and demographic changes.
The growth of Africa will be one of the defining stories of this century, with the continent's population expected to rise from 1.5 billion to 2.5 billion by 2050. However, whether this proves a boom or a burden depends on the capital Africa can attract.
According to Bridgewater, a hedge fund, sub-Saharan Africa has only half the development financing resources it requires for productivity gains that would narrow its gap with the rest of the world. The Africa Growth Initiative estimates that the region needs $245 billion in extra finance per year.
Despite the challenges, there are signs of optimism in Africa's economic growth, with the IMF forecasting higher growth in Africa this year than in the Asia-Pacific region. African sovereign debt has its highest average ratings since 2020, and the value of African Eurobonds sold to foreign investors has marked the best start in a given year since 2013.
Foreign investors are attracted to Africa's resources, including critical minerals, and the continent's potential in logistics and food. The American government is keen to invest in African minerals, and Chinese firms are also increasing their investments in the region.
African policymakers are doing more to open up their markets and reduce frictions between African countries. At the same time, African capitalists are spending more money at home, and the era of aid or free money is gone.
The growth of African firms and their investments in Africa is a promising development, with African investors finally starting to invest in their own continent. A new batch of sovereign-wealth funds has mandates to invest in infrastructure, and pension funds are getting bigger due to regulatory changes and demographic factors.
Joint investments between local and foreign capital may increasingly be a part of Africa's future, with some old-line investors already investing alongside African peers. The time is ripe for African investments, which tend to have low correlations with assets based in other countries.
