Impact of the Financial Crisis on Private Equity in Africa

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Permalink Reply by Eyembe Elango on January 6, 2009 at 7:39pm

http://www.cfr.org/publication/17551/africa_and_the_global_financia...

http://www.cfr.org/publication/17853/africa_dodges_the_financial_bu...

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Permalink Reply by Ben on January 6, 2009 at 7:49pm

Africa and the Global Financial Crisis

Interviewee:
Shantayanan Devarajan, Chief Economist of the World Bank's Africa Region

Interviewer:

Stephanie Hanson, News Editor
October 17, 2008

Shantayanan Devarajan, chief economist of the World Bank's Africa region, says that Africa' s banking system is not threatened by the current global financial crisis, but the region could see a decrease in private investment flows. Such a decrease would compromise the financing of many infrastructure projects on the continent. Devarajan proposes, however, that sovereign wealth funds may now turn to Africa as an attractive place to invest, given the upheaval in U.S. and European markets.
In a recent post on your blog, you talked about how the global financial crisis might affect Africa and the first thing you mentioned was the difference between African banking systems and the U.S. banking system. Is the fact that the African banking system is so nascent actually helpful in this situation?

Well it's helpful in the dimension that there are very few subprime loans and credit default swaps and all these fancy derivative instruments that we have seen in the United States and in Europe that may have created some of the problems of the banking system. So African banks hardly ever take their loans and then turn them into other instruments, break them up into mortgage securities and trade them and things like that. So yes, in a sense, it's a simpler system and therefore it's less prone to the particular kind of downfall that the American financial system has been facing.

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Permalink Reply by Jean-Marc Savi de Tové on January 9, 2009 at 8:47pm

Good read. Two points though,

The first is that non oil growth has been higher in 2008 than oil related in oil exporting countries. oil cash has fueled other sectors, which are driving the growth: construction, telecoms, retail, etc. there is a growing internal demand. Most countries in Africa are not oil exprters, so the misperception must be reduced. The non oil producers have been growing as well. What is the reason?

Second point.
- The Nigeria stock market has suffered mainly from margin lending activity, more than the international financial crisis.
- Kenya has had the political crisis we all know about, which hit the market.
- It is really South Africa and Egypt that suffered the most from capital withdrawals I believe.

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Permalink Reply by Ben on January 10, 2009 at 3:10pm

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Permalink Reply by Eyembe Elango on January 13, 2009 at 7:42pm

The Credit Crises & North Africa: Read More

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Permalink Reply by Eyembe Elango on January 22, 2009 at 4:23pm

Afrfica Braces for Global Shockwaves:
http://www.thefaceofafrika.com/2009/01/africa-braces-for-global-sho...

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Permalink Reply by Eyembe Elango on January 23, 2009 at 4:59pm

"On 6 November, the International Monetary Fund (IMF) released updated forecasts showing that economic growth in all regions will slow markedly. But Africa’s performance will still be relatively strong, with 5.2 per cent average growth in gross domestic product (GDP) projected for 2008 and 4.7 per cent for 2009. That compares favourably not only to the hard-hit industrialized economies, but also to the growth rates of some other developing regions, such as Latin America and the Caribbean (see graph).''

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Permalink Reply by Eyembe Elango on January 25, 2009 at 6:20am

"The World Bank has said that building African markets is a means to encourage growth as well as mitigating potential negative effects of the global financial crisis.

This was the outcome of a side meeting of African Finance Ministers during the Annual International Monetary Fund (IMF) and World Bank meeting held in Washington recently. "
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Permalink Reply by Eyembe Elango on January 25, 2009 at 6:27am

"Washington, D.C., October 12, 2008 -- How the current global financial crisis might affect Africa and what countries can do to protect themselves was the focus of a seminar yesterday between African bankers and international investment analysts, held under the auspices of the World Bank-IMF Annual Meetings. "
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Permalink Reply by Eyembe Elango on January 25, 2009 at 6:29am

"In the early days of the banking crisis, a lot of reference was made to “decoupling”, that Africa would not be directly impacted by the current banking crisis due to its weak integration into the global market. African capital markets are the smallest in the world and account for less than two percent of the global stock market capitalization and less than one percent of global debt securities and bank assets. Apart from South Africa, Nigeria and Egypt, most of the economies in Africa are marginal recipients of portfolio flows which, compared to foreign direct investment, are subject to high volatility. For countries like South Africa the main concern is the financing of the large current account deficit which has largely depended on short-term capital flows."
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Permalink Reply by Eyembe Elango on January 25, 2009 at 7:05am

"Fitch Ratings says Sub-Saharan Africa's (SSA) investment momentum and positive economic growth trends have improved the regions resilience to external shocks.
...In the report, Fitch highlights better economic management, rising public investment using resources freed up from debt relief, windfall from oil and other commodities, and increased private capital flows as factors driving Africa's growth. According to the report, investment rates in SSA have risen to 22% of GDP in 2007. This strong growth has resulted in annual GDP per capital at market exchange rates more than doubling since 2002 to just over US$1,000 in 2007."
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Permalink Reply by Ben on February 2, 2009 at 4:50pm

Interesting article in the AfricanManager.com website:

The African Development Bank (ADB) took the initiative to gather the African ministers and bank governors to debate the world financial crisis which has been raging for some time, and about which the world experts say that the poorest among the African countries will be the most affected. Read more.

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