Business
East African Community looking into Private Equity to raise capital – and break aid dependency
East African Community partner states are looking into the possibilities of raising more money from international capital markets and in turn reduce donor dependency.
The plan is to use this capital for financing infrastructure projects to improve the East African Community’s competitiveness as an investor destination.
Most recently Rwanda managed to sell a US$400 million Eurobond which was quickly snapped up by investors. Kenya intends to raise US$1 billion before the end of this year.
During a round-table held on the theme ‘Building Private Equity and Private Capital Markets in Africa’, participants brainstormed about the challenges facing financing of development projects in Africa of which the East African Community is comprised.
Investors and policy makers met under the auspices of the Economic Commission for Africa and the World Economic Forum to identify and resolve the problems of attracting private equity.
According to a statement from the Economic Commission for Africa communications department, private equity could be Africa’s next development financing frontier and could mark an end to aid dependency.
However, the participants agreed there are still negative perceptions which portray Africa as “a risky continent in which to do business”. These perceptions have to be changed for the better.
Carlos Lopes, the Executive Secretary of the Economic Commission for Africa, said, “No one mentions the Saba insurgency in Malaysia or the Mindanao problem in the Philippines, which affect the investment climate for these countries. Investors must understand that the East African Community in particular and the African continent at large are not any riskier than other regions. There are far more people affected by conflict and insecurity in Asia than in Africa,” he said.
Other issues that hurt African economic growth include the high cost of raising capital in Africa; the mix of regulatory systems; and low levels of skills in the area of private equity.
On the positive side, it was agreed that harmonizing regulatory systems and deepening regional integration is a means to develop capital markets across national borders.
This could bring about long-term investments that could bolster Africa’s development aspirations.
According to officials, Vision 2063, currently under preparation in partnership with the African Union and the African Development Bank, will help to change mindsets.
“In this visionary document, we contend that the discourse on financing Africa’s development must shift; it must move out of the aid syndrome,” Lopes said.
The Economic Commission for Africa’s forthcoming study on domestic resource mobilization for the continent also aims to demonstrate that the continent can harness enough resources to finance development by tapping into reserves held by African central banks and in remittances.
Source: East African Business Week