During what is increasingly considered to be the ‘new normal’ of low oil prices and a slowdown in consumption of commodities, the rapid growth seen in sub-Saharan Africa has perhaps rightly given foreign investors pause for thought. However, it remains a region that is rich in natural resources with fertile land and some of the youngest populations on the planet who are increasingly educated and hungry for opportunity.

Right across the continent, there is an eagerness to build diverse economies and nurture the region’s entrepreneurs: SMEs are the key to diversity, job creation and social mobility and all of these rest on economic sustainability. Yet, in a region that continues to struggle with weak capital markets, low levels of intra-Africa trade and strong concerns of corruption, the road towards diversification continues to be an uphill struggle. There are many factors and challenges at play right now across sub-Saharan Africa. Entrepreneurs struggle to access capital, cross-border trade is frustrated by a multitude of trade agreements and regulatory hurdles, the region’s trade deficit is widening and despite being able to feed itself, Africa imports most of its food. These are structural and political issues that need to be addressed on a regional level.

On the national level, governments need to work hard to develop solutions. These include investing in infrastructure – and despite the significant drop in national revenues, infrastructure investment must continue to be a major priority. Local businesses depend on it and foreign companies demand it if they are to put their own money in to African ventures. One country that has been of particular investor-focus over recent years has been Angola, which has invested heavily in business-critical infrastructure. A recent PwC report entitled Africa Gearing Up, comments on Angola’s critical infrastructure saying that, ‘…the speed at which the Angolan railroad system has been rebuilt is a first for the African continent.’ The report goes on to state that in only a few years, 2700km of railroads were rebuilt and more than US$3.3 billion was spent on the nation’s three main lines. Nowadays, every province is connected by main roads, making the transportation of materials and people much faster. Education has also begun to improve, attracting further support and funding from the World Bank, which stated in a memo in September 2013 that the number of primary school students,’…has grown from 1.8 million to 4.2 million in just ten years.’ This progress saw the Board of the World Bank approve a US$75 million credit to help Angola train a further 24,000 teachers that will serve half a million pupils in more than a thousand primary schools.

In addition, UNICEF has stated that Angola is one of only three sub-Saharan African nations that are on track to meet their Millennium Development Goal (MDG) of reducing the proportion of people without sanitation by half. UNICEF also states that Angola is making progress on achieving MDG 5 – the reduction of maternal deaths – with an average annual decline of between 2 and 5.5 percent. Angola has also been the recipient of regional investment. In 2014 the African Development Bank signed a $1 billion agreement to encourage private investment and financial and institutional reform in the country’s energy sector, helping to leverage greater overseas funding and contributing to the development of an electricity grid.

Angola does appear to be on track with its focus on infrastructure. However, its rapidly growing population of roughly 20 million people, most of whom live in cities and half of whom are under the age of twenty, needs to be supported financially when they set up new businesses. Lack of available capital remains an issue for business-owners right across the continent. Set-up costs are high and credit is expensive. In Angola, the central bank’s base rate is around 9 percent. This makes it very difficult for entrepreneurs and innovators to get new ventures off the ground. It is also difficult for young companies to attract the best talent, which often prefers to work for international companies or for the government. These factors slow down the creation of SMEs, which in most developed nations are the real engines of growth. In answer to this, the Angolan government has created new public bodies and reformed others in order to make it easier for SME’s to grow. In 2015, the National Private Investment Agency (ANIP) was reformed following the new Private Investment Law in July 2015. This narrows the Agency’s remit to focus solely on promoting private investment abroad.

Innovative funding channels have also been created, including Fundo Activo de Capital de Risco Angolana (FACRA), a government-backed VC and business support service. It acts as an intermediary between growing businesses and potential foreign investors – pointing foreign firms towards investment opportunities and presenting entrepreneurs with potential funding sources. Despite these important and much-needed reforms and initiatives, global markets and investors often remain cautious because of historic concerns surrounding political corruption and transparency. Organisations – particularly those that are related to government and/or managed by individuals who sit inside government – have a duty to demonstrate that they are whiter than white. Good governance, fiscal transparency and independent auditing are crucial. Much like other government-backed funds, Angola’s FACRA is governed by a strict investment criteria and its annual reports are audited by an independent external organisation. The Fund prioritises investments in key industry sectors, including technology related to agriculture, fish breeding, livestock and poultry. In addition, it focuses on healthcare, logistics, IT, education, tourism, industrial services, biotechnology, online services and construction. All investments are overseen by a Supervisory Board, which review the socio-economic results of FACRA activities and monitor the activities of the Audit Committee and external auditors.

FACRA is also administered by a private professional management entity that constitutes the legal representative of FACRA – it is responsible for the selection of portfolio companies, analysis of investment opportunities, investment management, active management and exit processes. It is more important than ever before that African nations create investment vehicles that support their burgeoning SME sectors and entrepreneurs – and even more important that such vehicles are properly governed and transparent in every respect. Right across the region, there are investment opportunities in growing African businesses and direct investment in infrastructure or PPP contracts. It would be a tragedy if international concerns surrounding governance and transparency were to overshadow important reforms that have taken place – and in doing so stifle socio-economic growth just when Africa needs it most.

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