As the debate rages on over the mots polémiques in the Band Aid 30 song with lyrics that are tone deaf, inaccurately reflect the state of affairs and cause Africa more harm than good, there is an Africa story that has been largely off the radar of most members of the general public and has received precious little media attention.
Africa is the new poster child for growth, multi-million and billion dollar deals and high investor returns. It is a continent with a fast growing middle class willing and able to spend money on all the trappings that go with a middle class lifestyle. Sub-Saharan Africa is home to six of the ten fastest growing global economies, it accounted for the largest number of global regulatory reforms in the last year making it easier to do business and it is where the International Monetary Fund predicts GDP growth of 5.8% next year. Growth in sub-Saharan Africa over the last few years has been mostly driven by domestic demand, including investment outlays and private consumption.
Sub-Saharan Africa is where savvy Western investors go looking for yield in an environment where Japan extends its lost decades, Russia is on the verge of collapse, Chinese growth slows, the Eurozone remains weak and US growth, although steady, is slow. Seeking yield, high profile investors are looking to the frontier markets, increasingly in sub- Saharan Africa. Former Barclays Bank CEO, Bob Diamond, with a war chest of hundreds of millions of dollars, is seeking, through his Atlas Mara fund, to plough money into ventures that will enable the fund to build the premier financial institution in sub-Saharan Africa. Carlyle, the private equity firm, recently made two multi-million dollar investments in the African banking and retail sectors, and Coca-Cola and SAB Miller, last month, sealed a deal to create Africa's largest bottler of Coca-Cola which will help the company profit from the continent's appetite for beer and soft drinks.
The UK saver on the other hand, frustrated with a persistent low interest rate environment (the Bank of England, this month, announced that it will hold the benchmark interest rate at 0.5%, a record low that has been in place since March 2009), where money in regular savings accounts earns less than 1% annually for accountholders, and unwilling or unable to pay the fees charged by fund managers to strategically invest client money, has few options to access returns which won't be wiped out by inflationary pressures. Some investors have sought to take part in the alternative finance sector and engage in peer-to-peer lending or invest through crowdfunding. A number of peer-to-peer lending platforms are in operation, including MYC4 which has been featured on the BBC programme, "World Challenge". Retail investors interested in purchasing stakes in small businesses can turn to platforms like Crowdcube and Seedrs for UK investments. Investors looking to invest in the frontier or emerging markets but who do not have a war chest like Bob Diamond or access to private equity funds like Carlyle can look to platforms such as Emerging Crowd, which is set to launch in January 2015.
Emerging Crowd, headquartered in London and under FCA regulation, is the first investment-based crowdfunding platform exclusively focused on frontier and emerging market companies. The firm was founded by market veterans, Lucien Moolenaar and Will Tindall, and is supported by a team of in-house analysts who carry out rigorous due diligence on each company before launching it to the UK market.
For investors who also want the feel good factor, one point to note is that philanthropy and profit do not have to be mutually exclusive concepts. Take for instance a fashion-forward clothing designer and manufacturer in East Africa focusing on ethically sourced materials and sustainable development or a small business set up in West Africa by a cooperative of women seeking funds to buy additional freezers to operate near market places so that fishmongers may rent the freezers to preserve their wares. Investing in a small business like this could help the business grow and provide sustainable income for the women running the business which will help support their families and pay for their children's education, but at the same time provide potential returns for the investors either through interest rates on debt or returns on equity to the extent that the venture becomes very successful.
Like all the other Band Aid projects, the popularity of Band Aid 30 will be ephemeral. However, investment opportunities now available through crowdfunding platforms have the potential to forever change market access for retail investors by offering more investment choices and opening up avenues that enable such investors to contribute to sustainable growth in markets that badly need it. These investments also have the added benefit of serving the community of emerging and frontier market small and medium-sized business entrepreneurs who are currently underserved by the banking and international finance community.Suggest a correction