Why ESG is here to stay in African investments
Apr 14, 2014
Africa is still touted as the next investment frontier and the figures bear it out: with over $50 billion foreign investments in 2012 according to UN figures it is the recipient of more foreign direct investment (FDI) than any other continent. Investors appear to view the developed world as over-regulated, and regions such as North Africa or parts of the Middle East too unstable. Africa's economic resurgence has its roots in small but real improvements in governance and transparency, more open societies empowered by social media, and economies leapfrogging directly to new technologies such as the mobile phone as a business tool. More than 720 million Africans have mobile phones and 167 million have access to the internet. However, due to its low domestic savings rates Africa has to rely on foreign investments to fuel its growth and here two models have presented themselves:
- The Chinese 'ask no questions approach' which trades infrastructure investments for access to natural resources; and
- The conditional model espoused by the 'West' where investments seem to come with a range of conditions, especially in respect of environmental, social and governance performance.