African Conflict Threatening to Curb Investment, Lenders SayRene Vollgraaff, David Malingha Doya and Saul Butera
A spate of bombings in Nigeria and Kenya is sparking concern that investors may begin to shy away from the continent unless the violence eases, the African Development Bank and World Bank said.
While Standard Chartered Plc’s chief executive officer for Africa, Diana Layfield, said this week that the violence won’t halt the bank’s expansion plans, industries such as tourism are already feeling the impact, Makhtar Diop, the World Bank’s vice president for Africa Region, said at the African Development Bank’s annual meeting in the Rwandan capital, Kigali.
“Conflicts in Africa are having an impact on investment in some countries, particularly in the tourism sector,” Diop said in an interview during the AfDB meeting, which ends today. “These events are slowing down economic growth, with infrastructure being destroyed and people being displaced.”
Tourist arrivals in Kenya fell by almost a fifth last year as the country was hit by a series of bombings, including an assault by the Somali militant group al-Shabaab on the Westgate Mall in Nairobi that killed at least 67 people. Tourism is Kenya’s second-biggest source of foreign currency.
About 90 people were killed in bombings in the Nigerian capital, Abuja, on April 14 and May 1 that were claimed by Boko Haram, the Islamist group that kidnapped more than 200 schoolgirls last month. Kenya’s capital, Nairobi, was rocked by two attacks this month in which at least 15 people died.
While retail investors factor in increased political risks, there seems to be no change in appetite from companies with long-term commitments in industries such as infrastructure, Alastair Herbertson, an investment specialist at Cape Town-based Investec Asset Management, said on May 21.
Standard Chartered is planning to open 13 new branches in Nigeria, Ghana, Kenya and Zambia this year, Layfield said in an interview.
“Our belief in the medium-term and long-term prospects of those economies isn’t diminished,” she said. “We still remain incredibly focused on growing our presence in both Nigeria and Kenya.”
Companies looking to make their first commitments in Africa may be particularly sensitive to the violence, said Stuart Culverhouse, chief economist of Exotix Partners LLP in London, said on May 21.
“For new investors that have never looked at Africa before, this probably just reinforces their prejudices,” Culverhouse said. “I think countries have to work so much harder to keep that international interest alive.”
Lingering tensions and political instability “could affect investors’ willingness to undertake planned projects” in Africa, the AfDB said in its African Economic Outlook released this week.
The Nigerian government said in an e-mailed statement President Goodluck Jonathan will meet other heads of state in Pretoria for discussions on combating terrorism in Africa before the inauguration of South African President Jacob Zuma tomorrow.
While the security problems in Nigeria and Kenya are still relatively contained, there’s concern they will spread, Andrew Alli, chief executive officer of Africa Finance Corp., said in an interview yesterday.
“It’s extremely worrying, the levels of increasing violence on the continent,” Alli said.