The Power of Partnership Among U.S. and African Investors
This post originally appeared the Prosper Africa blog. Read the original piece here.
By Cameron Khosrowshahi, Senior Investment Advisor, Prosper Africa
This blog is part one of a three part series. Read parts two and three.
Africa offers tremendous growth opportunities for shared prosperity on both sides of the Atlantic. The continent is home to the world’s largest free trade area, growing economies, and an increasingly young, urban, and digitally connected population, all of which opens up new investment opportunities today and into the future.
This summer, I had the privilege of attending the 2022 U.S. Africa Business Summit as part of a delegation convened by Prosper Africa, the U.S. Government’s signature investment initiative in Africa. I joined colleagues from ten U.S. Government departments and agencies, as well as a group of nine U.S. institutional investors — pension funds, insurance companies, endowments — who manage over a trillion dollars in assets.
The Summit, co-hosted by the Corporate Council on Africa and the Kingdom of Morocco, provided a forum for U.S. and African institutional investors to discuss opportunities for investment in Africa. Institutional investors control $61 trillion in global assets and often deploy their funds through financial intermediaries like asset managers. Although investing for impact — aiming to generate financial and social or environmental returns — is a growing area, the U.S. investment community in particular is still focused mainly on risk-adjusted returns in mainstream markets. Overall, U.S. investors tend to concentrate their investments closer to home, in larger, more familiar markets which they view as less risky than developing economies. Less than 1% of U.S. pension funds are invested in African countries.
At the Summit, Vice President Kamala Harris delivered a video address on the importance of partnership in achieving sustainable economic growth across both the African continent and the United States. She said that the “Administration’s goal is to promote inclusive and sustainable economic growth and development across the continent, to expand capital flows, and to promote the vibrant spirit of entrepreneurship and innovation that is so prevalent across Africa.”
Spreading the word that Africa is open for business
African countries require at least $200 billion per year in financing to meet the United Nations Sustainable Development Goals by 2030 and avoid the worst consequences of food insecurity and climate change. We see this as an opportunity to be a reliable partner to African businesses and governments seeking investment to finance their pressing economic and infrastructure goals.
With public budgets and debt levels already strained across the world, private institutional capital is the largest reservoir of relatively untapped investment dollars, increasingly looking for financial and impact returns in faster growing developing markets. Through the Prosper Africa initiative, our U.S. Government partners are working to mobilize these investment dollars to foster two-way, mutually beneficial trade and investment partnerships between the United States and African countries.
How are we doing this? One way is by acting as a bridge between the U.S. private sector and the investment community in Africa, facilitating peer-to-peer connections among investors to build long term partnerships, and creating investable opportunities on the continent for U.S. institutions.
Ultimately, we’re showing U.S. investors that African countries are poised for consistent growth. With fast growing economies and an exploding urban population, Africa will be home to both a huge consumer base and the largest workforce in the world. We are also showing investors that Africa is a far more nuanced investment destination than the negative headlines that typically jolt U.S. investors’ perceptions of risk on the continent. Strong partners on the ground and well-structured investment projects can make Africa a prime investment destination for many U.S. pensions facing underperforming returns in home markets and growing retiree liabilities. We’re also using risk mitigation tools and providing transaction advisory support and facilitation to close deals.
Increasing U.S. trade and investment is a priority of the Biden-Harris Administration, as detailed in the U.S. Strategy Toward Sub-Saharan Africa. In December, the U.S. Government will convene the U.S.-African Leaders Summit, which will feature a Business Forum to advance two-way trade and investment partnerships that bolster Africa’s role in the global economy. As the U.S. Government gears up for the Summit, Prosper Africa and our U.S. Government partners look forward to playing a key role in helping to facilitate the dialogue and to maximize the opportunity for investors to connect.
