According to Warren Buffett “Risk comes from not knowing what you’re doing” and he should know, he’s done quite well for himself. But the truth is all investment decisions are grounded as much on market certainties as they are on personal conviction, so whatever some fellow in a shiny suit driving a Porsche might tell you sensible investors will always look for as much certainty as possible before staking their hard-earned cash on the next big thing. And above all else, that means the certainty of having a properly regulated market. Just look at what happened when US Regulators allowed Rating Agencies to give AAA ratings to diced and sliced subprime housing assets.
So when London played host last month to the UK-Africa Investment Summit regulatory standards were always going to be top of the agenda.
Hosted by an ever bouncier and oven-ready Boris Johnson, the London Summit brought together businesses, governmental agencies and, influential institutions from across the globe: all looking to showcase an expanding range of investment opportunities on the African Continent, with mutual prosperity and investment certainty running through the programme like a stick of rock.
And when it comes to certainty, the Delegates in London would have been well advised to remind themselves of the findings of last month’s Report on Economic Transparency issued by the Legatum Institute: Ghana is now not only one of the world’s fastest-growing economies but also one of the best regulated, with an international ranking of 54th for Governance Quality which puts it ahead of Hungary (69th), China (88th) and Egypt (157th). As the report concludes with beguiling simplicity “Countries that have greater levels of Economic Openness are more productive, which means better Africa Investment can be improved by policy choices: Governance is the key.”
Quite right… just ask Warren Buffett.
There are some predictably hard facts beneath the success story. Over recent years Ghana has benefited significantly from a much-improved communications, administrative and regulatory infrastructure that has enhanced access to overseas markets beyond recognition and in the process nurtured a much more flexible labour market. In particular, a dramatic series of policy initiatives have relaxed restrictions on international investment and improved flows capital as well as encouraging new and more localised centres of trading expertise.
All of this creates a pretty heady mix but as Stephen Brien of Legatum rightly puts it: “Prosperity is so much more than material wealth: without an open and competitive economy it can be very challenging to create lasting social and economic wellbeing. That’s why we view economic openness as being so important.”
And it’s not all just about Ghana either: Rwanda was ranked 51st globally for the quality of its Investment Environment (the biggest improvement of any country in sub-Saharan Africa) and all the sub-Saharan markets are currently benefiting from participation in The African Continental Free Trade Area, the largest single market anywhere in the World.
Small wonder Johnson made a point of meeting Ghana’s President Nana Akufo-Addo on the first day of the Conference…I wonder what he was after?
The SLC African Fund aims to build on the opportunities offered by sub-Saharan African Markets and deliver long term capital growth as well as income distribution: working to solve social and environmental challenges and at the same time deliver sustainable profits for investors.
African markets have been bedevilled by a lack of regulation, sadly fettering historic growth patterns across the continent: but that picture of a dated, post-colonial world is rapidly aging. Africa now has some of the most transparent and well-regulated markets in the world and that is surely something to celebrate.
At Red Ribbon we’ve long been aware of the potential of sub-Saharan markets as a driver for global economic growth, and the recent findings of Legatum have reinforced my convictions and confidence in its future.
I’m not at all surprised Boris Johnson is paying so much attention!