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Africa’s private capital boom

Written by Dirk Willem te Velde

Press Release

The nature of private capital flows in sub-Saharan Africa has changed radically in the last decade, with nearly one third of all private capital flows now being comprised of portfolio equity and bonds flows.  The boom in new private capital flows has occurred over the last decade, with a downturn during the global financial crisis, and picked up significantly in recent years.

New research from the ODI’s ‘Shockwatch’ series reveals a significant shift from 2001 when almost 100% of private capital flows to sub-Saharan Africa took the more traditional form of Foreign Direct Investment (FDI).

FDI is more stable, whilst other capital flows tend to be more volatile, which requires improved management. Alongside the growth in private capital, FDI has more than doubled over the last ten years rising from $15billion in 2001 to $37 billion in 2011 with the BRICS accounting for a quarter of the total by 2010.

Dirk Willem te Velde, Head of the International Economic Development Group at the ODI said:

“The figures show a striking recent growth in portfolio flows which has been accelerated by the increasing success of African stock exchanges and bond issues by public and private providers.

The overall picture of private capital flows is changing radically, and we’ve now started to see a recovery of flows from the contraction that occurred around the financial crisis of 2008-2009.

Organisations such as the IMF have downgraded Europe’s growth forecasts once more, but they continue to contribute to a sense of optimism around African markets with African growth forecasts well above the average of developing countries. Our research shows that investors have certainly responded to this optimism.”