Conflict Threatens Investment in Africa

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A spate of bombings in Nigeria and Kenya is sparking concerns that investors may begin to shy away from the continent unless the violence eases, the African Development Bank and World Bank have said.
 
While Standard Chartered Plc’s Chief Executive Officer for Africa, Diana Layfield, said the violence won’t halt the bank’s expansion plans, industries such as tourism are already feeling the impact.
 
Bloomberg quoted the World Bank’s Vice-President for Africa Region, Makhtar Diop, to have said: “Conflicts in Africa are having an impact on investment in some countries, particularly in the tourism sector.”
 
Diop added: “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 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.
 
However, 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, said an investment specialist at Cape Town-based Investec Asset Management, Alastair Herbertson.
 
Standard Chartered is planning to open 13 new branches in Nigeria, Ghana, Kenya and Zambia this year, its Chief Executive Officer for Africa 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, the Chief Economist of Exotix Partners LLP in London, Stuart Culverhouse said.
 
“For new investors that have never looked at Africa before, this probably just reinforces their prejudices,” Culverhouse added.
 
“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.
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