In this second of a six-part series, Globe and Mail Africa correspondent Geoffrey York investigates how Africa's growth is changing its future.
Driving north in Africa’s copper belt, Mark Crandon marvels at the new factories and offices along the highway. “It’s crazy,” he says. “None of this was here three weeks ago.”
Supermarkets and shopping malls are opening too. They’re fresh fuel for his theory that anyone can make money in this corner of Africa. “You could almost blindly open any business here and it would be a success,” he says . There’s just no competition.”
It’s an unlikely place for a foreign investor to be raving about. The Democratic Republic of the Congo is one of the world’s most corrupt, impoverished and war-torn countries. Millions have died in the military and political chaos of recent years. Yet even here, the lure of the Africa boom is proving irresistible.
In the copper-belt city of Lubumbashi, the nouveaux riches of the mining industry can be spotted at upscale businesses such as La Plage – a glitzy suburban mall with a gelato shop, high-priced supermarket and cafés, not to mention a swimming pool and an artificial sand beach with parasols and volleyball nets.
Mr. Crandon’s employer, Renaissance Partners – a unit of leading Moscow-based emerging-markets investment bank Renaissance Group – is making an aggressive gamble on the future of Congo: It is investing $50-million in the first phase of a hugely ambitious 4,000-hectare property development. Luxury homes and retail shops will soon be springing up in the planned “satellite city” of Kiswishi on the outskirts of Lubumbashi.
In both its boldness and the nationality of its creators, Kiswishi (which means “there is wealth”) represents the new face of African economic development.
The dramatic rise in trade and investment from the BRIC countries – Brazil, Russia, India and China – provides a crucial source of capital for African countries, new markets for African commodities, and cheap new technology besides.
Annual trade between Africa and the BRIC nations, led by China, has already climbed past $200-billion and is expected to reach $530-billion by 2015. Direct investment in Africa by the BRIC nations is forecast to reach $150-billion by 2015, compared to about $60-billion in 2010.
The sources of foreign investment are changing partly because BRIC investors can more easily tolerate the political risks in African countries than their counterparts in the West.
Renaissance Partners, with its long experience in the rough-and-tumble “wild east” of post-Soviet business, has an instinctive understanding of the hazards of Africa – including the widespread corruption.
Its executives don’t blink twice at the unofficial payments they are obliged to give to Congolese soldiers at checkpoints along the road to its property.
“I think the Russian experience has made us more ballsy,” says Arnold Meyer, director of African real estate at Renaissance. “What we looked at in Lubumbashi, almost any other company would have walked away from.”
The company’s appetite for risky ventures is helpful in a country where, apart from the culture of bribery, war still simmers and company assets have been expropriated by the government. Its rivals from Europe and North America face pressure to stay out of conflict zones, as well as a trend among their governments to penalize companies that engage in corruption abroad.
Renaissance Partners, which manages a $750-million investment portfolio, has property developments under way at eight sites across Africa, from Ghana to Zimbabwe, including a planned $5-billion project called Tatu City on the outskirts of Nairobi. The project in Lubumbashi could be the most challenging – and rewarding.
“The political risk is probably the highest in Africa,” admits Mr. Crandon, an energetic young South African who is overseeing the satellite city project.
“There’s a lot of cash in the city, but it doesn’t sit in the formal sector. The middle class is often a lot bigger than you realize from the outside. They’re desperate for quality homes and quality infrastructure. It’s a city of three million people, with almost zero infrastructure, so the opportunity is just enormous.”
But in an age-old pattern, much of the BRIC investment flowing in to Africa is benefiting the political and business elite, rather than ordinary Africans. In Ethiopia, for example, China built a gleaming new $200-million headquarters for the African Union – and supplied surveillance technology to the state telecommunications company. In oil-rich Angola, China spent $600-million to build four new soccer stadiums for the authoritarian government, allowing it to host a prestigious African soccer tournament.