Keynote Address at the Africa Investor Summit

Good morning.  I’m Bob Rubin and let me add my welcome to all of you to the Africa Investor Index Series Summit at the New York Stock Exchange.  As Secretary of the Treasury, I traveled to Sub-Sahara Africa, and I formed a view that has remained consistent through my Africa-related experiences since the.  Africa clearly faces many challenges, but it also presents enormous opportunities.  For a long time, Africa’s problems have dominated its image and have clouded the view of investors, resulting in considerably less focus than was warranted by the potential rewards.  More recently, though, there has been increasing recognition of the investment opportunities in Africa and of Africa as an area for serious focus by global investors.  Recently, the consulting firm of McKinsey & Co., in a report entitled “Fulfilling the Promise of Sub-Saharan Africa” said:  “the region has already made big strides below the radar.  It now stands to become the developing world’s next great success story.”  Along similar lines, The Boston Consulting Group, another distinguished global management consulting firm, did a report on Africa called “The African Challengers”.  The report says “hidden in plain view, scores of African companies have been competing and rapidly expanding in the global economy”.  The report also said that “the conventional view is that Africa has been down so long that it will be hard for it ever to rebound.  This view is understandable – but out of date”.

The discussion of African indices and of Africa as an investment arena at the New York Stock Exchange is itself a sign of increasing global recognition of Africa’s investment potential.  We all know that Africa has hugely consequential issues in governance, infrastructure, education, political stability and many other areas; but most of us know far less about the opportunities for investors, and that is the point of this Summit.  I remember the Finance Minister of Mozambique telling me about that the agricultural income in the interior of the country could be substantial if the products could be delivered effectively to the markets on the coast, but that the absence of adequate roads and trucks undermined much of this potential.  My thought at the time was that this was both a problem for the country and a great opportunity for providers of equity capital, where substantial risk-adjusted rates of return might well be available for investments in any infrastructure and trucks in projects that attracted much less attention than similar investments in other parts of the world.  The Africa Investor expressed this point more broadly as follows:  “This is the opportunity in Africa – a pivotal market with potential much greater than actual output today.  A market like this needs just a bit of private investment to get the ball rolling.”  I also remember President Clinton saying, when he got back from his own trip to Sub-Sahara Africa, that most people look at Africa as a single unit and that that is a great mistake.  Instead, he said, we need to understand the individual countries of Africa and the characteristics of each.  Clearly, there are some countries with tragic conditions, and those stories often dominate the news.  But, as President Clinton said – and it is even more true today – there are many countries where real progress has been made and where conditions are conducive to business engagement and investment. 

Let me make two more points about investment in Africa.  Firstly, The Boston Consulting Group report that I referred to earlier lists 40 companies that are making a mark, and the report says there are many other “noteworthy” African companies.  Some of these companies are involved in the extractive industries that we tend to associate with foreign investment in Africa, but many more are involved in financial services, technology, media, logistics, industrial goods and other areas.  In other words, while natural resources will remain very important to Africa for a long time to come, there are many companies that are now developing successfully in other areas.  And, secondly, it seems to me that long-run profitability is likely to be associated with good citizenship, in the sense that extractive companies will benefit over the long run by addressing the environmental effects of their activities, and all companies can promote their own interests by providing training, healthcare and the like for their employees.  The reason I say this is in the interest of the companies themselves over the long run, is that when business helps further better conditions for the people of Africa, that can help create public and political support for a positive business environment, including the rule of law, good governance, adequate but sensible regulation, and the other requisites for business success.

Let me close by saying that I think today’s Summit is exactly what both Africa and investors need.  Over the past decade, huge new pools of capital developed in hedge funds and private equity funds; traditional pools, such as pension funds and endowments grew enormously; and investment has become truly global.  In this context, most investment arenas have been thoroughly explored.  But, Africa, though, is still relatively unknown to these pools as an investment arena.  However, as I said a moment ago, a clear requisite for success is to recognize, as President Clinton said, that Africa is not one place, but many countries, and investors need to focus on the particulars of each country.  The Summit will bring together American investors, including pension funds and many other bodies of capital, with the heads of African stock exchanges, the CEOs of African companies and African political officials.  And that provides investors and African officials and business people the opportunity to establish relationships that can be the basis for activity in the months and years to come, and can also give investors a better understanding of the conditions of the countries of Africa and the participants from Africa a better understanding of the concerns and interests of investors. 

With that, let me welcome you once again to this conference and I wish you the best, both in the time you are here and also in your respective engagements with investment opportunities in Africa.  Thank you.