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Sovereign Wealth Funds as Investors in Africa: Opportunities and Barriers

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  • Edouard Turkisch

Abstract

This paper studies the opportunities and barriers for Sovereign Wealth Funds’ (SWFs) investments in Africa. Based on historical databases on SWFs’ transactions, it shows that SWFs can facilitate up to 50% of the investment needs in infrastructure in Africa over the next decade to meet the Millennium Development Goals over the 2010-20 decade, and that African economies can benefit highly from the rising investor interest, which stretches increasingly beyond natural resources. However, there are specific barriers to SWF investments. Some of them are structural (lack of technologies; small size, low liquidity and fragmentation of markets; bad sovereign ratings; weak regulatory framework; lack of capacity building), requiring long-term changes, whereas others require shorter term adjustments (more co-ordinated development strategies, more active actions dedicated to SWFs). The international community and major financial institutions may also play an increasingly active role in channelling SWFs into Africa. Dans ce document, l’auteur étudie les opportunités et barrières pour les investissements des fonds souverains en Afrique. A partir de données historiques sur les transactions des fonds souverains, il montre que leurs investissements peuvent faciliter jusqu’à 50% des investissements en infrastructure nécessaires pour atteindre les objectifs du Millénaire pour le développement pendant la décennie 2010-20, et que les économies africaines peuvent grandement bénéficier de l’intérêt croissant des fonds souverains, au delà des ressources naturelles. Cependant, il y a des barrières spécifiques. Certaines d’entre elles sont structurelles (manque de technologies ; petite taille, faible liquidité et fragmentation des marchés ; mauvaises notations de dettes souveraines ; faible cadre de régulation ; manque de capacité institutionnelle), et requièrent des changements de long terme, tandis que d’autres requièrent des changements de plus court terme (comme la définition d’une stratégie de développement mieux coordonnée et des actions spécifiques envers les fonds souverains). La communauté internationale et des institutions financières peuvent également jouer un rôle de plus en plus actif dans l’attraction de fonds souverains en Afrique.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 303.

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Date of creation: Sep 2011
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Handle: RePEc:oec:devaaa:303-en

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Keywords: sovereign wealth fund; cross-border investment; developing countries; pays en développement; fonds souverain; investissements transfrontaliers;

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