The announcement by Stephen Jennings, CEO of Renaissance Capital, in January 2007 that his firm was setting up operations in Africa with an upfront investment of $500m was a landmark moment. It signalled the continent's attractiveness as a home for investment dollars to the developed markets in Europe and North America, as well as the cash-rich sovereign investors in Asia and the Middle East.
With returns often outstripping those in other emerging markets, Jennings' optimism still seems justified. The Nigerian Stock Exchange (NSE) All Share Index grew by 74% between 2006 and 2007, while Ghana had the best performing stock market in the world in the 12 months from June 2007, with 46% growth. In the same time period, the S&P Africa Frontier Index rose by 27%.
With a few obvious exceptions (Sudan, Zimbabwe), the last decade has witnessed a period of increased political stability, coupled with better governance in most of Africa. This has provided a disciplined regulatory framework that encourages greater investment in private-sector enterprise as evidenced by the steady stream of IPOs and private placements in Africa's larger economies.
As with all emerging markets, investing in Africa comes with its own unique risks - irrespective of the increasingly investor-friendly climate, due diligence supported by local knowledge is still key.
The African capital markets are growing at a phenomenal pace, indeed too great a pace for the domestic skill base to keep up with. Repeating trends seen in previous emerging markets, there is significant demand for expatriate talent as well as for repatriating Africans from the large diaspora (the UK alone is home to an estimated 1.5 million Nigerians).
Most banks and investment firms have staffed the top echelons of their African businesses with a mix of expatriate veterans of other emerging markets and repatriating African bankers with the right political connections as well as an appreciation for local culture and business customs.
Earlier this year, for example, Alex von Sponeck, previously head of debt capital markets for CEEMEA at Merrill Lynch, joined Goldman Sachs along with two other members of his team. Tutu Agyare left his position as global head of emerging markets at UBS to start up a hedge fund focused purely on African investments. And Francis Wood, a veteran of Credit Suisse and Merrill Lynch, joined First City Monument Bank in Lagos as head of investment banking.
The names mentioned above are just some of the high-profile moves of late. Lower down the corporate ladder, there is plenty of hiring activity at the VP, associate and analyst levels as firms jostle for competitive advantage in this booming market.
Opportunity abounds for the adventurous investor or banker. The lights are being turned on right across the Dark Continent.
Ikenna Iroche is a consultant at Correlate Search.