Sovereign Wealth Funds as Investors in Africa

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.