Investment opportunities and needs in frontier markets across Africa
In a recent survey of investment professionals from development finance institutions (DFIs), 95% said they are interested or very interested in doing more in frontier markets.
To provide investors with further guidance, the Africa Resilience Investment Accelerator (ARIA) has published a new report sharing experiences from five frontier markets in sub-Saharan Africa – Benin, the Democratic Republic of the Congo (DRC), Ethiopia, Liberia and Sierra Leone.
The publication – titled Investment opportunities and needs in frontier markets across Africa: Insights from ARIA countries – is based on an analysis of more than 400 companies operating in these markets. It categorises businesses and financial institutions, analyses investment opportunities, highlights these projects’ impact potential and discusses how greater investment can be mobilised.
Some of the key insights from the publication are:
Companies operating in the five countries fall into five categories: large multinationals and international companies, regional players, major local conglomerates, local mid-sized businesses, and small companies
Banks fall into three categories: major international and regional banks, private banks, and state-owned banks
Of the 400 companies, 128 have been identified by ARIA as potential opportunities – these largely fall into four sectors: agribusiness (27%), financial institutions (21%), manufacturing (19%) and energy (17%)
The companies in the ARIA pipeline are looking for US$2bn in combined investment, with just over half (53%) needing between US$5 million and US$20 million
These projects have significant impact potential – 50% have import substitution or export potential, 42% are natively-owned and 26% are addressing the climate crisis
While these businesses present significant potential, 43% require technical assistance to become ready for investment from development finance institutions (DFIs).
DFIs are developing an increasing number of tools tailored to companies in frontier markets. The publication highlights several innovative examples including blended finance programmes, early-stage equity investments, and local currency products. Building on this work is crucial in delivering greater investment and supporting economic growth.
This is the second in our Foundations of Growth series of publications that shares the trends, lessons, challenges, and opportunities of investing in frontier markets in Africa. The series is aimed at helping development finance institutions, donors and impact investors develop their strategies for operating in these markets.