Rwandan President Paul Kagame speaks as he sits beside Senegalese President Macky Sall during the Tony Elumelu Foundation's African entrepreneurship forum in Abuja, on July 27, 2019.PIUS UTOMI EKPEI/AFP/Getty Images
Richard Remillard is a former executive-director of Canada’s Venture Capital and Private Equity Association, former vice-president at the Canadian Bankers Association and has had stints with Finance Canada and the Bank of Montreal.
The long-anticipated release of Canada’s Africa strategy paper in August prompts concern that we may be missing out on business opportunities for Canadian corporations and investment funds in Africa. This view is fuelled by Ottawa’s long-standing tendency to see Africa solely through the twin lens of internal conflict and economic underdevelopment.
And so Ottawa contributed $132-million to the Canada-Africa Development Bank (ADB) Climate Fund, which was set up in 2021 to offer concessional loans with the objective to “mobilize private capital to fill the climate investment gap in Africa.” This lens results in tunnel vision that blinds Canadian governments and businesses to the prospects for successful enterprise across diverse sectors in Africa.
The strategy paper should concentrate on taking advantage of the accelerating business opportunities in Africa that have contributed to ranking the continent as the second-fastest growing region in the world after Asia. The ADB tallies the continent’s growth rate at 4.1 per cent in 2022 and 3.1 per cent in 2023 while forecasting 3.7-per-cent growth for 2024 and 4.3 per cent for 2025. This performance contrasts with that of Canada, which achieved a growth rate of 3.8 per cent in 2022 and a mere 1.1 per cent in 2023 while the International Monetary Fund (IMF) has forecast growth for the country of 1.3 per cent in 2024 and 2.4 per cent in 2025. The ADB also predicted that 11 of the 20 fastest-growing countries this year would be African.
This data hasn’t gone entirely unnoticed by Canadian business as there was $10.7-billion in Canadian foreign direct investment into Africa in 2019, which grew to $15.7-billion in 2022. In 2020, the Business Council of Canada (BCC) released a paper urging the private sector and government not to overlook Africa. In June, BCC members including representatives from Canadian Imperial Bank of Commerce, Ontario Municipal Employees Retirement System, Cameco Corp., and Mattamy Asset Management travelled to Nigeria to meet with public- and private-sector executives.
However, to date most of Canadian investment into Africa has been in the form of mining – with Canadian mining assets of $37-billion recorded in 2022. Mining hasn’t been a priority for the current federal government and the heavy involvement of Canadian miners in Africa may have obscured the opportunities that exist for business promotion elsewhere in the African economy.
Largely absent from the African scene have been important segments of Canadian business, of which three stand out.
First, there are the investment arms of the Maple 8 pension funds that collectively manage $2-trillion in Canadians’ savings, namely Canada Pension Plan; Caisse de dépôt et placement du Québec; Public Sector Pension Investment Board, which manages pensions of federal employees; British Columbia Investment Management Corp.; Alberta Investment Management Corp.; Ontario Teachers’ Pension Plan; Ontario Municipal Employees Retirement System and Healthcare of Ontario Pension Plan. They are large, sophisticated investors that have mostly, if not entirely, shied away from robust, active involvement in Africa. Generally, they have chosen to focus their efforts on North America, Asia and Europe, leaving Africa to others.
Second, the Big Six banks have largely ignored the fintech-innovation-rich environment that has burgeoned in Africa, particularly in Kenya, Nigeria and South Africa where rapid-fire technological adoption in financial services has emerged as a way of leapfrogging more traditional means for banks to do business. This is puzzling as all the big banks, as well as their leading non-bank competitors such as Power Corp. and the Desjardins credit union, have been actively involved in backing fintechs to stay ahead of the technological curve at a time of revolutionary change.
Third, there was not a single Canadian venture-capital investment in Africa in 2023. One fund, Kinvest Venture Partners and Capstone Asset Management, announced an initial close of a US$3.15-million fund for African investment while two social impact funds with plans to invest in Africa, among other emerging economies, were launched in 2020, one of which has been liquidated.
Meanwhile, the Partech Africa Tech VC Report stated that over 500 investment funds had poured US$3.5-billion in venture capital investment in 2023 in Africa, down for the first time in eight years, a decline which largely mirrored the downturn in venture capital across multiple jurisdictions. Of these investments, fintech led the way with 113 deals and US$852-million followed by e-commerce (13 per cent of deals) and cleantech (13 per cent of deals); 79 per cent of all the deals went to Nigeria, South Africa, Kenya and Egypt. Currently, Canada has foreign investment promotion and protection agreements with nine African countries – but not with Kenya, South Africa or Nigeria.
Quite obviously, Canada has a misperception problem when it comes to doing business in Africa and it is time to clear that problem up.