HOW FRANCOPHONE AFRICA IS AFFIRMING ITS INVESTMENT FUTURE

I grew up in North Africa but my professional introduction to business in Francophone Africa was the kind of case study that would baffle many Africa novices, even as it was a familiar scenario for me. In 2011 I worked on resurrecting and recycling a small fleet of Soviet-issue patrol boats from the bottom of Conakry harbour in Guinea-Bissau. How they got there says a lot about where Africa has been, and about where it is going

The providence of these “Bogomol Class” missile boats is entangled in Cold War and post-colonial African geopolitics. But, the details are less important for us here. What’s really interesting is their story once they got there. Because, you see, those brand new, best-in-class ships sunk out of neglect. The local navy didn’t know how to maintain them, let alone operate them, and in the decades after they arrived in Conakry, they simply fell apart, rusted away and sank.

My work on this project raises two themes which I think are relevant for today’s Francophone Africa as an investment opportunity.

One theme is about the past. Africa has been blessed with abundant resources and a rich heritage of natural gifts. Since the wave of decolonization in the 1960s and 1970s, there have been significant opportunities to harness this potential. By focusing on sustainable growth, leveraging its resource base, and embracing innovative solutions, Africa can continue to build a brighter future, tapping into the strengths and opportunities that have always been present.

The second is the good news for the future. Francophone Africa has woken up. My project was just a small part of a massive shift in gears and a salient example of a process that has been building in momentum for some years now. Today, the region has reached a point of critical mass, full of speed, excitement and opportunity.

ESTABLISHED NETWORKS

There are 29 French-speaking countries in Africa, covering most of the north of the continent, the West African “bulge” and reaching south into the central part of the continent. The island of Madagascar is an outlier off Africa’s east coast.

The population growth in the region is estimated to be 2.4% year on year.  This means that as much of the developing world ages, Francophone Africa is producing young entrepreneurs, consumers and tax bases faster than just about anywhere in the world.

There are six French-speaking African countries in the top ten of fastest growing populations globally (2nd.Niger, 4th.Benin 5th. Equatorial Guinea 7th.DRC 8th.Chad and 9th.Mali). Niger currently has the highest fertility rate in the world at four offspring for every one woman. Francophone Africa has two countries in the top ten highest fertility rates in the world (the Democratic Republic of Congo along with Niger).

Most of those young Africans will use French as an everyday tongue. The homogeneity offered by the prevalence of French usage - the language is widely spoken in North Africa, while it is a core, generic language cutting across differences in local dialects across the rest of the region - bolsters integration, despite the lack of a formal or institutional network. There are over 400 million French speakers in Francophone Africa.

The prevalence of the French language gives this region an easy connectivity, reaching across the borders of culture and nationality. This offers access to a variety of markets and investment opportunities, allowing those considering entering the space financially both a well-established and functional linguistic and cultural network.

The commonality of French language also provides pathways to the French speaking world, including France of course, as well as into other areas in Europe like Belgium and Switzerland. In North America, Canada counts French as one of its national languages and French is also used in parts of Asia, including Vietnam, Laos and Cambodia.

This connectivity is aided by the centrality of the CFA Franc as a widely used currency. The West African (XOF) and the Central African Franc (XAF) are default currencies in at least 14 countries in the region.

The CFA’s wide usage dampens the impacts of currency exchange and fluctuations, in turn developing a freer flow of trade across borders. Fintech, for instance, benefits markedly from these conditions by being able to overcome inflation as a drag on business activity and integration between cross-border payments systems.

GROWING INVESTOR INTEREST

The exciting potential of the Francophone region has already got the attention of leading global investors. Venture capital and broad-based business investment deals have been struck in recent years, offering proof that the apparent potential stacks up in terms of real-world numbers and data.

Sovereign debt markets, among the more difficult to convince of the viability of an investment offer in the international investment ranks, have been noticeably keen to take a stake in leading economies in the region. Both Benin and Ivory Coast, for instance, have both had the experience recently of USD denominated bonds they have issued being oversubscribed, indicating a healthy appetite for increased exposure to the region and its member countries. 

Take Ivory Coast as a bellwether economy in the region. The country has worked hard to re-establish stability after the devastating civil war in recent years. Today, the economy has become one of the fastest growing in the region, presenting a remarkable turnaround since the dark days of war, and offers an inkling to the resilience and dedication Francophone Africa’s member states can display if given the room to move.

Ivory Coast’s success has been helped by the fact that, from early on in its post-colonial journey, the country has maintained a liberal financial system. This has been marked by no export taxes, tax breaks on foreign investments in local industry and laws against nationalisation in numerous industries to encourage private initiative and growth and to protect investor interests.

Driven by major export growth in cashews and cocoa, both of which commodities Ivory Coast is the world’s leading producer, the country has recorded one of the most rapidly expanding economies in Sub-Saharan Africa over the last decade. The country’s GDP surged an average of 8.2% year on year between 2012-2019.

While Ivory Coast has become an economic power in its own right, it has also become recognised as a popular regional hub, providing valuable value-add services and market access for manufacturers and distributors from other countries in Francophone Africa and beyond.

EMERGING AREAS

Ivory Coast may be the region’s rock star. But, Francophone Africa as a whole is able to draw on its potential and upward momentum, tapping into region wide strengths the Ivory Coast itself has helped establish.

In 2023, Francophone Africa was unique in all Africa in recording year-on-year growth in important indicators in 2023. The region saw investment deals finalised increase by 16% in the last year, bucking a continent-wide trend which saw a decrease in investment deals inked in 2022. Francophone Africa accounted for 20% of Africa’s total investment deals in 2022.

The tech sector has emerged as a major engine for investment funding. While tech investment across Africa remains dominated by continental superpowers like South Africa, Nigeria, Egypt and Kenya, Francophone countries take up 4 of the top 10 spots in equity value over the last year (Morocco, Congo, Tunisia, Senegal).

The telco sector, for instance, offers a range of entry points for start-ups and their investment partners to find traction. With money flow being central to intra-region trade, the fact that local telcos often control the networks via which these transactions are done suggests targets for growth and investment opportunities.

Currently, there is no known operator who is able to provide a coordinated and streamlined system dedicated to the Francophone region, through which Francophone Africa can become financially networked.

One means of creating this in the fintech sector is the creation of a kind of network “moat”. This would mean providing a separate fintech system which is able to provide benefits due to the  CFA’s position as a common currency. With this system, intra-regional transactions would be streamlined and fast-tracked, by virtue of not having to convert back and forwards in and out of the USD and other currencies. This would be faster and cheaper offering powerful regional impacts as companies are given an entry mechanism into other countries, using the advantages of common language and currency, as well as a dedicated region-wide fintech system facilitating the movement of funds and a range of other financial operations.

GO AHEAD SECTORS

Other exciting possibilities exist in AI and in insurance.

In the emerging and fast-moving world of AI, Francophone Africa looks set to be a space where new interfaces and technological solutions can be married to widespread need and huge market potential.

One such area is healthcare, where AI technology could be deployed to generate early detection of ailments and to increase availability of health services through automated response mechanisms and rapid distribution of treatments. The growth of telemedicine during the pandemic offers an insight into how Francophone Africa might be among Africa’s first regions to utilize AI to power diagnostic outcomes and to administer remote treatments.

Moreover, AI presents opportunities to circumvent administration logjams through developing sophisticated AI generated decision-making and resource allocation programs.

Finally, under-funding of healthcare in the Francophone countries, could be overturned by relatively low-cost AI or similarly based systems which can function 24/7 and minimize human resource requirements.

The presence of AI and other technologies and a demonstrated quick adoption of new technologies – it’s worth noting, for instance, the fast take-up and spread of mobile phones across Africa - slots neatly with a widespread need across the region in question for better healthcare systems and outcomes.

Another expansive area is insurance. From business to trade, to personal and other types of liability cover, insurance products in Francophone Africa have largely failed to take root..

The take-up of insurance in Francophone Africa is often undermined by tangled financial systems as well as by the impacts of national and international economic inhibitors like inflation. Added to these obstacles are red tape and bureaucratic ineffectiveness and the challenges presented by remote locations. The sector has also failed to educate and inform on the value and workings of insurance in functioning consumer and trade economies.

Such obstacles ensure many potential insurance consumers turn away from considering cover thus leaving a major hole in the market waiting to be filled.

Once again, the benefits of language and currency could be concentrated to allow for intra-region policies and regimes to apply across jurisdictions

Opening up and interconnecting the insurance sector across the region would reduce the cost of premiums and provide the ground for quicker responses and localized service provision.

There is value in going beyond simply reselling insurance and with developing localized and acculturated models that fit the region and its needs. These models could be readily advanced and deployed to address the insurance gap that exists in many nations in this region.

EXCITING FUTURE

Having grown up in Morocco and then spending considerable time in Guinea and elsewhere in the region, I have seen how the region has transformed and developed in the past few decades. I firmly believe in its potential. It seems clear to me that this region, taken as a large area without a dominant force or country, offers a variety of possibilities and opportunities that are unique in global terms.

Francophone Africa is a vast, growing and go-ahead space that is not limited by established systems or singular methodologies, yet is linked by language, common histories and by financial ties, like a common currency. It is set right now to develop and thrive.  

One might expect regions dominated by well-known economies like Nigeria and South Africa to monopolize investor attention and capital. While the region has often been overshadowed by these more prominent countries, Francophone Africa has emerged as a stable and attractive destination for venture capital and investment in its own right.

As I have shown, there is a robust investor appetite for exposure to this region. This phenomenon is surprising because it defies the common perception that Francophone Africa lacks significant investment opportunities or is fraught with insurmountable economic challenges. Instead, the region's economic diversity and the strategic advantages provided by the CFA franc and other factors I have outlined have created a resilient and integrated market that is increasingly attracting savvy investors.

This trend underscores the untapped potential and growing confidence in Francophone Africa's economic future.