Africa’s future as an emerging market hinges on the establishment of the rule of law. In Nigeria, President Mouhamadou Buhari’s campaign against corruption has raised notions of the rule of law in the burgeoning country. In Benin, President Boni Yayi’s decision to respect the constitution by stepping down from the presidency at the end of his term gives hope that the rule of law is emerging as a theme in the region. Such developments brighten the region’s prospects as a destination for institutional investment.
In the past, many institutional investors have noted that despite the attractive fundamentals of the region, the void has been a major factor in their decision to avoid investing. Today, these investors are looking for signs of emerging rule of law, as evidenced in Nigeria and Benin. Though they demand a more certain rule of law, their larger and more institutional nature allows them to make long term commitments, which is exactly what Africa needs to develop critical infrastructure.
To put it in analogous terms, with the low hanging fruit of the Baobab (mostly commodity plays) now looking less attractive, investors are left looking at the harder to reach opportunities in the region. Market dynamics have actually caused an unprecedented build up of investors who have an appetite for the more difficult to reach investment opportunities. This group of investors is larger than the group of investors who have invested in Africa thus far. All these investors need to scale that the African baobab is some rule of law.
