BBC - Friday, September 18, 1998 Published at 17:37 GMT 18:37 UK

Africa's investment bonanza

Business reporter Mark Fisher reports:

Anyone who put money into the Ghanaian stock market at the start of this
year was probably making a smart move.

In US dollar terms the market index rose about 90% in just seven months.

Investors in stock markets as far apart as Morocco and Botswana have also
watched shares prices move higher.

Some markets have gone down, but not much. While fortunes have turned to
dust in Asia, Africa has shown that there's still money to be made in
emerging stock markets.

Western funds that invest in African stocks have been reporting a rise in
interest from people who now look at the continent in a fresh light.

For years many foreign investors wrote off Africa as a place where war,
disease and mismanagement ensured that profits could not be made. Now they
are changing their minds, at least as far as some countries are concerned.

The result could be an influx of money into the most successful African
markets, which would reinforce the already robust performance of their
economies.

But many problems remain. One is to ensure that the economic policies that
have contributed to success so far remain in place. These include
privatisation and a general economic liberalisation - moves that are not
always politically popular as they disrupt powerful vested interests, as
well as sometimes leading to higher unemployment.

Another drag on new investment in shares is that most African stock markets
are small. There just aren't that many companies to buy into, and enlarging
the pool of shares will be a slow process even under benign conditions.

South Africa's performance is another worry. Its stock market is by far the
continent's biggest, but it hasn't prospered like some of the others - its
economy is more closely linked to the rest of the world's and thus more
vulnerable to the international downturn.

The United Nations Conference on Trade and Development (UNCTAD) points to
other concerns, including Africa's huge debt burden and low prices for the
commodities on which many countries still depend.

It adds that exchange rates have become unstable and interest rates are
often too high.

Still, UNCTAD adds that Africa has much more growth potential than is
commonly believed. Investors with a taste for risk obviously agree.

They have been making money there, an outcome that few were predicting even
as recently as five years ago.