For Israel, Africa investment remains black box

A climber with no support save his chalky hands hangs onto a cliff overlooking a raging ocean; perhaps it is not the image that inspires confidence, but it is one the Israel Export and International Cooperation Institute (IEICI) chose as a metaphor in its presentation on investing in Africa Thursday.

Yes it’s dangerous, explains Shauli Katznelson, Deputy Director General for Economics at IEICI, but this extreme climber will survive because he has planned every move ahead of time.

Fear of falling to a horrible death aside, the IEICI convened its Africa conference on the observation that Africa holds the key to long-term investment success. While markets like India and China are already maturing, it is the so-called “dark continent” that holds potential further down the line.

“There’s been a change in the nature of Israel’s involvement in Africa from the economic side. It’s less development and more economic interest,” says Irit Ben Abba, Deputy Director General, Economic Division Ministry of Foreign Affairs.

According to Ofer Sachs, the CEO of IEICI, Israeli exports to Africa have grown 250% in the past decade. Yet difficulties remain: On a continent that houses 54 countries, over 1,000 languages and three times as many ethnicities, Israel has just 10 embassies, and only one foreign trade office.

So why, with all the difficulties, political instability, lack of development, conflict, and potentially explosive demographics should Israeli business look to Africa? Two primary reasons are salient. One is that Africa has 40% of the world’s arable land, yet only utilizes 10% of it. Another is that Israel has strong expertise in the very areas that Africa needs the most: agriculture, food, water sustainability and clean energy.

“We are ready to go a long way with Israel,” says Henri Etoundi Essomba, Cameroon’s Ambassador to Israel, who points out that Africa’s economic growth in the past few years has been second only to Asia's. “We expect the Israeli community to be more aggressive.”

One of the major problems Israeli companies face is obtaining credit for projects in Africa. “There’s room for at least $2 billion in projects,” says Eli Avidar, President of the Israel-Africa Chamber of Commerce, but adds that the Israeli Export Insurance Company Ashra, which insures export credit transactions, has little stomach for such projects.

One avenue of financing Israelis may turn to is the International Finance Corporation, the private-sector arm of the World Bank, which invested nearly $15.5 billion worldwide in 2012. “IFC considers Africa its top priority today,” says Oscar Chemerinski, Director Africa and Latin America Manufacturing, Agribusiness and Services at the IFC’s Western Europe division. While the IFC has helped Israeli companies fund investments in other regions, it has yet to find a good fit for Africa.  “We traditionally finance investment projects,” explains Paula Alayo, the IFC country coordinator for Israel, currently on one of her quarterly visits to find fitting investment projects. Most Israeli companies that would have interest in Africa, she says, provide services that other companies hire out instead of investing in their own projects That may be changing, however.  

“We’re beginning to see a shift,” she says.

The fact that a business conference on Africa could fill the seats of the Dan’s King David room with business people and investors, a feat that would strain credulity just a few years ago, demonstrates a step in the right direction.