Whither Africa’s “Frontier Markets”?

NEW YORK – Zimbabwe’s election appears, once again, to confirm a truism: Africa only seems to make international headlines when disasters strike – a drought, a coup, a war, a genocide, or, as in the case of Robert Mugabe, grossly incompetent government. But, over the past several years, a number of sub-Saharan countries have attracted unprecedented inflows of foreign capital. Recent global financial turmoil has only added to Africa’s allure, because its frontier markets are less vulnerable to international volatility than are most of the world’s more familiar emerging economies.

There are three main reasons why many sub-Saharan countries are performing well. First, high commodity prices yield windfall profits for the region’s leading producers of raw materials. Growing demand for energy, metals, and minerals – particularly in China – has driven unprecedented levels of foreign investment. Even large pension funds are beginning to take notice. Moreover, a large number of Africa’s poorest countries have benefited from exponential growth in (primarily United States-based) philanthropy.