Africa (2)

Recently investors have been looking at the African continent for better returns on their money.  Africa has been hailed as the next big investment destination following a decline in European and the previously championed BRIC (Brazil, Russia, India, China) economies.

Africa offers wide opportunities throughout her 54 countries.  For example, Kenya, Bloomberg predicts, is the world’s third-fastest growing economy in 2015, and an oasis of opportunity in itself!

Why exactly is it time to invest in Africa?

There are several reasons, here are a few of them. Firstly, the African population is expanding, creating new customers and new opportunities daily. Currently the population stands at over 1.2 billion people and is growing at more than 2% a year. This creates one of the greatest population booms globally. As well as this there is more young people in Africa than anywhere else in the world. In fact, 43% of the population is under the age of 15. With this increasing in the young there is an increasing number of tech savvy consumers. There is also a rising education level within this.

Secondly, democracy and political stability has become widespread across the continent. Voters are starting to hold politicians accountable: Deliver or be voted out! Nigeria’s recent presidential election and smooth transition of the reins of power is a good example.

Thirdly, there has been a massive increase in urbanization and rise of the middle class. This means you have lots of people moving into the cities, in spite of the fact that urban planning and infrastructure has not kept up.

So what exactly does this mean for the average investor?

Or more importantly, where should you invest your money when it comes to Africa? The answer is simple; anywhere! In Africa, demand is greater than the supply for everything. Good examples of opportunities for growth are in real estate, agriculture, energy and consumer retail.

In agriculture for example there is a real risk and limitations in the availability of fresh water. Although internationally, access to water is protected under human rights law, lack of fresh water threatens health and social cohesion and also poses risks to food security. Investment in water efficient agriculture with modern approaches that withdraws less water and produces more crops has become essential. With agribusiness being of such importance across the continent, there is also a significant demand for fertilisers and such basic materials.

In consumer retail things are also somewhat underdeveloped and this creates further opportunities for trade and new businesses to come into. The formalisation of the sector will be a key trend underlying the sector’s expansion in the coming decade. With a growing middle class, the African population is moving away from traditional shops and markets and looking at more upscale shopping malls for shopping as well as entertainment. In spite of this, the lack of physical infrastructure has been one of the main constraints to the entry of formal retailers, as there are simply not enough shopping centres available at present. Big names have been quick to recognise this, not so long ago the French retail giant Carrefour has partnered with a French distributor which specializes in African sales and distribution, and plans to open stores in eight countries across the continent in 2015.

The opportunities are vast and are quickly being taken up by the crude investor.  Africa is certainly open for business and the best time to seize this opportunity is now!

 

By Dr. Mwenya Kasonde, founder of Sishima Holdings, author of ‘A Brighter Shade of Black’