Africa has never really been identified as an investment location, whereas Asia has been the darling of the investment world. Since the early 2000s some African countries have been pointed out as ideal markets to invest in by underground investors, although this view is becoming more mainstream as we head into the new ‘20s decade. So, the question remains, why should you invest in Africa?
Stabilising Political Environment:
During the 1980s and 1990s Africa was rife with political instability (think the Rwandan Genocide and Ethiopian famine). Today, these countries have progressed significantly. For instance, in the Global Economy 2018 Political Stability Index Rwanda is ranked 86th out of 195 countries, moving up from 178th position in 1996. Ghana was placed 114th in 1996 and moved up to 98th. Political stability equals better economic growth.
Fastest Growing Countries in the World:
As mentioned in our last sentence above, increasing political stability has been one of the catalysts in booming economic growth in Africa. Six of the world’s top 12 fastest growing economies are in Africa, including Ethiopia, Cote d’Ivoire, Democratic Republic of the Congo, Mozambique, Tanzania and Rwanda, according to UNDP. For instance, Ghana and Ethiopia achieved a GDP growth rate of 8% in 2018. Further to this, the IMF have stated that Africa’s growth forecasts are among the highest in the world from 2018 to 2023.
Large Deposits of Resources:
The abundance of resources has previously been a curse for Africa, as it was at the centre of colonialism, post-independence looting and civil war. With regions in Africa becoming more stable, Africa’s natural resources will be the fuel in the economic engine of growth, creating opportunities for the creation of high value-adding chains. Some natural resources in Africa statistics to keep in mind:
· Africa owns 53.9% of the world’s diamonds.
· DRC accounts for 58% of the world’s production of cobalt, an essential input for electronics.
· 69.6% of platinum production occurs in South Africa.
Additionally, 60% of the world’s uncultivated arable land is situated in Africa. Agriculture is the pillar of strong linkages into the economy and value chain development.
Africa has a youthful, growing population that is rapidly entering the consumer goods market. Africa’s population is expected to increase from 1.19 billion in 2015 to 4.39 billion in 2100. The population growth combined with growing disposable income amongst the youth will form an exciting market to enter.
High Profitability in Africa:
Africa has shown to be the most profitable continent in the world. According to an UNCTAD report, Africa had 11.4%. return on inflows from Foreign Direct Investment, the highest return compared to other continents. Asia had the second highest return of 9.1%, followed by Latin America (8.9%) and the Caribbean (7.1%).