Reasons why the time to invest in Africa is now

Source: Heartmenders Magazine

By Dr. DEE. F Dominic

One of the areas it is always good spreading your seeds on multiple channels or avenues is in the field of investments. Undoubtedly, Africa is a continent that is standing out among all other continents of the world considering how richly it is endowed with abundant human, natural and agricultural resources. Better yielding land for both cash crop and food crop production exist in Africa.

Africa is the only continent that possesses the resources needed by the developed economies to sustain the rate of their development and growth today, which is why the time to come invest in Africa is now. The expected strong growth in the world’s economy is higher in Africa than in many of the developed nations.

From the World Bank projections, out of the 15 countries in the world with the highest rate of five-year economic growth, 9 are in Africa.

Yes, the factual estimation of the IMF that the real GDP of sub-Saharan Africa as a whole will grow by 5.8% by 2015 and the forecasts by many other renowned economists that this growth would be sustained the next few more years to come, also provide a very cogent reason to eyeing African investments now.

The Market Watch in a current World Economic Outlook had reported,

“That the U.S. economy will expand by 3.1% in 2015, while the euro area is forecast to produce growth of only 1.3%.”

From these forecasts and other indices given by professionals it shows that it is highly profitable investing in Africa now; better than investing in the developed economies.

This should not be hard to understand considering the fact Africa is almost like a virgin economy; whereas there’s no aspect of the western economy that has not been fully explored. Many fields in the African economies have been either untouched or underutilized. A stock of developable areas in the African economy abound.

Yet it is surprising, according to Market Watch, that “only about 0.3% of the average portfolio in the U.S. – just $3 out of every $1000 – is invested in Africa.”   

A good investor utilizes every good opportunity and this is probably one of them.

Let’s consider more reasons why the benefits of investing in Africa should supersede every risks in coming to invest in the continent below:

1.       Higher yield: Investors who are longing to invest elsewhere, where there will be a higher yield for their investments should think Africa. Low interest rates in many western countries is bad for business. Consequently in Africa where different opportunities are cropping up every time, anyone seeking a higher yield for investments should think Africa.

According to money.usnews.com, for example, Nigeria “has a debt-to-GDP ratio of only 18 percent, compared with countries like Greece and Japan whose debt-to-GDP ratio is more than 100 percent,” hence investing in a country like Nigeria will yield a higher dividend compared to those other countries with a higher debt-to-GDP ratio.

2.       Political stabilization: A more peaceful environment can be noted in many countries of Africa today in the 21^st century, contrasting what it used to be when many of the countries in the continent were characterized by more tumultuous government – civil wars, rebellions and military coups.

Many African countries now have functioning democracies. The emergence of South Africa out from the apartheid era, for example, turned South Africa to an economic power house creating multiple investment opportunities from their rich deposits of gold and other resources; besides their advanced industrialization and impressive infrastructural development.

It would also be noted that Nigeria’s recent peaceful transition from one democratic government to another in 2015 was historic and promising.  This kind of stabilization which has also occurred in many other countries in Africa has favored investments in Africa lately. 

3.       Already thriving foreign and local investments: An article in The Big Story reported:

“Kuwait's Mobile Telecommunications Co. sought to tap into this growth in 2005, when it paid $3.4 billion for Celtel International, gaining mobile telephone customers in countries including Kenya, Chad and Uganda.

The same year, London-based Barclays bank paid 2.9 million pounds ($4.5 billion) for a controlling stake in South Africa's Absa Group. Barclays' African unit now has more than 12 million customers in 12 countries.

Coca-Cola Co. last year said Africa was a "vital part" of its business as the company and its local bottlers added $5 billion to their planned investment in the continent this decade, pushing the total to $17 billion.”

Many other indigenous African companies are amassing billions and billions of dollars in profits like the MTN Nigeria, a South African company.

Companies doing business in Africa today have seen a higher return on capital and investment than companies in China, India, Indonesia and Vietnam.

Money.usnews.com confirmed in a report that, “Africa’s total stock market capitalization now exceeds $1 trillion.”

4.       Fantastic capital flows: A UN Conference on Trade and Development Report had shown that apart from China, recently, capital flows to Africa is higher than that of Brazil, India and Russia.

5.       Vast opportunity in the availability of resources: Any country that needs backup resources to sustain their growth and consumption rates in the future should look unto Africa as the place to inevitably turn. There are over 54 individual countries in Africa with some other non-sovereign countries, all with a vast assortment of resources. And this potential may have been what China discovered. Chinese are all over the continent of Africa exploring different business opportunities to sustain their own local growth rate.

6.       Favorable demographics: The Big Story reported,

“In sub-Saharan Africa, gross national income per capita has more than tripled since 2000, reaching $1,699 last year, according to the World Bank. Life expectancy rose to 57 years from 50 in the same period, and the portion of those completing primary education increased to 69 percent from 55 percent.

Those demographics are set to drive growth. With more than half its population now under 25, the highest percentage in the world, the continent will have a larger workforce than China or India by 2040, according to BCG.” Consequently,  

"While most of the world is growing older, Africa will have a young workforce for decades to come," BCG said.

Unlike in Asia, Europe, America etc. where the population is aging faster. Africa is world’s youngest region. And this is good for business.

7.       The rate of growth of the middle-class population in Africa is tremendous. A consumer class, good for business and investments.

8.       Technology savvy: The craving for information technology products and accessories in Africa is intense and this area of investment has not been fully tapped in Africa.

9.       Green energy investment: There are abundant natural resources in Africa with vast opportunities existing in green energy investments. Green energy companies would thrive in Africa. And this is important because many African villages and cities still face gross epileptic power supply. Power investments anchored mainly on green energy sources would yield high returns.

10.   Improved infrastructure:  Improved infrastructure due to increased public spending on infrastructure in Africa has turned many businesses around profitably today. Road and communication networks that are critical to broader economic development have been improved tremendously in Africa. Also business and investment orientation have changed positively among many. Government activities had gone beyond projects focused on getting minerals out of the ground and hurriedly shipping them around the world. Structures have been developed to support other aspects in the handling of natural resources. Thus making it ripe now the time to partner with many African governments in investments and other infrastructural developments that would yield massive dividends for both parties.

Photo credit: African Arguments

This is Nairobi; The financial center of Kenya, East Africa. Nairobi skyline. Photograph by Clara Sanchiz. Africa is modern and supports modern investments, from Agriculture to IT. 

Investment in Africa has gone beyond corporate organizations and companies; individual foreign investors have also taken the initiative to invest in Africa.

The likes of Jim O’Neill, former chief economist at Goldman Sachs who invested significantly in Pagatech, a Nigerian mobile-payment company in 2014.

It should be pointed out that one of the spirits hampering investments in Africa is the unkind media coverage of African news. Most of the headlines they generate for African news is bad. Around the world in the Middle East, in Asia, in Europe etc. there abound restiveness, disturbances and conflicts yet more and more investments still go on there. The case of Africa should not be different.

The bottom line is that Africa is the continent of the future and those who want to sustain and ascertain their future growth have the better option to think Africa.   

Note that the opening image was not in the original article published in Heartmenders Magazine, ISSUE 1002, 2015. And there's a slight change. 

Opening image credit: World Bank Blogs.

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