avvy investors worldwide have taken an interest in investing in Africa. Why? Here are five reasons:
Africa may have the highest economic growth potential of any continent. Growth is coming off a very low base, setting the table for what could be years or even decades of rapid economic progress. The International Monetary Fund (IMF) projects that seven of the ten fastest growing economies in the world from 2011-2015 will be in sub-Saharan Africa and it expects Africa to take from Asia the title of the world’s fastest growing region. (1) Nigeria, home to 20% of Africa’s population, is projected to notch economic growth of 6.8% per annum through 2015. The growth in mobile telephony is emblematic of Africa’s rise. In 2000 there were hardly any mobile subscribers. Today there are approximately 700 million.
To invest in Africa is to invest in what the world needs. The continent is extraordinarily rich in minerals, energy resources and uncultivated arable land. Although less than half of its land has been surveyed, Africa is thought to hold more than half of the world’s gold, more than 40% of its platinum and vast deposits of copper, diamonds and iron ore. Large new oil and natural gas fields are being discovered on a regular basis in numerous locations, including offshore West Africa, offshore south-east Africa and along East Africa’s Rift Valley. According to the United Nations, Africa also holds more than 60% of the world’s uncultivated arable land, yet only 10% is currently planted.
African investments, broadly speaking, are cheap relative to their growth potential. Many investment opportunities on the continent are, in our opinion, under-researched, under-appreciated and, consequently, under-valued.
Africa continues to become more open and democratic. In the early decades of the post-colonial era, peaceful changes in leadership were uncommon. Since 1991, however, peaceful transitions of power have occurred in more than 30 instances in sub-Saharan Africa. To be sure, the quality of many African democracies needs improvement, but the vast majority of Africans now cast their ballots in regular national elections and the move toward democracy is well embedded.
With about 40% of its population thought to be under the age of eighteen, Africa is the youngest continent in the world. In coming decades these young Africans will move into their most productive (and highest consuming) years, generating increasing demand for all manner of goods and services. As these younger and more educated people enter the workforce, consumer expenditures in sub-Saharan Africa are projected to rise from $600 billion in 2010 to nearly $1 trillion in 2020. (2)
(1) Ranking excludes Iraq, Afghanistan and countries with fewer than 10 million people.
(2) Accenture, The Dynamic African Consumer Market, 2011