Opportunities in Africa

Made up of 53 countries, as a continent Africa is both economically and culturally diverse.  Across the continent, different regional economic blocs exist and the financial systems are as diverse as the countries.  According to Santander Trade, Ethopia, Tanzania, Kenya, Rwanda, Uganda and Burkina Faso have all enjoyed more than 6% in annual change in %; illustrating impressive GDP growth.  Ayodele Odusola for the United Nations reports that Africa is the most profitable region in the world.  It has the highest rate of return inflows of Foreign Direct Investment at 11.4%.  If we compare this to Asia at 9.1%, Latin America at 8.9% and a global figure ate 7.1%, we will see that the best time to invest in Africa is now. 

As the world navigates the complexities of a global pandemic, key markets across Africa are becoming attractive to investors and for the FDI (foreign direct investments).  Yet despite the turbulence experienced throughout 2020, what is becoming increasingly clear is that Africa needs investment and investors need Africa.  Over the last decade, China has had a huge influx across the continent which was largely fuelled by the ambition to secure raw materials.  Yet there are new opportunities to be had.

We just have to look to one region – South Africa, whose dynamism lies in its regional economic strength and it’s a political powerhouse with a significant population.  Despite Santander Trade reporting that South Africa was recently replaced by Nigeria as the Sub-Saharan Africa’s largest economy, it continues to be a regional leader.  Alongside this, it’s a region rich in natural resources, including platinum, gold, coal and chromium (Coface Central Europe).  South Africa is the world’s largest producer and exporter of mineral resources.  It is the second largest palladium producer and the fourth largest producer of diamonds.  At time of writing, mining rents account for 2.4% of GDP (World Bank).  What’s more, coal and platinum are both larger contributors to mining output than gold.  South Africa produces 80% of the world’s platinum and has 60% of the world’s coal reserves. 

What’s more, the services sector in South Africa is also flourishing, representing 61% of the country’s GDP and employing 71.7% of the workforce.  The key drivers to the economy are finance, real estate and business services.  Fourth, is the general government services.  South Africa has a sophisticated financial structure with an active stock exchange that ranks among the world’s top 20 in terms of market capitalisation.  This is largely due to the fact it has a healthy banking system, a fully floating currency and a strong financial market.  The region is advanced when it comes to financial services.

When it comes to traditional recipients of FDI across Africa, Egypt, Morocco and South Africa all continue to boast attractive returns across manufacturing and mineral extraction industries and automotive industries, there are opportunities to be found in the content (Disrupt Africa).

One exciting country to watch is Rwanda.  As a landlocked country with considerably less resources than its neighbouring countries, the country is looking to position itself as the ‘Singapore of Africa’. This is set to be achieved through the creation of its Kigali Special Economic Zone and the development of a sophisticated telecommunications sector, which is drawing interest from the likes of Facebook, Google and Amazon.  In addition to this, Togo is another African country that has received recognition, with the World Bank citing it as a top 10 reformer in the world due to its committing in generating ease of doing business.  Interesting markets here include its cashew and bamboo production. With sustainability and ESG investments increasing in demand, bamboo production is opportune, and it comes as no surprise that the UN has confirmed that investing in Africa is good business and a sustainable corporate strategy.

From telecommunications and sustainability, to mineral resources and automotive industries, there are plenty of opportunities for Foreign Direct Investments into Africa.

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