Biggest investments opportunities to look forward to in Africa in 2023
Both Africa’s potential as a market for corporate expansion and its potential for business to play a transformative role in resolving the continent’s most pressing problems remain underappreciated and misunderstood. In a time of decreasing global growth, Africa’s markets and population expansion give significant business potential. In addition, for Africa to meet its unmet demand for goods and services, bridge infrastructural gaps, generate jobs, and reduce poverty, more corporate innovation and investment are required. Here, we outline the size of the business prospects in Africa’s core industries and offer suggestions for what investors may do to turn those potentials into successful, long-lasting businesses.
Between 2000 and 2010, Africa’s real GDP increased at an average annual pace of 5.4 per cent, driven almost equally by increases in labour force size and productivity. Africa’s economy has resumed, and its prospects for the future appear bright, following a pause brought on by the shocks of the Arab Spring in 2011 and the drop in oil prices in 2014. The World Bank’s two indexes highlight the continent’s potential. First, six of the ten economies with the fastest growth rates worldwide in 2018 were in Africa, with Ghana topping the list. Second, five of the ten nations with the biggest improvements in the World Bank’s 2019 Doing Business index are from Africa, and sub-Saharan Africa accounted for one-third of all worldwide changes.
Why should anyone consider investing in Africa?
For individuals with a long-term vision, Africa offers a great investment opportunity for a variety of reasons, including:
- African debt and equity investments are valued relatively lowly and provide appealing entry points, especially when compared to values in many more developed countries. PE ratios are in the mid-teens, and return on equity is in the mid-to high-20s.
- Currently, 17% of the world’s population originates from Africa, which is witnessing a tremendous population surge. By 2050, Africa’s population, which is currently doubling every two years, will be double that of France. It is anticipated that between 2050 and 2100, it will grow by another double to 4.3 billion people or as much as 40% of the world’s population.
- As the continent plays catch-up and frequently leaps ahead with the use of new technology or methods of operating, such as renewable energy, online education, etc., its economic growth is coming from a “low base,” translating into GDP growth rates that are significantly higher than in more developed countries. Africa, therefore, offers access to growth, as seen by the greater rates of increase in many listed business earnings.
- The ratio of market capitalization to GDP is the lowest in the world, and investors will certainly profit from the expansion of the capital market in the coming decades;
- With the advent of the internet and other modes of communication like mobile phones, international businesses will increasingly “offshore” to Africa to take advantage of the continent’s low wage rates and expanding pool of educated workers.
- African economies are diversifying, and brand-new industries like telecommunications, consumption, and infrastructure are expanding quickly.
- As the demand for large power plants fed by (typically) imported coal declines, solar energy and other forms of power generation that are significantly less expensive to implement and do not require as extensive of power infrastructure as found in countries that were electrified earlier are replacing it.
- Over the past three decades, Africa has benefited from much better fiscal and monetary policies. Among other factors, this has led to lower interest rates, controlled inflation, stable currencies, and low levels of public debt in Africa when compared to developed economies;
- We believe that because Africa is developing along the same lines as Asia, the continent will experience significant income growth, ongoing poverty reduction, and significant financial returns for early investors.
After hearing all of that, you are undoubtedly wondering, “So, where in Africa should I be seeking to invest?” The following are a few of Africa’s best investment prospects.
- African Tech startups
African tech startups are now doing incredibly well. And right now is the ideal time to make an investment in them. So, if you’re still debating where to put your money, consider investing in African digital firms, especially those that are based in Lagos, Cape Town, and Nairobi. The technological sector is one that requires significant investment. There have been a ton of value assets emerging in that sector. The fact that companies like Chipper Cash, Flutterwave, Paystack, and others have left new imprints in the global tech environment cannot be disregarded. Foreign investors are, therefore, eager to invest in that sector. People who are familiar with secondary markets can therefore seize the chance.
The largest cross-sector economic prospects continue to be found in Africa, which is leading the globe in mobile use. Mobile payment networks, which were invented in East Africa, allowed unbanked, poor metropolitan and rural residents access to the wired, global economy. Mobile communications are being utilized by businesses like Novartis to manage their supply chain, while Olam has employed mobile to connect with new African farmers and suppliers. These mobile projects have had great success.
For example, Ethiopia established a telephone hotline in 2014 that gave small farmers instant access to agronomist guidance. Over 3 million calls were placed during the pilot program’s first six months. Africa has pushed the developed world’s frontiers in the mobile field, and African tech incubators are driving innovation in this field.
- African stock market
The continent is home to about 30 stock exchanges. Additionally, they always feature a few high-performing stocks. Therefore, invest in African company shares. Purchase shares of banks, telecoms, and of course, cement companies. The massive cement companies that are heavily invested in the infrastructure sector cannot be disregarded. You can see that several nations, like Nigeria, which has the largest economy in Africa, are putting more emphasis on developing or improving their infrastructure. The cement businesses will undoubtedly benefit, as will their stocks.
- African agriculture and natural resources
Agriculture is yet another simple investment you may make. People will always require food. Therefore, any company specialising in manufacturing food will be profitable. Decide whether to invest directly in agriculture or through businesses that do so, ideally AgriTech startups.
Africa has a long history of having a wealth of agricultural and mineral resources. Africa has, however, had difficulty converting these resources into shared prosperity and long-term economic growth. This image is expected to alter due to recent investments and developments, offering businesses exciting new chances for expansion. Africa, for instance, has a vast unmet energy demand and is home to several high-potential, undeveloped locations. By 2025, when the continent might consume up to 70% of its own gas, our projection for the domestic gas market in Africa is a growth of 9% annually.
Africa has the capacity to examine what works abroad and then build its own solutions in the areas of energy, technology, supply chain design, and other areas. It has no historical baggage from which to extricate itself, allowing it to openly embrace new technology and ideas. It can create flexible fuel grids that produce electricity using a combination of cheap and plentiful wind, solar, hydro, and bioenergy, as well as cheap and plentiful conventional fuels like oil and gas. There is more undeveloped or underutilized arable land in Africa than everywhere else on Earth, therefore, expect major advancements in agriculture and productivity increases in the food production sector there.
Businesses are clamouring for thriving new markets, while consumers know that too few frontiers are open due to globalization. Opportunities for business expansion are constrained as the developed world ages and gets harder to trade in due to everything from law to terrorism. There are not enough areas like Africa where risk-taking, persistent, and innovative business owners and entrepreneurs may add value and experience long-term success.
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