REASONS TO INVEST IN AFRICA

African economies easily rank among the most resilient in the world. In the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively, at about 2%. The continent’s growth has been on an upward trajectory ever since then- 4.5% in 2010 and 5.0% in 2011.

And it will get even better in 2012. Africa is favorably positioned to become the 2^nd fastest growing region in the world, and according to the International Monetary Fund (IMF), economic growth across the 54 countries of the continent will hover around 6% in 2012.

 

Africa is becoming an increasingly attractive hub for foreign investors in light of various economic, political and social reforms that are sweeping through the continent, resulting in a much improved business environment conducive for foreign direct investment. Apart from that, there is widespread development of critical social and physical infrastructure, and there is an increasing pool of well-educated, English-speaking, enterprising workers in most countries across the continent.

There is also a significant boost in the spending power of Africans. According to the African Development Bank, Africa’s fast-emerging middle class is now comprised of over 300 million people, and analysts from the McKinsey Global Institute estimate that general consumer spending across the continent will hover past the $1 trillion mark next year.

If you’re a foreign investor who has yet to make a foray into Africa, now is the time to step in and capture a share of Africa’s $1 trillion opportunity in 2012. These are 5 lucrative sectors you should consider investing in:

Agriculture

Africa is ripe for a green revolution. According to the McKinsey Global Institute, the continent is currently home to 60% of the world’s total uncultivated, arable land. There’s your opportunity.

As the world’s population increases rapidly (recently exceeding the 7 billion mark), global agricultural production must rise to feed these growing numbers. Much of that increased agricultural production will come from Africa. While the traditional obstacles to boosting agricultural output in Africa have been well documented (including a deficit of distribution infrastructure and trade barriers among others), several African governments are making substantial and successful efforts in surmounting these shortcomings. As these barriers are overcome and agricultural output is increased, there’ll be a business opportunity for the manufacture and marketing of products such as fertilizers, pesticides and seeds as well as a demand for food processing services such as grain refining.  Already, a growing number of private equity funds are springing up to finance agricultural production in Africa. Join the train.

Tourism

Several African countries like Kenya, Mauritius, Seychelles and Tanzania have become some of the world’s favorite tourism destinations — for obvious reasons. According to the United Nations World Tourism Organization, tourist arrivals into Africa in the year 2010 exceeded 49 million and are likely to pass the 50 million mark in 2012. Those are the kind of numbers you should be taking advantage of. Next year, billionaire Richard Branson will be opening his luxury safari lodge in Masai Mara, Kenya while Italian tycoon Flavio Briatore already owns Lion In The Sun, a luxury retreat on the coastal resort of Malindi, Kenya. But apart from luxury lodges and retreats, several other opportunities are available in Africa’s tourism sector. For example, Lake Victoria in Uganda has a substantial number of bodies of water that are still unexploited. A luxury boat cruise or tour operatorship could be a great idea. Balloon flights are also a relatively new experience for millions of Africans- which could be explored as a viable opportunity. There is also room for foreign investors to partner with governments on National Park Concessions.

Mining of Solid Minerals

Several African countries have vast deposits of mineral resources that have been left largely unexploited because of a lack of technical know-how, as well as the financial incapacity to embark on capital-intensive mining projects. A case study is Nigeria’s hugely underdeveloped mining industry. The country also has a wide array of mineral resources which include iron ore, coal, bauxite, gold, tin, lead and zinc which have been neglected because of the country’s preoccupation with its massive oil deposits. The Democratic Republic of Congo, Tanzania, Namibia, and Zambia are other examples of African countries that also have unexploited high-value reserves of diamond, cobalt, gold, copper and other resources. Venture in.

Infrastructure

Investing in infrastructure is critical to Africa’s growth. While there have been significant improvements in the development and quality of infrastructure across the continent, there is still a clear-cut deficit. Needless to say, this shortfall has its consequences, including bottlenecks in the smooth running of trade and export activities.  But funding infrastructural development in Africa is not cheap. According to the World Bank’s 2008 Africa Country Infrastructure Diagnostic study, the continent requires about $80 billion annually to cover infrastructure needs. Of course, the financing capacity of individual country governments is limited; hence there are opportunities for private investors to partner with African governments in the development of under-performing infrastructure—such as investing in reliable power supply, water resources, roads and railway systems.

Fast Moving Consumer Goods

According to the McKinsey Global Institute, Africa’s consumer spending next year will be in the region of $1 trillion. With Africa’s exploding middle class (over 300 million people) always looking to be serviced with new products, Africa’s fast moving consumer goods sector looks promising. There is a huge and ever-growing opportunity for manufacturers and retailers of FMCGs like food, beverages, home care and personal care products. But speed is critical. Investors who can quickly step in and get a grip on the market will be the dominant players in the years to come.