Do you want to know what the best stocks to buy right now in Africa are? Or if Africa is a good investment opportunity? How do you invest in Africa? Where do you invest in Africa? We hope to answer your queries here.
In our opinion Africa is perhaps the most excitinginvestment destination globally. We have a long track record in Africa’s investment world, team members have run the largest pan African equity fund by assets under management, run an African Stock Exchange and built stockbroking companies trading African debt and equity. We think that we are well positioned to discuss Africa’s investment world.
Why Invest in Africa?
There are a substantial number of reasons why we believe Africa presents an incredible investment opportunity for those with a long-term outlook including:
- Africa is “undiscovered” from a global investment perspective resulting in what we think are very low valuations both in African debt and equity investments which offer attractive entry points, especially when compared to valuations in many more developed markets; pe ratios are mid-teens, and return on equity is mid to high 20s;
- Africa is experiencing a massive population boom, currently 17% of the world’s population is African. At current rates of growth Africa is growing by the equivalent population of France every two years and will double by 2050. It is expected to double again between 2050 and 2100 to 4.3bn people or account for as much as 40% of the world’s population;
- Since the 1960’s Africa’s GDP per head has been growing as African has developed. Unless that trend changes (Africans start becoming poorer) – something we think very unlikely – then the strong demographic growth should lead to strong GDP economic growth. In common with many other countries that experienced rapid growth in the working age population we expect Africa to benefit substantially from a “baby boom”; In this context it is worth noting that the developed world is ageing very rapidly, and now even China is seeing its working population shrink annually;
- Africa’s economic growth is coming off a “low base” translating into GDP growth rates that are significantly higher than in more developed countries as the continent plays catch up, and in many cases jumps ahead with the use of new technology or methods of operating e.g. renewable energy, online education etc; Africa therefore provides access to growth and we see this in the higher earnings growth rates of many listed corporates;
- Market capitalisation to GDP is the lowest globally and investors are likely to benefit from capital market growth in the coming decades;
- The arrival of the internet, and other forms of communication such as mobile phones will increasingly lead to global companies “offshoring” in Africa to benefit from the low wage costs, and increasingly well educated workforce;
- African economies are diversifying and we see new sectors growing rapidly such as telecommunications, consumption and infrastructure;
- Increasing electrification is happening in Africa, as the need for large power plants fed by (in most cases) imported coal falls away to be replaced by solar and other forms of power generation that are considerably less expensive to implement and which do not require such an extensive power backbone as is found in countries that electrified earlier;
- Africa has benefitted from significantly improved monetary and fiscal policy over the past three decades. This has resulted in amongst other things, lower interest rates, manageable inflation levels, stable currencies and African public debt levels that are low compared to those in developed markets;
- In our opinion Africa is following Asia’s development path and the coming decades will see a strong rise in incomes, continued reduction in poverty, and substantial economic gains for the investors who get in early.
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