It's so cliché to say that Africa is a wild continent. But the
fact is that it's true.
It's also true that 11 of the world's 20 fastest growing
economies are in Africa. That fact alone should get you digging a
little deeper into Africa's investment potential.
For many, the first question they need to overcome is this: Is
investing in Africa worth the risks despite the growth
You should know by now that the answer for me is yes,
absolutely … with the caveat that one must know the risks. That's
why I try to highlight them for each Africa-based company I
For the most part, these risks span the entire spectrum common
in frontier markets, which are often incredibly poor on a per
capita basis but incredibly rich in natural resources on a
We tend to hear more about the negatives than the positives,
since this is what captures the media's - and our own -
It's far more fascinating, albeit disturbing, to read about
armed conflict in Rwanda than the fact that Kenya's Nairobi
Securities Exchange is up 29% thus far in 2012.
Don't me wrong, there are a lot of issues in Africa, and many
that would exist with our without growth. But the positives for
investing in Africa are overwhelming, in my opinion.
It is the world's fastest growing continent, where populations
are expected to double by the middle of this century. The African
Development Bank projects that population growth will lead to an
explosion of the middle class, which will help consumer spending
expand threefold - to $2.2 trillion - by 2030. McKinsey and Co.
states that Africa already has more middle class consumers than
The International Monetary Fund's (
) World Economic Outlook, published in October 2012, claims that
11 of the world's 20 fastest growing economies are in Africa. In
order of increasing estimated cumulative average growth (
) during the next four years (2013-2017), these are:
#20: Rwanda: +8.23%
#19: The Gambia: +8.35%
# 17: Côte d'Ivoire: +8.63%
#16: Ghana: +8.92%
#13: Zambia: +9.24%
#12: Mozambique: +9.29%
#11: Republic of the Congo: +9.31%
#8: Libya: +10.38%
#3: Guinea: +16.27%
#2: South Sudan: +19.85%
#1: São Tomé and Principe: +31.50%
While resource exploration and development are the leading
growth drivers, construction, tourism and other services are
contributing a larger share of many countries' GDP figures. And
that's helping to attract foreign investment from around the
Contrast this to potential recession here in the U.S. and much
of Europe, and the case for at least some investment in Africa
becomes even stronger.
I prefer to invest in individual names, but for those looking
for broad-based Africa exposure in one easy and relatively
low-risk vehicle, take a look at the
Market Vectors Africa Index ETF (
. It is up more than 23% thus far in 2012. And given the growth
potential across much of the continent, the ETF is well
positioned to deliver a healthy return again in 2013.