Credit: Many traders consider Africa the final true frontier market. The continent is well known for its bountiful natural resources as well as corruption, poor infrastructure, volatile government, violence, almost non-existent human rights, and overwhelming levels of poverty, disease and unemployment. 
All packed into the world's second largest continent by area and population.
Africa's shortcomings are not that unexpected for a true frontier market, but what is surprising is the numbers of ETFs that allow you exposure to this resource-rich frontier.
Granted, some of the largest countries within the continent are not represented by the various ETF funds, but Market Vectors have filed plans for Nigeria-specific and Western Africa focused ETFs but have yet come to market.
Nevertheless, there are a number of ETFs offering traders exposure to Africa and are worth taking a look at ahead of any new offer.
Let's take a look at the list of ETFs, starting with the iShares MSCI South Africa Index Fund ( EZA , quote ) as highlighted at Emerging Money many times. Many traders are familiar with South Africa's economy making EZA the most popular and successful Africa-focused ETF, launched in February of 2003 with close to $557 million in assets.
The EZA fund contains 50 separate stocks with the heaviest weighting in financial services with a 20.99% weight, and basic materials following in a close second at 20.87%.
The region is not for the faint-hearted. I've written in the past that South Africa is the second worst country in the BRICs (the recent addition of the "S" was for South Africa). In fact all three rating agencies have reduced their outlooks for South Africa, citing the country's struggle with high unemployment and the need to cut public spending, making public policy volatile to predict.
No doubt one of the risks traders will need take in consideration is the 25% unemployment rate which could make Spain look good.
One of the upsides however, is the ETF will pay holders a 3.10% dividend to wait for the frontier market to turn itself around. Africa in general is looking to leverage its natural resources from not just oil and minerals, but also cash crops such as cocoa.
A quick look at the basic vitals:
The next ETF on our list, the Market Vectors Egypt ETF ( EGPT , quote ) is no stunner by any means but Egypt is a significant economy on the African continent. It's hard to ignore the political instability and people protesting in the street on our TV screens, and the government confirmed today that Ahmed Shafik, Hosni Mubarak's Egypt's last prime minister, will run against Muslim Brotherhood candidate Mohamed Morsi in the next round of elections to be held on June 16. The elections will provide the first democratically elected Egyptian president.
One encouraging aspect of EGPT is its performance against counterpart frontier market ETFs during the last weeks of global selling - it has held up relatively well. With communication services as the largest slice of the pie at 26.10%, followed by financial services at 24.70%, it will be dependent on the strength of Egypt's currency.
It will be interesting to watch the more heterogeneous, large Northern African economies to see if democratic elections can bring back foreign capital back to the country. It's important to note the mass exodus of foreign capital has pressured the country's currency reserves. Although the ETF has held up well, it could only be a matter of time before the ETF catches up to the fragile, weakened economy.
A quick look at the basic vitals:
Later we'll dive into few more frontier market focused ETFs in Africa.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
