5 Things Every Investor Should Know About Africa

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The African continent, with a combined population of around 1.3B people, immeasurable resources, and booming trade, has become a prime hotspot for foreign investors. A report by the UN Conference on Trade and Development states that from 2006 to 2011, Africa had 11.4% of return to Foreign Direct Investments, compared to Asia’s 9.1% and Latin America’s 8.9%.

A range of distinct investment options for investors looking for high growth and high impact makes the African nations a lucrative alternative to other places in the world. With all of these, there are a few things to keep in mind, including political stability, socioeconomic factors, etc. 

So, what are the aspects that somebody willing to pour in their money in this booming market must keep in mind? Read on to find out five things prospective investors should know about the countries in this continent.

Africa

Political Uncertainty

Terrorism due to political instability and corrupt governments play a huge role in economic debasement for some nations in the region. Other than that, tribal clashes and targeted attacks on foreigners are common in Africa. It can work as a mood buster for some investors with all these unreliability in place.

However, the rise in democratic practices among the people and the public’s view of the importance of mixing with the outside world has positively affected the willingness to have foreign investors in the region. Stability has increased, and more investors are entering the market, keeping all the risks in mind.

Infrastructure Development

In the past, bad InfrastructureInfrastructure was a big hindrance for investors. Still, in recent times, the implementation of new ambitious development projects shows that economic benefits will rise rapidly in the future. Lamu Port – South Sudan – Ethiopia Transport Corridor (LAPSSET) a road, port, and oil refinery project that will work on easy transportation of goods around East Africa.

The Dangote oil refinery in Nigeria, which is set to be the biggest single oil refinery globally. This will greatly boost the economic condition of Nigeria, which is already one of the richest African countries. Konza technology city in eastern Kenya is set to be the African version of Silicon Valley, a future investment playground for tech enthusiasts.

Egypt’s new capital city, 45 kilometers east of Cairo, will accommodate 7 million people initially, with 21 residential districts and 25 commercial districts. Lastly, the multi-billion dollar 969 km Kenyan standard gauge railway system. 

Consumerism

With a boom in economic growth, there has been a rise in the middle class as well. This has brought in opportunities for foreign consumer brands. An African report says that non-African brands account for 87% of the market share in the diverse landmass.

Popular food chains like Starbucks and KFC are entering the market as well, and many Chinese Consumer tech brands are coming in as well, grabbing the opportunity.

The largest consumer market in Africa will be in Nigeria, Egypt, and South Africa, with other future prospects like Ethiopia. Companies like Coca-Cola have already started investing in Ethiopia, seeing its potential. The demand for consumer commodities has skyrocketed the position of companies like Unilever as well.

Resources

Africa is widely known for its vast amount of natural resources that include the likes of gold, diamonds, oil, and also uranium. Due to the lack of proper Infrastructure Infrastructure in some places and financing, most of these resources remain untouched.

Companies like Total, Apache, and Petrobras have recently made huge investments in Eastern Africa with the discovery of oil in Uganda, gas deposits in Tanzania, and Crude oil in Kenya. Countries like Angola, which are heavy on oil deposits, are attracting quite many investors.

The Democratic Republic of Congo, which produces 54% of the world’s Cobalt, and South Africa, which produces 67% of the world’s platinum, are all being eyed by investors due to their importance in the global market.

Policies for foreign investors

To attract more investors from the outside world, a lot of the African nations have been adopting pro foreign investment policies. For example, infrastructure development in the region is directly funded by foreign companies, mainly due to the requirement of huge capital. China has been a huge player in the African region, mainly due to this.

Other steps taken by some Saharan countries with limited resources like International Foreign Direct Investment agreements, privatization programs of infrastructures, and image polishing initiatives taken by their governments have played a huge role in attracting foreign investors as well.

Steps like these were also taken by some other smaller countries with scarce resources like Ireland and Singapore in the past, and it has proven to be really beneficial for them with a downpour of investments.

Even with political and economic instability, currency and commodity price volatility, and rapid corruption in the governments, Africa has succeeded in attracting Investors willing to take risks and dive into the diverse investment sectors in the region with surety in growth and high returns. The African Market will keep on growing with the socio-economic changes as well as better Infrastructure.

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