Why invest in Africa?
Africa has an enormous amount of natural resources, ranging from oil and diamonds to gold and uranium. And many of these natural resources remain untapped due to a low human density along with a lack of infrastructure and financing.
With approximately 14.72% of the world’s total population with about a billion inhabitants in more than 60 territories,Africa creates a huge opportunity for consumer goods and services , such as telecommunications and banking.
As a matter of fact the telecommunications service industry is one of the fastest growing in the world with Mobile users moving from zero in 1990 to 747 million SIM connections in sub-Saharan Africa, representing 75% of the population,according to the most recent report from GSMA.
Risks of Investing in Africa
Political Risks:Some governments in Africa are known for their corruption or lack of policy. Corruption can lead to a number of problems, ranging from extortion to nationalizations, while the lack of policy can make it complicated to do business.
Lack of Infrastructure: Africa has a low human density and per capita income, which contributes to its lack of infrastructure. It makes it difficult for companies to get electricity, roadways and other necessary components to operate in some areas.
Some of the most recent mobile usage statistics come from a 2017 Pew Research Center study, which found that approximately 91% of South African adults own mobile phones, with 51% of adults owning smartphones and the remaining 40% percent owning standard cellphones. Ghana has an 80% ownership rate, and Senegal follows closely behind with a 79% ownership rate, with 34% of adults owning a smartphone and 46% of adults owning a standard smartphone. Nigeria and Kenya also had an 80% ownership rate, while in Tanzania 75% of adults reported owning a mobile phone. The study does find that those with lower education rates are less likely to own mobile phones, and much less likely to own smartphones, highlighting the ongoing importance of basic phones in sub-Saharan Africa.
(credit:International Investing)
Regional Conflicts: Africa is well known for its civil wars and conflicts, which have taken a toll on its population. Regime change can also be very difficult for companies since it causes a great amount of uncertainty.
Investors should carefully weigh the benefits and risks of investing in Africa before taking any positions. In general, it’s a good idea to only allocate a small percentage of assets to riskier regions, like Africa, to maximize risk-adjusted return
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Since Independence, in the late 50 and early 1960 Africa has been a continent plagued with a lot of challenges coming from the inability of the economies to perform.
In the early decades of Independence, most African states used diverse political and economic models trying to find a footing and sustain stability.
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