Why invest in Africa
Having visited and travelled around Africa on numerous occasions we are big fans of the continent, the happy smiley people and the amazing landscapes and property it offers. Africa offers an extremely diverse set of investments from palm-fringed Mozambique beach property to diamond mines on the west coast.
Africa is the least developed continent in the world (excluding Antarctica). 65% of Africans live on under $2 per day and 59% of African households do not have electricity. With a population of over 1 billion these statistics represent huge numbers of people. But the Africa of drought, famine and poverty that we see on the evening news is not the whole picture. 21st century Africa is an amazing continent with expanding economies and a hopeful future.
Traditional African investment opportunities
First world economies have exploited Africa’s incredibly rich natural resources but kept the profits, resulting in little benefit for the African people. Nowadays though, with an increasing demand for ethical investments, inward investment into Africa is creating jobs and wealth. African economies are booming and the next 50 years should see Africa emerge as an economic power.
The average annual GDP growth rates for some African countries have been impressive, as these figures from 2006-2009 prove;
- Uganda: 8.75%
- Rwanda: 7.92%
- Kenya: 4.37%
- Ethiopia: 10.45%
- Tanzania: 6.67%
Compare these to the rate of the USA at 0.5% for the same period and you can see why people are rushing to invest in Africa.
In the same way that historical investments have taken resources out of Africa, those people that wished to do good by the African people have given their money to charities, NGOs and Not-for-Profit organisations. But to enable true, sustainable growth Africa needs to create its own business. Lack of education, reliable healthcare and nutrition are all symptoms of poverty, not causes. One of the best ways to tackle poverty is to provide jobs and this can be achieved by investing in high growth industries that employ local people.
Where to invest
South Africa has long been considered the obvious African investment choice. It has a vibrant economy, good infrastructure and favourable tax laws. But in a continent that is constantly changing there are new emergent economies that challenge this. Mauritius and Botswana, for example, have recently introduced comprehensive tax breaks, deregulation and improved business climates. They have no exchange controls, and with corporate tax rates of as little as 3% and 15% respectively (compared to 28% in South Africa) they are providing tempting possibilities for new business and inward investment.
The countries of East Africa are also experiencing some fantastic economic growth, as evinced by the growth statistics above. With a population of over 130 million the East African Community (EAC) is one of the largest, single-bloc regional markets on the continent. The countries of the EAC have a combined GDP of around £50 billion and represent stable, political environments with high levels of governance and democracy. The EAC is also one of the world’s fastest reforming regions in terms of business regulation.
The main locations within South Africa to invest in are the Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West and Western Cape.
What to invest in
The list of investment opportunities in Africa is literally endless. As African countries economies grow and trade increases with the rest of the world, so infrastructure needs to grow to facilitate it, creating more jobs and more wealth, which in turn grows the economies and increases trade. We will look at a couple of investment opportunities on this page, but first check out this list of African investment opportunity sectors as published by East African Community Investment http://www.eac.int
Agriculture, Construction and Housing, Education, Energy, Finance, Fisheries, Healthcare, Horticulture, ICT, Infrastructure, Manufacturing, Mining, Tourism and Water.
As you can see, it’s a comprehensive list that covers many areas of interest and/or expertise.
So, let’s look at a couple of examples in sectors that may be of interest to the ethical investor.
The Kavango Zambezi TransFrontier Conservation Area (TFCA) offers a whole range of investment opportunities in the leisure and tourism sectors. By investing in eco-tourism you can help conserve the breathtaking natural wildlife that Africa is famous for. One of the current projects run by Kavango Zambezi TFCA is the Zambezi Waterfront Tourism Park in Namibia (known as NAM10). This is a government proposed initiative intended to stimulate social and economic development in remote regions, as well as promoting Namibia as a tourist destination. The Waterfront Park is to be located at Katima-Mulilo, in the Caprivi region, which shares borders with Angola, Botswana, Zambia and Zimbabwe. The Namibian government plans to invest $N138 million (£11.2 million) and this is to be spent on developing the infrastructure (roads, bridges, drainage, admin buildings etc.). Private investment is sought for a 4/5 star hotel, a shopping mall, a floating restaurant and an entertainment centre. For more information on this investment opportunity contact Deborah Kahatano, the Programme Manager, at: email@example.com
Delta State in Nigeria is actively looking to develop its fisheries and aquaculture sectors (this is a story repeated right across the continent). Nigeria has a long history of fishing and in Delta State it is the main source of income for many inhabitants. The aim of Delta State is not to only become self sufficient in fish products but to become a net exporter. To achieve this they are looking for investors in the following areas:
- Production of fishing equipment
- Establishment of modern fish farms
- Shrimp fishing
- Establishment of an ice-melting plant
- Fire processing for export
The success of these projects will provide many jobs and a massive boost to the local economy. It is, of course, impossible to cover the whole breadth of investment opportunities in Africa in one short article. But, if you’re looking for opportunities in a vibrant, expanding market, in a place where your money might do some good, then you could do worse than do a bit more research into Africa.