While there remain many challenges to the success of Africa’s economies, there is no doubt that the continent has enormous potential, not least in its rapidly growing consumer base.
In fact, it has been estimated that household consumption in Africa could reach over $2tn by 2030. Many of the most developed African nations are showing levels of growth and investment that are outstripping other major economies around the world.
Whether you want to invest in the JSE top 40 or explore the options in African real estate or treasury bonds, there are plenty of opportunities for the global investor in this part of the world.
Fintech
Fintech’s ascent and expansion in Africa has been remarkable. The industry is now the fastest-growing on the continent and African companies in this sector have made major inroads with approximately 2,500 firms, a market penetration of 3-5% and a projected revenue of $4-6bn.
Even though many analysts assert that the sector in Africa is now becoming saturated, more than 90% of transactions in Africa are still conducted in cash, indicating that growth, virtualization and profit potential are just beginning. In advanced subsectors such as insurance, retail loans, transportation, comprehensive payment systems and credit scoring, there are also significant opportunities for additional investment.
The fintech industry has created tremendous opportunities for the financial sector and has provided considerable value to its customers and that trend is likely to continue.
Telecommunications and digital payment
Over 800 million African consumers now own mobile phones, with MTN, Glo, Safaricom and Airtel dominating the African smartphone market.
The new growth in Africa is not the traditional smartphone, but rather the shift to e-commerce and mobile phone-based e-payments, in which Africa leads the world.
Although cash still accounts for up to 90% of exchanges in Africa, electronic payments are displacing cash and generated approximately $24bn in 2020. East Africa leads the continent, with Telecom giant Safaricom’s renowned M-PESA service enabling free digital money transfers across the region. Ghana, Nigeria and Tanzania are accelerating the adoption of digital payments.
This has resulted in plenty of opportunities, but despite all this activity, less than 10% of payments made in Africa were electronic last year, indicating a significant growth opportunity, especially given the rapid development of digital infrastructure across the continent.
This growth is being driven by Africa’s young population, which has a voracious appetite for adopting new technology, payment infrastructure and disruptive innovations such as Bitcoin. According to a 2021 report, Nigeria, Kenya and South Africa are already among the top ten countries for Bitcoin trading.
Health sector
Africa has only 3% of the world’s qualified medical personnel, but 25% of all its disease burden.
In addition to infectious diseases such as malaria, tuberculosis and AIDS, the continent is beginning to see an upsurge in non-communicable serious diseases such as diabetes, high blood pressure and respiratory ailments due to both rising income levels and Western-style diets.
This has further strained Africa’s already stretched health care systems. Inadequate roads, lack of access to high-quality medicines, facilities and treatment options, as well as a shortage of qualified personnel, have significantly exacerbated the problem.
As is always the case in Africa, there is a silver lining to this cloud of gloom: a string of inventions, resourcefulness and creative thinking among African entrepreneurs has created significant investment opportunities. There are enormous opportunities in health care, access to medications, diagnostic services and pharmacies, among others.
Tourism
Tourism has historically been one of Africa’s most important industries, contributing an estimated 8.5% or $194.2bn to the continent’s GDP in 2018.
It also emerged as the second-fastest growth region in 2018, with an estimated growth rate of 5.6% compared to the global average of 3.9%. To give just two examples, Morocco and South Africa receive between 10 and 11 million tourists annually on average.
The sector took a significant hit due to the Covid pandemic, but with pent-up demand for personal travel, now may be the ideal time to invest in this sector. Rwanda, Angola, Gabon, Zambia and Senegal have enormous expansion potential, and demand is expected to rise in established tourist destinations such as Kenya, Botswana, Tunisia, Morocco and Egypt.
Summary
There is enormous potential in the African economy, and in certain sectors and nations in particular. Although the continent faces challenges, shrewd global investors should seek out ways to unlock the potential of Africa, investing in local companies and entrepreneurs in the short term.
