As Africa’s economies gain momentum, democratic governments take hold and the continent’s young population grows wealthier, investing there is becoming both easier and more attractive to international investors.
Insurance and infrastructure represent some of the best investing opportunities as companies expand to meet the growing demand of countries that are becoming wealthier and more educated, says Ryan Hoover, founder of InvestinginAfrica.net.
“There’s huge demand for energy, roads and water,” he says.”Any companies that have exposure to building or owning or operating power plants are seeing huge gains.”
Among the top-performing stocks in Africa in the past year are three insurance companies on the Kenya exchange, he says. Shares of Britam Investments, headquartered in Nairobi, are up 193% in the past 12 months. Pan African Insurance Holdings shares are up 127%, and CIC Insurance shares are up 73%.
Still, with about 20 different stock markets, the disparity between more developed markets and newer exchanges can be vast. But countries are taking steps to improve investor confidence and access to funds, including adopting better financial reporting standards. Nigeria started a market maker program that makes it easier to buy and sell stocks.
Africa also has age on its side, with 200 million people between the ages of 15 and 24, and many more of them educated than past generations of young adults. Africa is expected to have the largest global workforce by 2040. Africa’s young adult population will be a boon for consumer goods companies as they target a largely underserved population, says Kanwal Masood, portfolio specialist for T. Rowe Price’s Africa and Middle East fund and frontier markets.
“Now as an investor, it’s a really exciting time to be looking at this region,” she says, citing Africa’s strong economic growth potential. According to a T. Rowe Price analysis of International Monetary Fund data, Africa will be home to eight of the 10 fastest-growing economies in the next five years.
While South African, Nigerian and Kenyan markets provide a wider selection of investments, it’s Africa’s smallest countries that are posting the biggest gains. Stock exchanges in Tanzania, Malawi and Rwanda have all risen by at least 11% in U.S. dollars since the start of the year, Hoover says.
U.S. companies are taking note of Africa’s potential, and it’s becoming easier for individual investors to participate in African funds. South Africa and Nigeria both have exchange-traded funds that trade on the New York Stock Exchange.
Plus, several internationally based companies have subsidiaries in African countries, such as divisions of Heineken, Nestlé and Unilever in Nigeria, which means investors can take advantage of Africa’s potential return on investment with established companies that have “strong corporate governance (and) very clear transparency,” Masood says.
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