Look beyond the clichés and consider the myriad investment opportunities in rapidly growing sub-saharan Africa, writes Rupert Walker
ub-saharan africa is a frustrating enigma for international investors. In almost any of its diverse countries, they encounter energy, initiative and tenacity among entrepreneurial, disciplined individuals and companies eager to improve the lives of their families and communities. These countries also have rich natural resources, developing infrastructure, young demographics and a rising middle class with disposable wealth.
Of course, this characterisation smacks of condescension, inferring that the vast continent with a population of a billion people is a special case, an unreliable applicant for entry into the investible universe. Yet there is an image problem. Many in the media portray Africa as overwhelmed by poverty, disease and war, while aid agencies and academic experts perpetuate the notion of the continent as a victim in constant need of rehabilitation. It’s hard to know which is worse: clichéd reporting by journalists who glamorise their voyeurism, or the Munchausen by proxy of unqualified Westerners who dodge competition and responsibility at home.
Instead, investors should recognise the continent’s tremendous potential, identify countries with the best prospects and seek investment opportunities in companies that are driving and profiting from booming economies. The macroeconomic rationale is compelling. The International Monetary Fund forecasts that the real GDP of sub-saharan Africa will grow by 5.8 per cent this year, spurred by foreign investment in natural resources, public spending on infrastructure, improved agricultural production and buoyant consumption.
Indeed, some African nations, such as Kenya, Rwanda, Tanzania and Ethiopia, could double the size of their economies over the next decade, implying an average annual growth rate of 7 per cent, according to Oxford University’s Centre for the Study of African Economies. Rapid economic growth will support greater consumer demand for products and services throughout the world, and will therefore boost revenue for telecommunications companies, food and beverage manufacturers, distributors and banks. For example, Nigeria’s middle class grew by 600 per cent between 2000 and 2014, according to South Africa’s Standard Bank. Other countries expected to see a significant rise in the number of middle-class families by 2030 include Angola, Ghana and Sudan.
Political stability in many parts of subsaharan Africa and, until recently, strong commodity prices have encouraged foreign investment. Most important, much of that investment is long-term and likely to be multiplied, especially by China as it seeks stable access to natural resources to sustain its own economic growth. According to a white paper on China-africa economic and trade cooperation published by China’s State Council in 2013, Chinese foreign direct investment (FDI) in Africa increased at an annual rate of 20.5 per cent between 2009 and 2012. Cumulative FDI totalled US$21.23 billion by 2012, mostly in the energy and mineral resources sectors, and Chinese