Sub-Saharan Africa is among the most dynamic regions in the world. For nearly a decade, its GDP growth averaged 5 percent annually. Though that figure plunged to 1.3 percent in 2016, it swiftly resurged to 2.4 percent the following year, evidencing the region’s economic resilience.
Burgeoning commodity prices and slowing inflation have already boosted the economies of Angola, Nigeria and South Africa, and the World Bank has estimated that steady domestic demand will push regional growth to 3.5 percent in 2019, with particularly high growth rates anticipated in Ethiopia, Côte d’Ivoire and Ghana this year.
But while Africa’s wealth of natural resources is well known, fewer would-be investors are familiar with the continent’s promising fintech and cryptocurrency offerings.
To help you decide whether investing in Africa is the path for you, we’ve compiled a list of the top five reasons to invest in the continent’s markets, culminating in an explanation of the African crypto scene:
Top ROI Rates
Industry publication Mining Weekly reported in 2017 that many foreign investors remain confident in high returns on investment in Africa, inspiring them to take increasingly substantial risks.
Return rates are bolstered by significant growth in the region. Africa features prominently among the World Bank’s listing of the ten fastest growing economies in 2018. In particular, Ghana and Ethiopia top the list with real GDP growth at market prices reaching 8.3% and 8.2% respectively.
This GDP growth is spurred on by a booming population, promising business governance reforms, a wealth of natural resources and thriving digital economies, which have ushered in ample opportunities for investors.
Over a billion people and the spending power to match
As Africa’s middle and upper classes bourgeon, so does the purchasing power of the continent’s population.
At present, the African population comprises some 1.2 billion people. According to the World Economic Forum, by 2030 this figure is set to soar to 1.7 billion people with combined consumer and business spending set to reach a flooring $6.7 trillion. Also by 2030, a UN estimate holds that sub-Saharan Africa will account for about half the increase in the global work force.
Smart investors are scrambling to lay the foundations now for African businesses which will soar over the course of the next decade alongside the continent’s population and spending prospects.
Agribusiness is on the rise across the continent, presenting a wealth of promising investment opportunities. Perhaps the most high-profile recent example of this was found in the $1 billion investment by Aliko Dangote – Africa’s wealthiest man – into commercial rice farming and modern rice mills in Nigeria, as reported by Forbes.
The opportunities in this sector are plentiful due to a variety of factors, such as Africa’s wealth of fertile and inexpensive agricultural land and growing market demand, which is only set to surge amid the continent’s aforementioned population boom.
Lucrative new IT opportunities
Beyond fintech and e-commerce, software development presents significant growth opportunities in the continent.
Software development firm Andela, which has offices in Nigeria, Kenya and Uganda, has accrued $80 million in funding since its 2014 launch. In poignant comments to Forbes magazine explaining his motivation for investing in Andela, Pule Taukobong – founding partner of CRE Venture Capital, which led a recent Series C investment of $40 million into the company – said: “At present, there is more capital to fund ideas globally than there are people to build them. Andela is providing a solution to this global talent dilemma while building a business case for one of Africa’s greatest assets: our people.”
Andela co-founder Jeremy Johnson predicted that African technologists will continue to launch high-impact companies and solve some of the world’s most pressing problems going forward, according to Forbes.
Software outsourcing firm Accelerance reported that Africa has emerged as the next frontier in software outsourcing potential, pointing to the continent’s growing young population, as well as the entrepreneurial hubs of Nairobi and Lagos.
Fintech and e-commerce take hold
Increased internet access has spurred the diversification of many African economies beyond commodities. According to the World Economic Forum, such diversification is attributable to returning members of the African diaspora who recognize the potential for innovative business opportunities in their countries of origin, including in the spheres of fintech and e-commerce.
A prime example of this can be found in the rapid emergence of the fintech sector across sub-Saharan Africa. According to the UN, an increased appetite for financial inclusion has led to mobile account growth outpacing bank accounts in several sub-Saharan African nations, including Kenya, Uganda and Tanzania.
Enterprising startups have recognized that sub-Saharan Africa is home to an enormous number of people who have traditionally been excluded from the banking sector, but who desire the perks associated with personal bank accounts, such as the ability to take out loans and transfer money. According to news hub Disrupt Africa, tech startups on the continent raised upwards of $195 million in funding in 2017 – a 51% uptick compared to 2016. In a recent survey, PwC reported that fintech investments across the continent could reach $3 billion by 2020, with Nigeria and South Africa each accounting for significant portions of these investments.
Naturally, this enthusiasm for fintech innovations has resulted in a surge in cryptocurrencies across the continent. Earlier this year, financial resource site Investopedia speculated that Africa may be the next big market for cryptocurrencies, noting that some 15 crypto trading venues had opened in the past year alone. According to the report, African markets are ripe for the widespread adoption of cryptocurrencies due to rampant inflation, the rapid spread of mobile technology and a relatively low threat of government regulation.
In a similar vein, increased internet access and mobile connectivity have boosted e-commerce across the region. According to a 2016 report by McKinsey Global Initiative, e-commerce revenue had in Nigeria doubled at that point each year since 2010. African accelerator reported that by 2025 online shopping could account for 10% of retail sales on the continent, amounting to some $75 billion.
All of these factors combined, Africa presents a rich diversity of exciting opportunities for foreign investors.
By Alex Fork