Where to invest in Africa starting in 2021

2020 has been tough for many investors but new opportunities have come with the pandemic which has -disrupted the global economy.

Africa remains a lucrative investment frontier with the unfolding prospects driven by a growing population and demand for goods and services, as economic empowerment expands the middle class.

With this, there are several sectors where investors can count on for good returns.

Read: Africa’s energy demands to spike post-Covid 19

The African Development Bank (AfDB) acknowledges that the continent remains a prime investment destination.

“Despite the Covid-19 pandemic, investment opportunities still abound in Africa. Global markets are shifting to South Asia and Africa. In a sense, Africa is not very far for Asian investors who might be interested in the investment opportunities on the continent,” said Tetsushi Sonobe, the Dean of the Asian Development Bank Institute (ADBI).

Speaking at a webinar for Asian audiences in September, Sonobe observed that Africa’s GDP growth is projected to quickly rebound in 2021 following steady growth before Covid-19.

And with such an optimistic outlook, the latest Rand Merchant Bank’s RMB Global Markets Research shows that there are sectors that are key to releasing the continent’s growth potential.  The RMB research notes that while Africa’s infrastructure shortage is undeniable, it provides abundant investment opportunities – particularly for the construction sector. The infrastructure projects across the continent include real estate developments, pipeline projects, roads, bridges, airports and harbours.

As usual, big-ticket projects in construction will continue being the norm on the continent. This means that investors can put their money into transforming Africa’s infrastructure and landscape- which remains a key constraint to inclusive growth.

All these investments in infrastructure are seeking to increase intra-African trade while also attracting Foreign Direct Investment into the continent.

With Africa being home to more than half of the world’s gold, chrome and platinum reserves, investors will also not go wrong exploring the continent’s mining sector.  In addition, Africa has a significant proportion of the world’s diamond reserves making it even much better for investment in the precious stones.

As of 2014, the continent was producing over 60 different metals and minerals and there was a huge potential for exploration and production.

The IFC (International Finance Corporation) noted that there was a considerable history of mining across the continent with artisanal and small scale mining of gold. The Bretton Woods Institution added that Africa’s enormous mining potential, along with improvements in political systems, and changes in fiscal and regulatory environments had led to a rise in investments over the years. And with the growing demand for the resources, investors in the mining sector in Africa are up for a good return if they invest right.

With the expanding middle class and improving purchasing power, there is an increasing demand for goods and services creating opportunities in the retail sector.

RMB adds that consumer demand and sales volumes have peaked in the developed world, and emerging economies are the next big thing in global spending and consumption over the next few decades, especially as African economic growth rates recover.   “Although the pace in the growth of the middle class has been slower than expected for reasons unique to each country’s economic profile, the continent’s demographic landscape remains attractive,” notes RMB.

The continent remains one of the least developed when it comes to bankability and with this, there is room to financing the continent’s full potential.

With many citizens still not bank account owners, the financial services sector remains a suitable investment opportunity since it plays a critical role in securing Africa’s future.

Without sustainable funding and commercial credit, project development in key areas such as infrastructure, healthcare, and energy projects remain concepts rather than reality.

RMB says that regulatory reforms, the emergence of an urban middle class and technological advancements allow financial institutions’ access to funding mechanisms to mitigate risk and maximise returns.

And with the world now being a global village, Africa needs to be connected to the rest of the globe through the adoption of technology and telecommunications.

The ICT/TMT sector is growing with emerging technologies which need to be rolled out on the continent. As such, investors who will tap into this sector will be among those who can reap the most from Africa’s -huge connectivity gap.

In the manufacturing sector, Africa still lags behind with the future uncertain if the status quo remains. While the manufacturing sector has become highly competitive, and many additional countries have become more appealing, a lot more needs to be done to get Africa to a place where it minimises its imports.

According to the 2018 Made in Africa; Manufacturing and the fourth industrial revolution report by the Institute for Security Studies (ISS), the situation in Africa is improving.  The report notes that agriculture is more effective at reducing poverty than other sectors, but manufacturing is unique in its potential to transform productivity and induce rapid economic growth.

ISS adds that new globalisation, the future of global value chains and digital production are poised to disrupt the nature of manufacturing globally.

“The fourth industrial revolution offers Africa opportunities to accelerate the economic transformation into higher rates of productivity and growth. This is a future where some goods will be produced and consumed in regional rather than global markets, possibly in a more distributed manner, presenting Africa with opportunities for industrialisation as well as regional trade,” it adds.

This year has been tough for many investors but new opportunities have come with the pandemic which has dishevelled the global economy.

Read: Africa Investment Hubs: Tanzania Gaining On Kenya

With this, there are several sectors where investors can count on for good returns.

According to the latest Rand Merchant Bank’s RMB Global Markets Research, there are sectors that are key to releasing the continent’s growth potential.

As usual, big ticket projects in construction will continue being the norm on the continent. This means that investors can put their money into transforming Africa’s infrastructure and landscape.

Infrastructure remains a key constraint to inclusive growth.

The RMB research notes that while Africa’s infrastructure shortage is undeniable, it provides abundant investment opportunities – particularly for the construction sector. The infrastructure projects across the continent include real estate developments, pipeline projects, roads, bridges, airports and harbours.

All these investments in infrastructure are seeking to increase intra-African trade while also attracting FDI into the continent.

With Africa being home to more than half of the world’s gold, chrome and platinum reserves, investors will not go wrong exploring the continent’s mining sector.

In addition, Africa has a significant proportion of the world’s diamond reserves making it even much better for investment in the precious stones.

As of 2014, the continent was producing over 60 different metals and minerals and there was huge potential for exploration and production.

The IFC noted then that there was a considerable history of mining across the continent with artisanal and small scale mining of gold. The Bretton Woods Institutions added that Africa’s enormous mining potential, along with improvements in political systems, and changes in fiscal and regulatory environments had led to a rise in investments over the years. And with the growing demand for the resources, investors in the mining sector in Africa are up for a good return if they invest right.

With the expanding middle class and improving purchasing power, there is increasing demand for goods and services creating opportunities in the retail sector.

RMB adds that consumer demand and sales volumes have peaked in the developed world, and emerging economies are the next big thing in global spending and consumption over the next few decades, especially as African economic growth rates recover.

“Although the pace in the growth of the middle class has been slower than expected for reasons unique to each country’s economic profile, the continent’s demographic landscape remains attractive,” notes RMB.

The continent remains one of the least developed when it comes to bankability and with this, there is room to financing the continent’s full potential.

With many still not bank account owners, the financial services sector remains a suitable investment opportunity since it plays a critical role in securing Africa’s future.

Without sustainable funding and commercial credit, project development in key areas such as infrastructure, healthcare, and energy projects remain concepts rather than reality.

RMB says that regulatory reforms, the emergence of an urban middle class and technological advancements allow financial institutions access to funding mechanisms to mitigate risk and maximise returns.

And with the world now being a global village, Africa needs to be connected to the rest of the globe through the adoption of technology and telecommunications.

The ICT/TMT sector is growing with emerging technologies which need to be rolled out on the continent. As such, investors who will tap into this sector will be among those who can reap the most from Africa’s gaping connectivity gap.

In the manufacturing sector, Africa still lags behind with the future uncertain if the status quo remains. While the manufacturing sector has become highly competitive, and many additional countries becoming more appealing, a lot more needs to be done to get Africa to a place where it minimises its imports.

According to the 2018 Made in Africa; Manufacturing and the fourth industrial revolution report by the Institute for Security Studies (ISS), the situation in Africa is improving.

The report notes that agriculture is more effective at reducing poverty than other sectors, but manufacturing is unique in its potential to transform productivity and induce rapid economic growth.

ISS adds that new globalisation, the future of global value chains and digital production are poised to disrupt the nature of manufacturing globally.

“The fourth industrial revolution offers Africa opportunities to accelerate the economic transformation into higher rates of productivity and growth. This is a future where some goods will be produced and consumed in regional rather than global markets, possibly in a more distributed manner, presenting Africa with opportunities for industrialisation as well as regional trade,” it adds.

Read: Africa’s railways’ infrastructure key to AfCFTA success