African immigrants in the diaspora spend billions of dollars on the continent through remittances and other avenues. While most of these funds are meant to directly serve the needs of their families back home, immigrants are also interested in making economic investments in their home countries. Today, we look at why you should consider making investments in Africa, and which sectors you can look at for these investments.
Facts about Africa that you should know
When you are looking to invest in a country or continent, there are factors that you need to consider that help you understand the environment which you are considering for your investment. While each of Africa’s 54 countries has its own unique properties that you will need to consider individually, here are some general facts about the continent that show you why investing in Africa is a sound decision:
- Africa is the youngest continent in the world, with 60% of its population being under the age of 25. While other continents have an aging population that results in the shrinking of the workforce, Africa’s workforce is growing.
- Fiscal and monetary policies have generally improved across the continent. This has created stable currencies, lower inflation rates, and lower interest rates.
- There is a lot of room for infrastructural development such as power grids, telecoms infrastructure, and property development, among other sectors. These areas become inviting for investors.
- African startups attracted a record amount of investment in 2021, and those numbers are expected to continue going up. Reports suggest that startups on the continent raised between $4.3 – $5.2 billion in 2021.
Sectors to consider for investment
Agriculture is one of the more “traditional” areas of investment in Africa but it remains one of the leading industries in terms of ROI on the continent. The potential for investment lies in the fact that 60% of arable land in Africa remains untouched, which translates to there being a lot of room for wood investors to put their money into the sector.
The majority of startup funding in Africa has gone towards fintech firms. This is because fintech startups are regarded as the key to the improvement of financial inclusion in Africa. When financial inclusion is improved, more people are able to participate in the economy and this drives economic growth. It is estimated that GDP growth can be improved by as much as 30% if the right financially inclusive tools are used.
- Real Estate
The African real estate market, particularly in Africa’s leading economies such as Egypt and South Africa, is a sound and reliable sector for one to make an investment. The supporting factors are that many African cities are still growing and expanding, which makes investments into developments worthwhile. The growing population of the continent also demands housing and other services that are reliant on a good real estate industry. While the African real estate market may not offer ROI as quickly as other industries, it is a solid long-term investment.
- Pharmaceuticals and Health Care
The pandemic exposed the fragility of healthcare systems globally, and Africa is no exception. In 2020, Africa had a population of 1.34 billion people, and this is expected to grow to as much as 2.5 billion by 2050. The population will require healthcare, and the current systems do not have the capacity to handle the growing population. Due to this demand, the healthcare sector offers a good investment opportunity.
- Mobile Money Services
Mobile money services are popular in Africa, and these continue to find more users. These services have low barriers of entry, and the increased accessibility to mobile devices means that several people can easily use mobile money services. There are some mobile money services that have grown to include cross-border remittances, debit orders, loans to users, and other features that improve financial inclusivity. These services will continue to have a growing user base and this makes it another good area for investment.
For decades, Africa has been considered to be a high-risk environment for investment due to a volatile political environment and inconsistent policies, among other factors. These circumstances have changed, and the continent continues to improve on these fronts. Several African countries have growing economies and large markets to serve, thus creating good investment opportunities.