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Investment Opportunities

Africa’s Astonishing Growth and Unstoppable Bull Market

Africa's Gross Domestic Product in US Dollars

Mention developing economies… and China and India likely come to mind. It’s true both countries are growing fast. But China is nearly a developed nation, and India isn’t too far behind.

To find the fastestgrowing economies, you’d have to travel to Africa.

More than a dozen of the fastest-growing economies in the world are located in Africa. Chief among them is Ethiopia. The East African nation has seen an incredible 10% average annual gross domestic product (GDP) growth in the past decade.

It’s not just Ethiopia that’s booming either…

Senegal’s GDP is growing at 7%, the Ivory Coast’s is growing at 8% and the continent’s as a whole is growing by 3.7% on average annually thanks to a combination of foreign investors and native entrepreneurs.

American and European companies have largely avoided investing in Africa. It’s a huge missed opportunity that China is taking full advantage of.

There are three major industries spurring Africa’s growth:

  1. Agriculture: Forget the Sahara, Africa has actually got huge amounts of fertile farmland. Digital tools, computers, drone technology and improved fertilizers have all helped African farmers boost their output. Further, the growth of financial institutions allows many people, including farmers, to access credit and other financial tools.
  2. Mining: This is Africa’s most profitable industry. The continent is home to one-third of the Earth’s mineral wealth. Africa produces 89% of the world’s gold. There are huge numbers of gold mining companies, like AngloGold Ashanti (NYSE: AU) and Sibanye Gold (NYSE: SBGL), based in South Africa alone.
  3. Manufacturing: China has become more developed in the last few decades. Average wages and quality of life in China have risen greatly. The Chinese are exporting some of their cheap (and dangerous) manufacturing jobs to Africa. Ethiopia in particular has been the destination for huge numbers of Chinese factories.

One barrier to growth is many countries in Africa are almost entirely dependent on their mineral or fossil fuel wealth. For example, 90% of Nigeria’s export earnings is from oil. African countries will have to diversify to truly prosper.

But the main barrier to manufacturing in Africa is infrastructure. However, Chinese investments are changing this. Roads and rail networks, as well as new ports, have sprung up across the continent.

Africa has one of the fastest-growing economies, and there could be plenty of opportunities to prosper along with it.

Good investing,

James

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.


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