Investment opportunities in Africa

To answer the question of “what are the opportunities for investors in Africa?” the number of opportunities emerging in the region, as over the decades, Africa has explored great depth for its rise in growth of investment and economic opportunities. Upon exploring, it is found that the region offers greater returns on investment than most other emerging economies. Moreover, we cannot call it the body of solitary performance as there are 54 distinct economies in the continent. Each state weighs with opportunities and challenges significant to their economics and operating environments, which are two vital ingredients for investment. The economies of Africa support their nations. The world is investing in the region for natural resources, low-cost labor and skills. There are some untapped investment opportunities for international investors.

These emerging opportunities are;

  • Solar systems installations (in different categories like solar street lights, solar water heaters).
  • Maize and wheat milling.
  • Packaged food manufacturing.
  • Water purification systems.
  • Retail (fast-moving consumer goods, furniture and home appliances, baby and children products, consumer electronics, makeup and cosmetic products, apparel, fashion and clothing).
  • Agriculture (cultivation and agricultural machinery).
  • Mining, Biogas and Biodiesel.
  • Online retailing.
  • Consultation (for new business ventures).
  • Digital and Mobile Banking.

 

This article provides information to investors for investing in three major sectors. The insight for each sector in terms of market share, financial projections and GDP is provided here. The sectors with opportunities for major returns on investments are Agriculture, Power and Digital/Mobile Banking.

Agriculture 

There is a global comparative advantage of Africa in the agriculture sector as it is home to more than half of the most suitable agricultural lands in the world, which are unused and rich in natural resources. The vital resource of its land is water that is hardly tapped. Africa has 60% of the world’s uncultivated lands. At the same time, it is producing only 10% of the agricultural products for the world. Therefore, this sector is a kind of untapped investment opportunity expected to drive the region’s major economic growth. Further, Africa’s agricultural sectors’ competitiveness increases with the increase in competition. Moreover, the governments of African states are also investing in the agriculture sector and subsidizing the investments in the sector alongside the subsistence farming shift to ago-processing.

African countries are exploring the ago-processing advantages as most of Uganda’s agricultural products, including coffee, tobacco and fish, are exported across the world in the raw form. Another untapped agricultural market of Africa is Ethiopia which has some of the world’s most arable lands. Currently, Ethiopia is investing 25% of the agricultural sector’s budget as it is the backbone of their economy by representing 50% of the country GDP and more than 85% of the country export revenue. Employment opportunities come from the agriculture sector. In terms of crops to invest in the sugarcane has been found as the most return generating cultivation as the sugar production has rendered the growth of many African countries as most of these countries lie under the top list of sugar producers as Sudan is 25th, Kenya 33rd, Ethiopia 27th, Tanzania 45th and Uganda 43rd largest sugar-producing countries in the world.

Electricity 

 

 

Among the major goals of Africa, affordable and reliable energy is at the forefront as it would elevate the growth of its economy and fulfill its population’s needs. Most of the African countries are struggling with low capacity, high cost and constant power shortage. Governments of African countries are willing to invest in collaboration to produce low-cost electricity as there are countries that still do not have access to grid electricity, as 55% of Nigerians do not have. With a rough estimation, in East Africa, almost 80% of the region does not have access to electricity. Moreover, in Liberia, almost 90% of its population does not have access to affordable electricity, and this low accessibility of the African population to electricity is an investment opportunity in the sector of hydro-powered electricity as the states like Liberia have the advantage of rivers as the 60% of the water in the country is drained from its river that facilitates the investing in hydroelectricity.

Additionally, the opportunities for investing in the Power sector are increasing with the involvement of governments of African countries like Rural Electrification Agency of Nigeria has planned to develop 10,000 mini-grids by the end of 2023, which would serve 14% of its people, but this plan needs the participation of private sector. The Nigeria Electrification project would provide a facility of African Development Bank and World Bank funds of $550 million based on performance for solar home developers and mini-grids deployment developers. Such facilities encourage and support investments in the sector. In the power generation sectors, there are various opportunities like hydroelectricity, geothermal and solar energy as in recent times there have been abundant geothermal explorations in Africa where are estimated at GW of 7 to 15. Though the opportunity of solar power is also untapped and gaps in structures of conventional energy also provide the opportunities of investing in low-carbon solutions.

Digital/Mobile Banking

 

Africa has shown the fastest rate of mobile networks and broadband connection from 2008 to 2015, which provides the forecast of increasing mobile data traffic across the region from 2017 to 2022. The vast opportunity to invest in the sector can be analyzed with the number of mobile money accounts in Africa that is 120 million. It is almost half of the total number of mobile accounts in the globe. Over time, there has been a significant change in the number of bank accounts in the region. The accounts were increased from 170 million in 2012 to 300 million in 2020. The figures are expected to reach 450 million in the next five years. It is expected that revenue on a continent’s scale will grow from $86 billion (2017) to 129$ billion (2020).

Moreover, the revenue of mobile banking accounts is 68% of the continent’s total banking revenues. Hence, with the emergence of new business models, mobile banking can further grow. Thus it provides growth opportunities for the investors as the sector is expected to contribute $300 billion in the continent’s GDP by 2025.

Conclusion 

Africa has successfully been exploring the greater insights related to the development in investment and economic prospects. This exploration has led to the results that Africa offers greater returns than the other developing economies, though with the cumulative efforts of 54 distinct economies. Africa is highly opted for investment due to low labor costs, skills, and natural resources. This article has provided a comprehensive detail for the investors to invest in three sectors with major returns, namely Agriculture, Power and Digital/Mobile Banking, by focusing on the related market share, financial projections, and GDP. The essential resource of its agricultural land is water that is barely utilized. Presently, Ethiopia is investing 25% of the agricultural sector’s budget by representing 50% of the country GDP and more than 85% of the country export revenue. Africa is highly focused on providing inexpensive and consistent energy as it is anticipated to uplift economic growth and meet the population’s needs. The swiftest rate of mobile networks and broadband connection has been depicted by Africa from 2008 to 2015 and is expected to flourish by 2022. This sector offers developmental prospects for the investors as it is anticipated to add 300 billion dollars by 2025 in Africa’s GDP. Henceforth, investing in these sectors would be of greater benefits for the investors and the continent.

 

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