Investing in Africa Grows More Attractive

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imagesAs Africa’s economies gain momentum, democratic governments take hold and the continent’s young population grows wealthier, investing there is becoming both easier and more attractive to international investors.

That narrative is one President Barack Obama promotes this week as he convenes the largest gathering ever of African government officials in Washington, D.C., in an effort to bolster the U.S. relationship with one of the world’s fastest-growing economies. An all-day event Tuesday will focus specifically on business and investing opportunities. Insurance and infrastructure represent some of the best investing opportunities as companies expand to meet the growing demand of countries that are becoming wealthier and more educated, says Ryan Hoover, founder of InvestinginAfrica.net.

“There’s huge demand for energy, roads and water,” he says. “Any companies that have exposure to building or owning or operating power plants are seeing huge gains.”

Among the top-performing stocks in Africa in the past year are three insurance companies on the Kenya exchange, he says. Shares of Britam Investments, headquartered in Nairobi, are up 193 percent in the past 12 months. Pan African Insurance Holdings shares are up 127 percent, and CIC Insurance shares are up 73 percent.

Still, with about 20 different stock markets, the disparity between more developed markets and newer exchanges can be vast. But countries are taking steps to improve investor confidence and access to funds, including adopting better financial reporting standards. Nigeria started a market maker program that makes it easier to buy and sell stocks.

Africa also has age on its side, with 200 million people between the ages of 15 and 24, and many more of them educated than past generations of young adults. Africa is expected to have the largest global workforce by 2040. Africa’s young adult population will be a boon for consumer goods companies as they target a largely underserved population, says Kanwal Masood, portfolio specialist for T. Rowe Price’s Africa and Middle East fund and frontier markets.

 

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