With the mining and oil industries’ under pressure as commodity prices fall to record lows, investors have to look to other prospects on the African continent. The rhetoric that a disproportionate amount of the world’s mineral resources lies on our shores, waiting to be extracted, is no longer a compelling investment case.
The need for infrastructure on the continent is obvious. Ports, electricity capacity and transportation are all necessary to ensure growth. Meanwhile, the World Bank estimates that while sub-Saharan Africa needs infrastructure investment of nearly $100 billion annually, it currently gets less than half of that.
It makes sense to assume then, that the best businesses to be in are directly or indirectly related to servicing this need.
Energy
Raoul Gamsu, CEO of Consolidated Infrastructure Group (CIG), says his company made strides into Africa when it realised there was a complete supply/demand mismatch in terms of energy infrastructure. The JSE-listed company now has an order book outside South Africa of about $100 million.
“For every dollar spent on generation, you need 20 cents for transmission and distribution. So it was an avenue to target. And that’s how we increased our presence on the continent.”
Construction
A significant portion of government spending in Africa is geared towards the building of roads, railways, homes and other buildings like schools and hospitals. That is why the construction sector and industries that support those activities are bound to be in high demand. Cement is one example. Old Mutual Investment Group’s African Equities Manager Cavan Osborne says Lafarge, South Africa’s PPC and Nigeria’s Dangote are all cement companies that have a strong footprint on the continent and are investment options worth considering.
“Everyone in the world wants to have a house, and if they already have one they want a nicer or a bigger one. That’s what makes cement such an attractive prospect.”
Similarly, JSE-listed Onelogix is a company that has managed to exploit the need for efficient logistics services in the construction and infrastructure build market, transporting cars and capital equipment needed by companies carrying out big projects.
Read more at moneyweb.co.za
