- Daniel Hendrych
The High Yielding Impact Opportunity Known as Africa
Investing in emerging markets such as Africa does not always come without risk as reports of corruption, unsafe business environments and poor governance policies circulate the media. During the past decades, Africa has been working hard to implement institutional changes to realize its full potential, on the backdrop of strong fundamentals such as a young and growing population. Signaling foreign investors to come and reap the benefits. But you can not reap the benefits without planting seeds and the time for planting is now!
Recent publications indicate Africa has a growing population. According to Worldometers, the population accounts for an estimated 17 percent of the world population and research conducted by Brookings Institution expects the continent to double by 2060 to 2.6 billion people. Examining the growth closer reveals Africa as the youngest population by median age in the world, landing at a median age of 19.7. In addition, the continent’s middle-class is rapidly increasing from 355 million people in 2010 to an estimated 1.1 billion by 2060. With the rising young middle-class a large portion will seek access to a wider choice of consumption providing a boost for Africa’s economy. In 2019, middle class expenditure extended beyond the $1 trillion mark and a report from McKinsey Global Institute has predicted the number to reach $2.5 trillion by the year 2025.
To truly position the continent as an attractive and safe investment destination, democratic governance needs continued strengthening. Africa has over the past five decades increased governance to enable stable growth and prosperity. Most African countries have undertaken significant change through institutional reforms that are impacting their governance architectures and putting in place new leaders. However, not all countries have accomplished the same level of institutional transformation that can inhibit dictatorship, corruption and economic decline. Spreading doubt to international investors when faced with reports of corruption, unsafe business environments and poor governance policies.
There is strong consensus from Researchers, Analysts, Policy Makers and Politicians, among others, that for Africa to reach its potential, it needs to attract sufficient investments. African countries individually and collectively have undertaken several initiatives aimed at attracting foreign direct investment into the African economy. One such recent collective initiative is the African Continental Free Trade Area (AfCFTA).
AfCFTA is the world's largest free trade area since the World Trade Organization (WTO). The purpose of the agreement is to reduce all trade costs and allow Africa to additionally develop global supply chains. It will phase out 90 percent of tariffs and establish a sole market with free movement of goods and services. Additionally, the arrangement will positively affect movement of investment, intellectual property, competition and so on, marking a major step for Africa towards becoming similar to developed integrated markets such as the European Union.
Considering that Africa’s intracontinental export accounts for only 17 percent of all its exports, compared with Europe which is 68 percent, the capacity for growth is significant. With the implementation of AfCFTA the intracontinental export is expected to grow over 81 percent and it is estimated that the agreement could generate consumer and business expenditure of $6.7 trillion by 2030, according to The World Bank and Mo Ibrahim Foundation.
Recognizing that Africa is on the rise is clear. Therefore, the question should not be if Africa is worth the wait, but rather how to seize the abundant high yielding and impactful opportunities and navigate through the uncertainties that exist. The Investure white paper dissects the key fundamentals and presents 5 tips on investing in Africa, below is an excerpt:
Strong local teams and partners. As with any investment opportunity you will need to invest in people, the one that will drive the venture and safeguard your investment. This can be intimidating especially if you are not familiar with the continent, have strong networks and understand the culture. Which brings us to our next how tip - collaborate.
Collaborate, collaborate, collaborate. Unless you are a super billionaire or superman, do not go it alone, collaborate with others which will help leverage their experiences, networks and resources and thus reduce the risk that is normally synonymous with any high yielding undertakings.
Leverage technology. Africa has one of the highest levels of technology adoption in the world and a young population that is technology savvy and willing to try new things. Using technology to find, evaluate, undertake and manage investment opportunities can speed up execution, reduce cost, and increase trust, transparency and accountability.
Think long term and be strategic. Investment transactions in emerging markets can take a long time to conclude, and when the investments are made, they can take even longer to materialize due to unexpected surprises and delays. Real value can be built over a long time by capitalizing on incremental progress.
Follow up, follow up, follow up. Due to various uncertainties that exist in emerging markets, it is important to have a mechanism to follow up on your investment, the resources to reinvest if required, and the possibility to divest or exit.
You can download the entire report here
With Investure it is possible to find, evaluate, undertake and manage investment opportunities in emerging markets. Investure has over 12 years of experience with strong and trusted local partners. To decrease the gap of unfamiliarity of the local markets, Investure increases trust, transparency and accountability by providing investors extensive viewing of counterparty information and past performance by fundraisers and facilitators. In addition, all deals are pre-qualified by Investure and most are qualified or underwritten by regulated financial institutions in local markets. Due to the importance of collaboration, Investure enables the ability to run formal or informal syndicates whether it is to tag along with institutional investors or share due diligence resources. The blockchain technology upon which Investure is based on provides incorruptible and indelible records to allow for a higher level of trust.
Considering the young population in Africa and the high technology adaptation. Investure becomes an easy and simple private marketplace exchange to find and undertake impactful investments. Africa’s abundant high yielding opportunities take a long time to materialize. Therefore, thinking long term and follow up on investment is critical. That is why Investure offers asset servicing, where you can manage your portfolio and receive flexible and automated reports. In addition, Investure increases the possibility of liquidating the assets via a secondary market. Making Investure the first truly end-to-end service for investors throughout the entire value chain.
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