The Future of Investing in Africa

With Africa’s growing population, urbanization, and rising digital capabilities, its future looks bright. But for that to occur successfully requires extensive country-by-country due diligence.

Africa presents opportunities for long-term investment growth and sustainable development. However, due diligence must be exercised when expanding your portfolio here. Below are some points to keep in mind before expanding it further.

1. Technology

Astute investors understand Africa’s vast natural and human resources offer endless potential. Markets like Nigeria, Ethiopia and Ghana boasting millions of inhabitants offer ample opportunity for future consumers.

Africa’s technology investment industry is on an upswing thanks to advances in technologies that help achieve the Sustainable Development Goals.

Sumitomo Chemical’s insect-proofing mosquito net technology, helping to eradicate malaria; JGC and Hitachi’s desalination technology that accelerates access to clean water; and weather index insurance from Sompo Japan Niponkoa that mitigates climate change are examples of long-term investments with immediate benefits; however, investors still often react quickly when suddenly changed sentiment or commodity prices fluctuate; it is therefore imperative that investors devise an integrated, long-term investment strategy which takes account of Africa’s emerging tech landscape realities.

2. Agriculture

Africa boasts abundant natural resources, an exploding economy, ground-breaking free trade agreements and new policies promoting women’s rights – so it should come as no surprise that investment into Africa is on the rise.

However, taking an all-or-nothing approach to investing in Africa may only yield limited returns for high-net-worth investors. To maximize investments and minimize risk and short-term sentiment shifts that can quickly undo gains made over weeks or months. One such challenge for Africa investors is agriculture’s massive investment gap: financial markets remain underdeveloped while commercial lending to this sector remains low due to perceived high risks and lack of collateral backing up loans from traditional financial institutions.

3. Energy

Africa currently faces an energy access deficit estimated at 3.188 percent of income per capita and thus private capital is essential to increasing electricity supplies on the continent. Unfortunately, fossil fuel extraction projects dominate investment flows within this sector and clean energy investments remain too small to get Africa moving towards meeting its Sustainable Development Goals.

African mineral reserves provide essential raw materials for clean energy technologies, including lithium, cobalt and platinum. Unfortunately, mining revenues have been decreasing, so better oversight must be implemented over the region’s mineral reserves.

African governments must establish the necessary structures in order to attract foreign investments, which include eliminating corruption; investing in quality education and science, technology and innovation; strengthening macroeconomic conditions; and avoiding a race-to-the-bottom with excessive tax concessions.

4. Financial Services

African consumers’ growing consumer market is drawing investor interest to sectors catering to end-consumer needs, yet investors must carefully assess a diverse set of risks ranging from political volatility and commodity price fluctuation, through foreign exchange liquidity issues and political unpredictability.

Contrary to advanced economies, many African nations are highly exposed to fluctuations in commodity prices. This can have devastating repercussions for tax revenue generation and lead to foreign exchange liquidity crises.

To reduce these risks, governments can take measures to improve the investment climate by creating industrial strategies and clusters, offering innovative funding methods, advocating value chain development initiatives and supporting vibrant private sector activities through good governance, transparent policymaking and by eliminating unnecessary tax breaks that skew investment flows. By doing this, Africa could be on its way towards a brighter financial future.

5. Health

Even though Africa contributes a portion of global emissions, its people suffer from climate change-induced health challenges such as poverty, malnutrition and disease due to limited access to medical services and medicines.

Many new technologies are emerging to address these problems. For instance, Smart Lockers enable patients to dispense their medicine from home instead of traveling back and forth to hospitals for refills.

However, the most successful investments in healthcare are those which address the root causes of health disparities rather than treating symptoms alone. A new perspective must be adopted – one in which communities make their own decisions rather than being simply provided with services; this requires a different kind of investment, which has already begun taking form – health investing is Africa’s future!