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As a general rule, the most successful man in life is the man who has the best
information
Little was
known about Africa’s
interior so early map makers
would often leave this region
blank. Today’s investors may be the equivalent of yesterdays mapmakers.
Africa is a continent of opportunity.
According to The Economist, between 2000 and 2010, six of the world’s
ten fastest growing economies where in Sub-Saharan Africa. The only BRIC (Brazil, Russia, India and China) country to make
the top ten was China which came in second behind
Angola – the fastest growing
country in the world.
Nigeria, Ethiopia, Chad, Mozambique and
Rwanda made up the rest of the African
countries within the top ten
and all had annual growth rates of around 8% or
more.
The
International Monetary Fund
(IMF) says Africa will own seven
out of the top ten places for fastest
growing economies between now and 2015. The World
Bank raised its forecast for economic growth in Sub-Saharan Africa to 5.3% for 2011 - the highest
forecast rate of growth outside Asia.
Africans, on
a per capita basis, are richer than
Indians and a full dozen African states have higher gross national income per
capita than China.
A lot of this growth is
driven by a blossoming domestic market - the largest domestic market outside India and China. Much
of the funding for Africa’s
private sector comes from domestic
banks and investors - their returns on investment are among the highest in the world. In the last four years private consumption of goods and
services has accounted for two
thirds of Africa's GDP growth. In Africa's 10 largest economies the service sector makes up 40 percent of
GDP – as a comparison India's
is at 53 percent.
Today Africa has 14% of the world’s population and by 2050 one in every four people on the planet
will be African - by 2027 Africa will have more people than does China or India. Development expert Vijay Majahan, author of Africa Rising,
said the rapidly emerging African middle class could today number
almost 300 million people - that’s
out of a total population of one billion.
Many African stock markets performed very well last year - eight out of the eleven main Sub-Saharan African markets closed the year in positive territory. Leading the way was the Uganda Securities
Exchange (USE) with a 34.16% gain.
Some of the factors contributing to the high growth rates:
- China’s demand
for raw materials
- Higher commodity
prices
- Big inflows
of foreign direct investment
- Foreign aid and
debt relief
- Urbanization - rising
incomes - growth in domestic demand
“Africa could be on the brink of an economic takeoff, much like China was 30 years ago, and India 20 years ago.” The World Bank report - Africa’s Future and the World Bank’s
Role in it
Africa is
incredibly resource rich, natural resource extraction and the necessary
infrastructure investment is
driving the development
of its growing industrial and service sectors.
Some of the new prosperity
results from better economic policies but the ongoing
explosion in commodity prices
drives investment in exploration, development and mining which leads to the building of bridges, roads and power lines.
Infrastructure build out is
ultimately responsible
for the boom in prosperity. This is because much
of the same infrastructure needed
for mining is also the same infrastructure
essential for growth in:
- Agriculture
- Manufacturing
- Services
- Trade
The latest African Mining Indaba in Cape Town, South Africa was attended by 6,000 delegates.
A number of economies are increasingly becoming more
important in terms of resource
extraction:
Conclusion
There are African countries with a well founded, and much publicized, reputation for corruption and poor
governance – to put it
bluntly, some of Africa’s economies are too poorly run
for there to be any hope of secure
investment opportunities.
But, in much of Africa, there has been a sea change underway for sometime - a substantial chunk of the
continent has experienced a stealthy,
economic renaissance because
of unprecedented, long term,
political stability.
Steven Radelet, author of Emerging Africa: How 17
Countries are Leading the Way,
says five fundamental
changes are at work:
- More democratic
and accountable governments
- More sensible economic
policies
- The end of the debt
crisis and changing relationships with donors
- The spread
of new technologies
- The emergence
of a new generation of policymakers,
activists, and business leaders
Africa is
the last continent to be developed
– ironic considering
that research confirms the “Out Of Africa”
hypothesis that all
modern humans stem from a
single group of Homo sapiens who emigrated from Africa 2,000 generations ago.
Over the next generation Africa could very well be
where some of the best returns on investment will be made - thanks to the increasing global
appetite for natural resources. Many of the
countries (Nigeria with its
150 million people comes to mind)
in Africa will take their place on the world
stage - much as the resource
rich nations of Australia,
Brazil and Canada have.
Africa has long been neglected
by exploration and mining companies
- and their investors
– but resource extraction will
constitute the most
important economic opportunity
in Africa’s history
over the coming decades.
Here is the opportunity
– find the countries that
match your risk acceptance level, find suitable investments within these countries and watch the others that presently
do not meet your
guidelines. Sooner, rather
than later, after seeing their neighbors prosper, they will come to see the light and
change their ways opening up the country for investment
and meeting your risk levels.
Ahead of the herd investments in Africa’s resource sector could be represented
in an investor’s portfolio, country by
country, for years to come.
Are Africa’s resource rich countries on your investment radar screen?
If not, maybe they should
be.
Richard Mills
Aheadoftheherd.com
If you're
interested in learning more about the junior resource market please come and
visit Richard at www.aheadoftheherd.com. Membership is free, no credit card or personal
information is asked for.
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