The developed world has been a good place since the 2008/9 crisis. The economies of these countries have continued to expand, mostly because of low interest rates. The performance of the stock market in most developed countries has been great. Indeed, in the United States and Europe, stocks are trading at an all-time high.
The chart below shows the performance of the Dow Jones Industrial Average, Stoxx 50, and the Nikkei. As a result, most investors are starting to look elsewhere such as in the emerging markets.
In this article, we will look at the best countries to invest in Africa.
Is Africa a Good Investment?
Africa has lagged far behind of the rest of the world for decades. Indeed, Africa is ranked as the poorest continent in the world. At the same time, Africa is known for its many resources. For example, the continent is the most important in the electric car industry because of the minerals that are found in the Democratic Republic of Congo.
Another thing. While many African countries are poor, some are emerging as the fastest growing in the world. For example, among all the top ten world economies, there are 5 African countries. These are Libya, Eritrea, Rwanda, Ethiopia, and Ivory Coast. Therefore, as an investor, you need to look closely to find the African countries to invest in.
The screenshot below shows how Africa is never considered to be investable. As you can see, in the global overview of global stock performance, Africa is not mentioned.
The Difficulty of Investing in Africa
There is a difficulty of investing in Africa. This difficulty means that it is only the big investors who are able to invest in Africa. The biggest difficulty of investing in the continent is that the stock exchanges are relatively small. Also, these exchanges only allow people in the respective countries to invest in. There are no contracts for differences (CFDs) on African countries. Also, most African currencies are not available on the major trading platforms.
How to Invest in Africa
As mentioned above, there are several challenges of investing in Africa. Still, there are a few ways that foreigners can invest in the continent.
First, they can come and invest in the continent directly. In the past, we have seen many large investors come and invest in African companies. Others have come and invested in companies in the African continent. Unfortunately, this is only an option good for many big investors.
Second, you can invest in African-focused Exchange Traded Funds (ETFs) that are listed in the United States. The most obvious is the MSCI South African ETF that is offered by iShares. The ETF has assets worth more than $415 million and has companies like Naspers, First Rand, Standard Bank Group, and Sanlam. Another African ETF is the VanEck Vectors Egypt Index ETF that has more than $31 million assets. You can also invest in Market Vectors Africa ETF.
Third, you can invest in African currencies. However, the only currency that is available on a global scale is the South African rand.
So, without further ado, let us look at the best African countries you can invest in.
South Africa is the most advanced country in the African continent. It is also the most modern. The country is home to the biggest companies in Africa like Old Mutual, Standard Investments, Sanlam, and Naspers. While the country has faced a number of challenges, it is the easiest one to invest in. You can do this through the Johannesburg Stock Exchange (JSE). JSE has more than 350 listed companies.
For foreigners, investing in the South Africa financial market is relatively easy. This is because it can be done by investing in emerging market asset managers like Fidelity, Vanguard, and Blackrock.
Kenya is one of the best countries to invest in real estate in Africa. We recently looked at how to invest in the Kenyan real estate sector. Another way you can invest in Kenya is to invest in stocks. The Nairobi Securities Exchange is one of the leading exchanges in Africa. It is mostly weighted towards Safaricom, the biggest communication company in Africa. There are also has a number of investment banks in Kenya such as Equity and Kenya Commercial Bank.
As a foreigner, the best way to invest in the Kenyan stock market is through a fund. There are several such funds in Kenya. They are ICEA Lion Group, Zimele Asset Management, and Standard Investment Bank.
Nigeria is the biggest economy in Africa with a GDP of more than $375 billion. The country has one of the most dynamic stock exchanges in Africa. The Nigerian Stock Exchange has more than 328 public companies, with most of them being in the real estate, industrial, and financial sectors. Some of the biggest companies that are public in Nigeria are Dangote Group, Guaranty Trust Bank, Zenith Bank, and Nigeria Breweries.
Want to invest in Nigeria? If you are a Nigeria, it is easy to invest in the country’s stock market. You can do this from most banks, which also offer brokerage services. For foreigners, you can do this through the many funds that are available in the country. Some of these fund managers are ARM Asset Management, PAC Asset Management, and Tower Asset Management among others.
Egypt is one of the fastest-growing economies in Africa. Also, the country has one of the fastest-growing stock markets. The Egyptian stock market has more than 200 companies. Some of the biggest companies listed in the exchange are Travco Group, Commercial International Bank, and Elseweddy Electric.
Language is the biggest barrier for investing in Egypt. This is because Arabic is the main language in the country. However, it is possible to find some English fund managers in the country. Some of the biggest fund managers in Egypt are EFG Hermes and Acumen Asset Management among others.
Morocco is another African country you can invest in. The Casablanca Stock Exchange is one of the biggest in Africa. It has more than 50 companies. The biggest of these companies are Itissalat al-maghrib, Attijariwafa Bank, and BMCE Bank among others.
As with Egypt, the biggest challenge for investing in Morocco is language. This is because Arabic is the main language. If you are a Moroccan, you can invest use one of the several brokers to invest in the country’s stock exchange. If you are a foreigner, you can use some of the leading asset managers like BMCE and BNP Paribas.
Africa is often never thought as a good place to invest in. However, the same was told of many Asian countries in the past. As we have mentioned above, not all African make a good investment. Also, investing in Africa is not as easy as investing in other countries like the United States and those in Europe. Therefore, as an investor, you need to have a good understanding of the dynamics in the African continent.