Africa - unknown terrain for investors
A growing young population, a growing trend towards urbanization and the formalization of African economies mean that the continent offers investors attractive long-term returns and diversification perspectives. After a phase of consolidation, selected countries of the continent will once again take on new impetus. Egypt, for example, suspended the pound from free exchange rates, reduced subsidies and introduced value added tax. Morocco's economy is also on the rise. State industrial enterprises are privatized, unprofitable industries closed, the production of higher value goods and services - for example in the automotive or aircraft supplier sector - promoted and new sales markets in West Africa tapped. Likewise, South Africa shows encouraging signals for the first time after many years with the election of reformist Cyril Ramaphosa as president.
This, in turn, shows that much has changed for the better on the vast continent in recent years. The dynamics in the economy are great. The growth rate of real gross domestic product is more than 5 percent, leaving the developed countries behind. Per capita income also increased significantly. Africa is already in third place behind China and India in terms of this key economic indicator. The World Bank and the IMF also forecast a continuation of this trend for the coming years. Debt reduction, the control of inflation, the formation of foreign currency reserves and infrastructure investment are unleashing new forces in Africa. In particular, there are numerous micro-reforms that provide regional growth impulses. Examples include the liberalization of the telecommunications sector in northern and sub-Saharan Africa or various measures to promote local industrial production
Still undiscovered stock markets
The political and economic elite of the continent is young and well educated. It opens up long-term structural growth opportunities. These opportunities are increasingly offered in northern and sub-Saharan Africa, regions that investors have neglected so far. If the previous reform efforts continue, African experts expect above-average growth in the long term, especially in the countries of northern and sub-Saharan Africa. This is especially true in the downstream sectors such as banking, insurance, telecommunications and construction.
Especially the emerging equity markets in North and Sub-Saharan Africa have hitherto been hidden from investors. Here, modern stock exchanges have emerged in recent years. So far, not international capital flows, but local investors determine the prices. For this reason, these markets sometimes develop very autonomously. The diversification potential of investing in the region is therefore great. At the same time, it should be kept in mind that investments in emerging markets are also subject to higher fluctuations in value and temporary collapses. Africa is therefore especially suitable as an admixture. Investors should have a multi-year investment horizon.