What Makes Africa a Good Investment Destination?
Africa is an emerging market with a wealth of untapped resources, a growing consumer base, and a rising trend of innovation in technology. These factors, among others, make it an attractive destination for investors looking to diversify their portfolios and tap into new growth opportunities.
Here are 13 fascinating reasons why investing in Africa could be your next big move:
- Large Informal Sector: Most African economies are informal, presenting a huge market for digital products. The informal market globally is estimated to be worth over $10 trillion, and Sub-Saharan Africa’s informal economy remains the largest of the global informal economy.
- Increasing internet penetration rates. Mobile internet adoption is higher in Africa than in most parts of the world. Between 2017-2023, 4G coverage nearly doubled. Mobile phones are the primary means of accessing the internet on the continent.
- Rapid growth of digital payments. The increase in mobile phone usage and internet data affordability has led to a surge in mobile money services. In Ghana, mobile money penetration is 39%, Kenya 57%, Uganda 32%, and Rwanda 63%.
- Emerging startups are creating new markets: Mobile money generated new revenue pools, digitized the cash economy, and unlocked network effects fueling the exponential market growth. Today, Africa accounts for 70% of the world’s $1 trillion mobile money value – a market size not even the most bullish optimists could have predicted.
- Low competition: Compared to more developed tech ecosystems, such as those in Silicon Valley or Europe, the African tech ecosystem is relatively less competitive, which means that there are still many opportunities for new entrants to make a mark.
- Early-Stage Investment Opportunities: Many of the startups on the continent are in their early stages, providing opportunities for early-stage investors to get involved in promising ventures.
- Young, educated, and rapidly urbanizing population: By 2050, Africa will have the world’s largest working-age population. The population is steadily moving to cities and investing in education. As urbanization continues and disposable income increases due to the creation of more jobs, demand for consumer goods is expected to rise among the growing middle class population. A large, youthful population also provides a strong labor force that can fuel economic growth through increased productivity and innovation.
- African E-commerce opportunities are expanding. Online sales currently account for just 1% of total retail sales in Africa. However, by 2025, they are predicted to reach 10%, equivalent to $75 billion in Gross Merchandise Volume (GMV). The growth prospects are evident. In 2017, only 138.9 million people in Africa shopped online. But by 2022, that number had risen to 387.5 million.
- Fintech is gaining momentum. In 2022, African fintech startups received $1.3bn in investment. Nigeria, South Africa, and Kenya have developed bustling fintech sectors. It is expected that the fintech industry will experience significant growth in 11 key markets in Africa, including Cameroon, Côte d'Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda. These markets represent approximately 70% of Africa's GDP and half of its population.
- Innovation hubs are emerging. Egypt, Tunisia, Kenya, and Senegal have entrepreneurs building and scaling new technologies. The technology industry in Africa is expected to represent a $180bn opportunity by 2025.
- Healthcare opportunities abound in Africa. Due to the pandemic, telehealth services boomed, making it simpler for patients to virtually access doctors.There is a significant opportunity for private investors to fill gaps in the continent's healthcare sector. In terms of scalability, African health-tech startups have the potential to scale quickly due to the shared challenges that many of the continent's healthcare systems face.
- Agriculture potential is enormous: More than 60% of the world’s uncultivated arable land is in Africa. Incorporating technology into traditional farming practices could transform African agriculture, unlocking immense potential. The African Continental Free Trade Area (AfCFTA) also has the potential to boost intra-African trade.
- Market Maturity: More M&A deals are taking place yearly, a sign of a maturing market. This trend potentially reduces the risk of failing startups, providing more economies of scale, diversity, and operational know-how for more successful African startups to be born.
Africa’s economic growth prospects are among the world’s brightest. Don’t miss the opportunity to become one of the drivers of technological transformation in Africa.
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