While the last couple of years have been tough for African equities and currencies, the long-term case for investing in Africa remains intact. The worst commodities bust in a generation, the strengthening of the US dollar and indigestion in frontier and emerging equity markets have left many African stocks trading at valuations not seen in years.
Strategic, long-term oriented investors with a knowledge of and affinity for Africa should look over the valley of the continent’s current challenges and consider establishing (or increasing) investment positions at today’s compelling prices.
As commodities prices have fallen over recent years, many resource-dependent countries in Africa have suffered. Now, with the boom over, one can invest in profitable, fast-growing African companies that are doing well of their own accord.
Equity valuations are attractive. Equity valuations in Africa are more attractive now than they have been in years and one US dollar can buy significantly more value than just a few years ago.
Economic growth has slowed for now but will likely rebound. Sub-Saharan Africa will likely slow to still-respectable 3% GDP growth in 2016. We expect growth to perk back up to its historic rate of 5%-6% in the coming years.
Improving infrastructure will be a boon to growth. The infrastructure pipeline in Africa is robust, with many projects in various stages of development that will improve transportation efficiency and the availability of power.
Attractive demographics will bolster growth in coming decades. Africa is by far the youngest continent in the world, and its economy will be bolstered in coming years by the hundreds of million of Africans who are still decades away from their point of peak spending.
Source: Africa Global Funds