Economic drive: investing in Africa

With a rising middle class, a young and large population and uncharted business opportunities Africa should be on every canny investor’s map. Vision reports

With a rising middle class, a young and large population and uncharted business opportunities Africa should be on every canny investor’s map.

The figures are simply staggering. Seventy percent of Africa’s population is under 35, the continent’s middle classes are over 300 million and it is already home to seven of 10 of the world’s fastest-growing economies. The International Monetary Fund IMF predicts that no continent will grow more strongly over the coming years.

“The growth opportunities in Africa are increasingly evident: by 2035, the continent will have the world’s largest workforce, with over half of the population currently under the age of 20; the past 10 years have seen vast improvements in macroeconomic stability, and a burgeoning and fast-growing South-South trade and investment flow (with over US$170 billion of trade with China alone),” stressed Diana Layfield, Standard Chartered’s Africa CEO, in Ernst & Young’s latest Africa Attractiveness Survey.

The international emerging markets bank is one of several leading financial institutions that have made significant efforts to break into the African market. Diana Layfield noted that Africa presents a significant opportunity across multiple sectors – with US$2.6tn of revenue expected by 2020 across resources, agriculture, consumer and infrastructure, of which US$1.4tn will be in consumer industries alone.

“The rapid emergence of a middle class, already equal in size to India, makes consumption a major driver of economic growth across the region, and is one of the most interesting yet less explored opportunities across Africa,” she added.

The Abraaj Group, a leading investor operating in growth markets, has recently completed a major transaction to tap into Africa’s growing appetite for consumer staples.

On 19 June, the Middle East company bought Fan Milk International (FMI), West Africa’s market leading manufacturer and distributor of frozen dairy products and juices, in the largest ever fast-moving consumer goods (FMCG) private equity transaction in Sub-Saharan Africa, outside South Africa.

Founded in the 1960s by Danish entrepreneur Erik Emborg, the small dairy business in Ghana has grown into a company reaching to more than 200 million people across seven West African countries today.

“The considerable investment and growth plans we have for FMI mirror the scale and depth of investment opportunities that we believe are now abundant on the African continent. Africa is witnessing the rise of a burgeoning middle and consumer class, so the acquisition of FMI is an extremely exciting and compelling investment opportunity,” said Arif Naqvi, Founder and Group Chief Executive of the Abraaj Group, which has already invested US$2.2bln in the region.

For the sceptics still unconvinced by Africa’s great investment case, Ernst & Young’s survey highlights a fact that may change their mind: despite the impact of the on-going global economic situation, the size of the African economy has more than tripled since 2000. For investors always looking for opportunities to break into new markets, this is a real panacea.