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An Investors’ Guide To Africa’s Goldmine By Lanre Daodu

Does it make any sense that Botswana has nearly half of the entire world’s diamonds, yet the country make only about $2 billion? Israel, on the other hand, doesn’t have a single diamond and they make $9 billion from the diamond industry.You don’t need a PhD to find out why-It is a typical third-world syndrome, raw material is extracted from the country and sent out for processing just like Nigeria’s crude oil. The Europeans polish and cut the diamonds and make the jewelry. They make the high-end finished goods.The people of Botswana do the dirty and tedious work!

However, it is saddening that many business leaders in the West and even Africans themselves are so skeptical about Africa, their perceptions are  outdated versions of the continent’s new realities. Africa is now home to some of the world’s fastest-growing economies and offers the highest risk-adjusted returns on foreign direct investment among emerging economies.

While mining and oil remain big businesses, agriculture, infrastructure investment and the consumer market are major growth areas. Telecom, mobile banking, retail, and clean-tech are only some sectors that are equally promising.

Fast forward, as worldwide investors vie for a piece of the action, the expectations of African stakeholders have risen. To succeed, investors will have to look beyond dazzling returns and one-off projects, and sign on as participating partners in Africa’s long-term growth and development.

According to Forbes,”African economies easily rank among the most resilient in the world. In the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively, at about 2%. The continent’s growth has been on an upward trajectory ever since then- 4.5% in 2010 and 5.0% in 2011.”

Now more than ever before Africa is poised to become the 2nd fastest growing region in the world, and true to the International Monetary Fund (IMF), economic growth across the 54 countries of the continent is hovering around 6%.

Africa is becoming an increasingly attractive hub for foreign investors in light of various economic, political and social reforms that are sweeping through the continent, resulting in a much improved business environment conducive for foreign direct investment. Apart from that, there is widespread development of critical social and physical infrastructure, and there is an increasing pool of well-educated, English-speaking, enterprising workers in most countries across the continent.

There is also a significant boost in the spending power of Africans. According to the African Development Bank,” Africa’s fast-emerging middle class is now comprised of over 300 million people”, and analysts from the McKinsey Global Institute estimate that general consumer spending across the continent will hover past the $1 trillion.

If you’re an African in the diaspora or foreign investor who hasn’t  yet  made a foray into Africa, now is the time to step in and capture a share of Africa’s more than $1 trillion opportunity. There are 6 lucrative sectors you should consider investing in:

Agriculture

Africa is ripe for a green revolution. According to the McKinsey Global Institute,” the continent is currently home to 60% of the world’s total uncultivated, arable land.”As the world’s population increases rapidly (recently exceeding the 7 billion mark), global agricultural production must rise to feed these growing numbers. Much of that increased agricultural production will come from Africa. While the traditional obstacles to boosting agricultural output in Africa have been well documented (including a deficit of distribution infrastructure and trade barriers among others), several African governments are making substantial and successful efforts in surmounting these shortcomings.As these barriers are overcome and agricultural output is increased, there’ll be a business opportunity for the manufacture and marketing of products such as fertilizers, pesticides and seeds as well as a demand for food processing services such as grain refining.Already, a growing number of private equity funds are springing up to finance agricultural production in Africa. Join the train.

Mining of Solid Minerals

Like Botswana,Ghana,Nigeria,Rwanda, several African countries have vast deposits of mineral resources that have been left largely unexploited because of a lack of technical know-how, as well as the financial incapacity to embark on capital-intensive mining projects. A case study is Nigeria’s hugely underdeveloped mining industry. The country also has a wide array of mineral resources which include iron ore, coal, bauxite, gold, tin, lead and zinc which have been neglected because of the country’s preoccupation with its massive oil deposits. The Democratic Republic of Congo, Tanzania, Namibia, and Zambia are other examples of African countries that also have unexploited high-value reserves of diamond, cobalt, gold, copper and other resources. Venture in.

Technology

Currently, forty percent of African-born scientists live in OECD countries, predominantly NATO and EU countries. This has been described as an African brain drain.

Although technology parks have a long history in the US and Europe, their presence across Africa is still limited, as the continent currently lags behind other regions of the world in terms of funding technological development and innovation,technology is a fast growing industry in Africa that any investor with an eagle eye would want to invest in,the millions of mobile phone subscribers and internet presence in more than half of the countries that make up the continent is a promising area to look.

Tourism

Several African countries like Kenya, Mauritius, Seychelles and Tanzania have become some of the world’s favorite tourism destinations — for obvious reasons. According to the United Nations World Tourism Organization,” tourist arrivals into Africa in the year 2010 exceeded 49 million and are likely to pass the 50 million mark in 2012.” Those are the kind of numbers you should be taking advantage of. Billionaire Richard Branson has opened his luxury safari lodge in Masai Mara, Kenya while Italian tycoon Flavio Briatore already owns Lion In The Sun, a luxury retreat on the coastal resort of Malindi, Kenya. But apart from luxury lodges and retreats, several other opportunities are available in Africa’s tourism sector. For example, Lake Victoria in Uganda has a substantial number of bodies of water that are still unexploited. A luxury boat cruise or tour operatorship could be a great idea. Balloon flights are also a relatively new experience for millions of Africans- which could be explored as a viable opportunity. There is also room for foreign investors to partner with governments on National Park Concessions.

Infrastructure

Investing in infrastructure is critical to Africa’s growth. While there have been significant improvements in the development and quality of infrastructure across the continent, there is still a clear-cut deficit. Needless to say, this shortfall has its consequences, including bottlenecks in the smooth running of trade and export activities.  But funding infrastructural development in Africa is not cheap. According to the World Bank’s 2008 Africa Country Infrastructure Diagnostic study, the continent requires about $80 billion annually to cover infrastructure needs. Of course, the financing capacity of individual country governments is limited; hence there are opportunities for private investors to partner with African governments in the development of under-performing infrastructure—such as investing in reliable power supply, water resources, roads and railway systems.

Fast Moving Consumer Goods

According to the McKinsey Global Institute,Africa’s consumer spending next year will be in the region of $1 trillion. With Africa’s exploding middle class (over 300 million people) always looking to be serviced with new products, Africa’s fast moving consumer goods sector looks promising. There is a huge and ever-growing opportunity for manufacturers and retailers of FMCGs like food, beverages, home care and personal care products. But speed is critical. Investors who can quickly step in and get a grip on the market will be the dominant players in the years to come.

Thank you for reading through.We would like to guide you further on the pitfalls to avoid even as you make and implement your investment decisions.

Email: lanrecreativeinnovations@yahoo.com

This report is researched by,Olanrewaju Daodu,a Former Managing Partner of Sustainable Hills Limited and a former Financial Data Marketing Executive at SBA Interactive Data(Africa’s Largest Financial and Investment Data Services Hub,Nigeria).

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