Africa remains plagued by negative perceptions and it is the wars, famines and dirty diamonds that grab the headlines, not the remarkable growth. However, the reality is that the region remains one of the last unrecognised growth opportunities in the world with GDP averaging 5.4% over the last decade.
Africa is one of the least researched of the emerging market regions and so hides some of the best value opportunities for pioneering investors willing to do their homework. It is well known that the continent is rich in natural resources with oil and precious metals in abundance. Familiar emerging market investment arguments also apply to the continent, including consistently high GDP growth, the considerable and growing low-cost labour force and its rapid rate of productivity growth.
The continent is one of the few regions of the world to have avoided recession in 2009 and has emerged from the financial crisis relatively unscathed. Africa’s exposure to the western developed world is shrinking and in its place are growing ties with the new global economic powerhouses such as the BRICs (Brazil, Russia, India and China).
Africa’s virtual competitive void is an opportunity for companies who provide for the continent’s growing consumer population. Shoprite is a low-cost food retailer, based in South Africa, but with outlets in 17 African counties and beyond. Its coverage across the continent is vast and a staggering 60 million customers shop in its stores every month. It enjoys little competition and has grown a dominant position in its sector, expanding into Africa at 30% a year1.
Adventurous growth-seeking investors will undoubtedly find emerging markets rich with opportunity in the coming years. Investments in South Africa and the African region remain attractively valued in comparison to other emerging markets. Furthermore, with scope for significant sustainable earnings growth in fast growing yet uncompetitive marketplaces, the investment case for certain stocks can begin to look very attractive indeed.
1 Source: Shoprite Holdings annual report 2009