“Despots, disasters and despair.” For many, say Jonathan Eley and Norma Cohen in the Financial Times, these are “defining images of Africa”. Yet the continent is making “huge social and economic progress”.
One key development has been an improvement in governance. Africa hasn’t been this peaceful in 20 years, as Wirtschaftswoche points out. And democracy is spreading. This has encouraged growth and domestic and foreign investment, while gradual economic reforms have freed up the private sector. The commodity boom has also bolstered the economies of Africa’s many raw-materials exporters.
Demographics bode well. Sub-Saharan Africa “is the one bright spot when analysing global demographic trends”, says Morgan Stanley. It will account for 30% of the increase in the global population of 20 to 64-year-olds over the next 20 years. So there is ample scope for the young and a growing workforce to boost growth.
The gradual emergence of the middle classes as economies grow richer is fuelling a consumer boom. This is a “really powerful story”, says Shelley McKeaveney of the Neptune Africa fund.
With incomes soaring, people are moving “off the land and into cities. They are just starting to do things like shopping in supermarkets, instead of growing their own food.” Hence the proliferation of malls all over Nigeria, for instance, and the growing presence there of South Africa’s retail giant Shoprite.
Given all this, it’s no wonder sub-Saharan Africa’s growth has averaged 6% since 2000. In the next five years, reckons the International Monetary Fund (IMF), ten of the 20 fastest-growing economies will come from this region.
There is still a long way to go, however. Markets are small and illiquid; corruption remains pervasive; the infrastructure is patchy. So it’s still a high-risk bet. But the potential is huge, say Eley and Norman.
MoneyWeek highlighted some Africa plays last autumn. They include the Templeton Africa Fund, run by Mark Mobius, and Zambian food group Zambeef (LSE: ZAM). WH Ireland’s share price target for Zambeef is 12% above current levels. Lonrho (LSE: LONR), a conglomerate with interests including oil, logistics and a budget airline, has struggled of late but remains worth exploring, given its long-term potential.