A major chunk of Africa's population consists of working age citizens. The African economy savings to GDP ratio is 23.69%.Together with that, Africa is rich in natural resources. For the past seven years, Africa's GDP growth rate has been above 5%. Statistics suggest future GDP growth is going to occur at approximately 5.3% in 2014. Within the next three decades, Africa will have a bigger work population, as most of Africa's current population is twenty years of age. Investors are showing interest in the continent, for these obvious reasons.
Africa has many resources, growth potential, and labor, but it is deprived of a proper system due to inappropriate governance. However, investors are of the view that its growth potential is worth the risk. The Citadel Investment Group has made investments in Africa's railway, whereas Heir Holdings has made investments in its energy infrastructure, with the hope that within the next three years, more than 50% of their investments are going to return.
Looking at opportunities, I am sure of Kenya's potential. The first reason for this is that looking at history, Kenya has had a structural alteration. 62% of its GDP comes from its service sector. On the retrospect, 22% of its GDP comes from its agricultural sector. Hence, I am of the view that Kenya's service sector is on its way to a major finance boom.
Kenya's Nairobi Stock Exchange owns a 41% YTD return. Statistics are sure regarding Kenya's GDP growth, which is said to increase up to an approximate six percentage points in the next year. I personally feel that Kenya is a good bet, because it owns the potential to grow economically. With the world revolving around technology, investing in telecom companies is also a good opportunity. The stock price of Safaricom Ltd is up 80% YTD.
Nigeria may be the land of opportunity, but according to a World Bank Report, it is considered on number 131 out of 185 economies as far as doing business is concerned. Its infrastructure needs improvement. Last year, it experienced a GDP growth of about 6.6%, and analysis suggests that its GDP will go up to approximately 8% by next year. However, due to drawbacks like lack of professional labor, poor business environment, lack of skilled governance, and inappropriate infrastructure, Nigeria is not a place for business just yet. However, I can see it standing tall and firm as far as business is concerned within the next two decades.
However, there is also the fact that Nigeria Stock Exchange has a 30% year to date return. It is considered as one of the best stock exchanges in the world as far as performance is concerned.
Ghana's logistics, gas and consumer goods sector could be considered as profitable areas of investments. Ghana's GDP is expected to reach approximately 9% next year, with its 2013 GDP growth predicted to be at an 8%. Ghana's gold made up 40% of its exports in 2012. The country consists of industrial minerals, cocoa and hydrocarbons. Cocoa made up 19% of Ghana's exports in 2012. This goes to show that Ghana is powerful in terms of investments, exports and numbers. Ghana lives on export of gold and cocoa, and its service sector, while it makes revenues from oil exports.
Ghana's Stock Exchange Composite index is one of the best performing stock markets globally, with a return of approximately 71% year-to-date. The Ghana Stock Exchange Composite index is stronger this year, due to the phenomenal performance of oil & gas companies. Is this the place to invest? One is quite sure it is. However, when one puts a deep thought to it, many queries arise- Africa is, currently, not a very familiar territory for investors. Hence, would it be safe to look at the good side and place the bet? Also, with most of Africa's infrastructure still under works, should investors pull their horses? Lastly, considering Africa's history, would it be a huge risk to invest too soon?
On the flip side, Africa has been experiencing strong GDP growth rates. The continent has witnessed a strong economic growth, due to investments in its infrastructure, food, consumer products and energy. This makes one wonders if it will outdo the emerging markets within the next decade. Africa is rich in minerals, precious metals, and a population that is young, talented, and dynamic. Africa's demographics prove that it has immense growth potential, and one can see its working-age population will exceed and cross that of China's. This would be a plus for Africa, as young labor is always essential to bring in ideas, innovation, efficiency and execution. My analysis regarding the continent suggests that Africa is a promising bet.