While there are numerous stocks to be bought in Africa, only a few are really profitable investments to get into. The simplest way to identify them is by looking at their place in the market, depending on their role in different sectors.
These are a few sectors to watch in Africa, the ones that have potential for growth. Investing in companies under the following sectors can make for very profitable investments:
Africa is still widely unconnected, and many areas still lack basic telecommunication infrastructure. This is quickly changing, though, with more and more countries acquiring 4G LTE connectivity and fibre optic cable. Such services are quickly growing in demand with most people looking forward to better connectivity. Investing in one of these telecommunication companies is a good bet on returns over the next decade.
The tech boom is quickly taking over Africa, and hardy a year goes by without a new IT company rising within the continent. The most promising sector is in software development, especially for mobile devices, which saw the rise of several software companies in 2015. While it may be a bit tricky to spot a truly profitable company, some have the capacity to bring returns of more than 100% in less than a year.
Urban areas within Africa are growing quickly as more residents move toward cities and away from rural areas. Shortage of housing has made the price of homes and rent rise drastically, making real estate really profitable. Newly constructed buildings are being quickly snatched up and there’s barely any house that goes unoccupied. You really can’t go wrong with real estate, as long as the location is right.
Banking and insurance sectors had long been unexploited, but that was only due to widespread illiteracy. Studies have shown, however, that these are some of the fastest growing industries in Africa. And with double-digit percentage in profits, you can be sure they won’t be slowing down soon.
This is a major sector of Africa’s economy, employing about 60% – 70% of the continent’s population. Despite the abundance of arable land in most places, and the workforce, there isn’t much productivity, only accounting for about 20% of total value added.
However, improvements in agribusiness through genetically modified plants and better farming methods are raising productivity drastically. In fact, agribusiness is expected to become a $1 trillion industry by 2030, raising returns from the sector and making it a profitable sector to invest in.
Picking the most profitable investments
While many people will go for the most obvious company, the one everyone is scrambling for, it’s better to select one with more potential. Remember, investing is best as a long-term plan rather than a get-rich-quick scheme. So carefully research any company you have an interest in, go through their financial records and compare that with the current market.