The recent downturn in Africa’s commodities markets might seem to signal dark times for the continent’s emerging economies. The slump in global oil prices prompted Angola’s government to end fuel subsidies; weak copper rates dramatically reduced the value of Zambia’s currency; and J.P. Morgan delisted the Nigerian naira from the Emerging Markets Bond Index.
The recent downturn in Africa’s commodities markets might seem to signal dark times for the continent’s emerging economies. The slump in global oil prices prompted Angola’s government to end fuel subsidies; weak copper rates dramatically reduced the value of Zambia’s currency; and J.P. Morgan delisted the Nigerian naira from the Emerging Markets Bond Index.
But for long-term investors in Africa, these setbacks are blessings in disguise. They exposed the fault lines in sub-Saharan Africa’s growth narrative, but they also emphasized salient new opportunities at both the public and private investment levels.
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Depressed commodity prices forced regional policymakers to wake up to the need for diversified economies. In Angola, for instance, the government now recognizes the urgent need to reduce its dependency on oil. Instead of shying away from these seemingly troubled markets, investors should see abundant openings in young but lucrative development sectors.
As Angola and other African countries realize they can no longer invest solely in uncertain commodities, they will further open to other forms of economic stimulation. The following industries represent key areas for investment in the next several years:
An Israeli firm proved the viability of such an investment in Kenya, where it won a high-priced deal to develop a farm under the Galana-Kulalu irrigation scheme. The farm produced its first harvest earlier this year, and the project demonstrated the opportunities for foreign businesses to help revitalize Africa’s economies.
Investors need to get in on the ground floor of these opportunities. Growing manufacturing sectors often indicate opportunities to break into new markets and secure favorable deals on pricing and exchanges.
Ethiopia debuted its landmark light rail system in September 2015, thanks to significant funding from the Export-Import Bank of China. Chinese companies built the cars and the power supply. Eventually, they will also train local rail staff. Both milestones signify the growing appreciation of foreign investment’s role in accelerating capital markets.
Investors must realize that developments are lying beneath the veil of crisis that should inspire confidence in Africa’s promise for the next decade. As Africa’s many development projects and policy shifts suggest, the narrative is morphing from a tale of economic need to one of sustained and balanced growth.
