Investing in Africa

Investing in African equities on US exchanges can be very difficult, as there are not many products available, and some of the OTC listings have very poor liquidity. Nevertheless, it is worthwhile to look into existing options, as Africa has very strong growth potential during the coming decades.

Below are some of the top reasons why investors choose to invest in Africa:

  1. Favorable Demographics: The average median age in Africa is 18 years old. Many of these countries will have strong, consuming middle classes by the 2030s, with a setup that is analogous to Asia between 2015-2020.
  2. Growth: Some of the fastest-growing economies are African economies. Focus Economics notes that Libya and Niger will be two of the fastest-growing economies in the world during the next 4-5 years.
  3. Low Valuation: Select frontier African countries that trade at a single-digit PE ratio.
  4. Natural Resources: Africa has 40% of the world’s gold and 90% of chromium and platinum.

Investors who want to invest in Africa on US exchanges have limited options, mainly in countries like Nigeria and South Africa. Select frontier market ETFs can also provide investors with exposure to Africa’s growth, and investors can also invest in mining companies with assets in Africa. However, this blog post will focus on how to gain exposure to African listed equities, in industries like banking, consumer goods, and construction.

Investing in Nigeria

Nigeria is the world’s 6th most populous country and will be a key African economy during the 2030s, especially because of its oil reserves, favorable demographics, and other positive economic attributes. Nigeria will be the world’s 4th most populous country in the world by 2050.

You can also invest in Nigeria with the Global X MSCI Nigeria ETF ( NYSE: NGE), which invests in a basket of banking, consumer, and construction companies that are listed on the Nigeria stock exchange.

Below are some of the top companies that the ETF invests in.

Van Eck Africa ETF

The Van Eck Africa ETF ( AFK) invests in a variety of prominent African economies, including Nigeria, Kenya, and South Africa to name a few.

This is a solid vehicle that provides exposure to frontier and emerging African economies, many of which do not have US-listed ADR products.

South African ADRs

If you want to invest in ADRs, then South Africa has the most options available. There are currently 7 ADRs that trade on the NYSE, and these include the following:

  1. Anglogold Ashanti: AngloGold Ashanti Limited is a global gold mining company, with operations in North America, Australia, South Africa and other countries.
  2. DRDGold: A gold exploration company with operations in South Africa.
  3. Gold Fields: A gold and copper exploration and mining company, with operations in Chile, South Africa, Ghana, West Africa, Australia, and Per
  4. Harmony Gold: A gold mining company, with operations in South Africa and other countries like Papua New Guinea.
  5. MIX Telematics: MiX Telematics provides SaaS services for automotive companies.
  6. Sasol: A chemical and engineering company with operations in South Africa.
  7. Sibanye Stillwater: A precious metals mining company that operates in South Africa, the United States, Zimbabwe, Canada, and Argentina.

If you are willing to trade OTC stocks, then there are nearly 50 other options to choose from. Many of these ADRs are global mining companies, with operate outside of South Africa, and it is difficult to find pure-play consumption stocks unless you trade OTC stocks that have higher fees.

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