- Emerging market investments offer investors an opportunity to diversify their portfolio into companies based in rapidly growing economies. Emerging markets have younger, growing populations, and emerging middle classes with disposable income.
- Africa’s economies are growing rapidly from a very low base. The population is very young with an average age of 18 compared to over 30 for every other continent. Mobile phone penetration in Africa has increased from below 5% in 2000 to over 50% in 2022. This has given many communities access to telecommunications and financial services for the first time.
- The largest economies are Nigeria, South Africa, and Egypt, followed by Algeria, Morocco and Kenya. The larger economies act as economic hubs for surrounding countries, so companies based in these countries often operate in neighboring countries.
- As with most emerging market investments, the major opportunities are in companies exposed to the growing middle class, infrastructure development, and commodity exports.
- Emerging market investments offer higher growth potential than those in developed markets - but also come with greater risks. These risks include the potential for political and economic instability, and lower standards of governance, transparency and regulation. These risks can be mitigated through diversification.
- With this collection we have concentrated on four of the most liquid markets on the continent. We have also given preference to companies that operate in several countries in industries that benefit from the types of growth typical of developing economies - i.e. increasing consumption, infrastructure development and commodity exports.
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Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned.