With all of the attention on collapsing stock markets and governments around the world bailing out the global financial systems, one would assume that investing in an under-achieving economy like Africa would be the furthest thing on the minds of international investors. However, that does not seem to be the case. Stock markets across Africa are booming and funds focusing on sub-Saharan Africa have exploded in the past few years. In fact, with a market capitalization of well over $100 billion, Africa’s stock markets are substantially larger than Central Europe and Russia were in the mid 1990s when they opened up to foreign investors.
Consider this: Sub-Saharan Africa, a region that excludes the Middle East and Northern Africa, consists of 48 countries and boasts a population of over 800 million people. That’s almost triple the population of the United States’ 300 million but substantially less than India (population 1.1 billion) 
or China (1.3 billion). South Africa, by far the most developed economy in the region, dominates Sub-Saharan Africa economically, accounting for more than one-third of the region’s GDP. Moreover, till 1989, only five sub-Saharan African countries had stock markets; today, 16 countries, including Ghana, Malawi, Swaziland, Uganda, and Zambia, have them. And did you know that between 1992 and 2002, the capitalization of African stock markets more than doubled from $113 billion to $245 billion – an outstanding growth by any standards.
Just prior to the global financial meltdown, the IMF estimated GDP growth in the region would hit 6.6 per cent in 2010. That meant that if you take India and China out of the equation, sub-Saharan Africa actually is growing faster than Asia. With the notable exception of Zimbabwe, inflation in Africa is largely under control. Mobile phone penetration is soaring and boosting economic growth rates. Banking systems, which were too unsophisticated to have exposure to the subprime market, are rapidly expanding services to serve the emerging middle class. Foreign investment and loans to the region also are exploding, and have risen almost fivefold since 2000 to over $55 billion. The growth in sub-Saharan Africa can also be gauged by the fact that the IMF upgraded many countries in the region – Botswana, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Uganda and Zambia – to the rank of « emerging markets. »
Undoubtedly, Africa’s progress during the past few years has been remarkable. A recent poll interviewed more than 75 highly qualified native Africans educated at top American universities who are anxious to build their careers on the back of Africa’s emerging capital markets. That would have been unthinkable only a decade ago. This educated elite projects a very different image to the world than Uganda’s Idi Amin did in the 1970s – with his collection of 365 Roll Royce cars – one for each day of the year.
No doubt, Africa has a long way to go. Skeptics may say why risk any of your money in Africa when established western companies have now become such bargains. Here’s why: the best investment opportunities lie where perception differs from reality. Much like Russia and Central Europe in the early 1990s, Africa fits that bill perfectly. It’s generally hated. It’s undervalued. It’s difficult to invest there. But consider that in 1996, the entire market capitalization of Russia and Central and Eastern Europe was less than $30 billion – at the time, it was less than the market capitalization of Microsoft. Twelve years later, Russia alone had turned into a well over a $1 trillion market and Russians were buying up the most expensive properties in London. You don’t need to be a starry-eyed optimist to realise the same logic may apply to Africa.
