Investment opportunities in Africa

Africa is one of the most dynamically developing and promising regions of the world, which has significant natural and human resources. The economic potential of the African continent is enormous, and its development must take into account the significant political, social, cultural and confessional diversity.

African Outlook

About 1.5 billion people live in Africa, a huge resource base is concentrated — almost a third of the world's mineral reserves. And although African countries so far account for only 3% of global GDP, the economies of many of them are growing at a faster pace.

According to experts, by 2050 Africa's GDP will reach $29 trillion and will exceed the combined GDP of the US and the Eurozone in 2012. Africa — these are not only raw materials and agricultural resources, but also very rapid population growth, as well as huge untapped opportunities for industrialization, electrification and logistics development. All this — not only points of growth, but also areas of risk, especially at the initial stage. At the same time, the education sector, the share of the middle class are rapidly growing in Africa, and the availability of financial and telecommunications services is improving.

The interest in investments in regions with rapidly growing economies is especially relevant against the backdrop of slowing global production growth. North Africa is geographically and historically close to Europe and is now ready for industrial development. Egypt claims to be the industrialization champion for the next decade.

Doing Business Study for 2019, prepared by the World Bank, which analyzes the regulatory framework in the global economy, found that five of the ten most advanced economies in the world were African. In this direction, according to the World Bank report "Global Economic Prospects" the same year, we should expect the economic acceleration of African countries in the future.

The report prepared by UNCTAD (United Nations Conference on Trade and Development) for 2021 analyzes the economic growth of African countries. The removal of intra-African tariff and non-tariff barriers within the Free Trade Area could open up new trade opportunities. Partial tariff liberalization by 2025 under the African Continental Free Trade Area is expected to increase intra-African export potential by another $9.2 billion.

The African Continental Free Trade Area's opportunities to strengthen regional value chains could increase the resilience of African countries in the post-pandemic period, in particular with regard to medicines and food. This may also be relevant for renewable energy sources, as different countries have different energy resources, and more intensive trade can contribute to the diversification of the energy mix and complementarity. This may be important for Africa, given the growing importance of the green growth agenda; within post-pandemic scenarios.

Investing in Africa provides a dominant position at the center of global economic growth.

Russia and Africa: growing economic cooperation

Russia is actively cooperating with many African countries. Additional opportunities are opened up by the process of establishing the African Continental Free Trade Area, which began in 2021, which in the future will become a continental market with a total GDP of over $3 trillion.

In Africa, major Russian investment projects are being implemented with the participation of such domestic companies as Rosneft, Gazpromneft, RusHydro, ALROSA, Lukoil and many others. This is especially true for the energy sector, because in terms of electricity production, the continent is so far provided with only a quarter of its needs.

"Rosatom" is already building a nuclear power plant in Egypt, plans to expand its participation in the development of national energy systems of the African continent.

According to the President of the Russian Federation V.V. Putin at the International Parliamentary Conference "Russia—Africa in a Multipolar World": "Significant — in some countries 100% — funding is provided by Russia. These are serious projects in the amount of 15, 20, 25 billion dollars.

Russian-African cooperation in the field of high technologies is being strengthened. For example, in Angola, with Russian assistance, the Angosat satellite communications and television broadcasting system is being created. Company "Yandex" actively implements the implementation of information services in the countries of the African continent for organizing the transportation of passengers by taxi and other modes of transport.

An agreement on the creation of a Russian industrial zone on the territory of the economic zone of the Suez Canal for a period of 50 years was signed at the 11th intergovernmental commission Russia-Egypt in May 2018. It is planned that Russia will be assigned a territory of 100 hectares in 2 kilometers from the quay wall on the eastern bank of the Suez Canal (Port Said Vostochny). At the first stage of the project, the Russian Government plans to invest 12 billion rubles. through the Russian Direct Investment Fund within the framework of the national project "International Cooperation and Export".

Transmashholding is considered among the anchor residents; (already delivers railway cars to Egypt), Gazprom Neft PJSC, as well as the EFKO group of companies. (already delivers oils to Egypt), which plans to build an oil and fat terminal on the territory of the RPZ. According to the website of the Russian Industrial Zone, 29 Russian companies have already shown interest in the project.

 Also, AFROCOM (Coordinating Committee for Economic Cooperation with Sub-Saharan Africa) is actively operating on the continent — Russian public non-profit organization. The main objectives of the Committee are to promote the economic interests of Russia in Africa and support the foreign economic activity of Russian business on the African continent.

Thus, the countries of Africa — a promising and popular direction for Russian business to go abroad, including it is actively supported by the policy of the Russian government.

Business Opportunities in Southern Africa

Angola, Botswana, Mozambique, South Africa and Zimbabwe — countries that offer the most opportunities, especially in areas such as energy, water and renewable natural resources.

Energy resources

Energy extraction is one of the best investment sectors in the region. There are huge prospects here in the gas and oil industries (in Angola or Mozambique, enhanced by public and private initiative), as well as in the ancillary industry for their extraction and processing.

The South African government is keen to encourage its gas industry, with the main goal being that by 2030, 15.7% of the country's energy resources will come from this part of the continent. This led to the need to build regasification plants for imported liquefied natural gas, together with combined cycle plants.

The country's authorities aim to ensure that 36% of its energy comes from renewable sources. Thus, opportunities are expanding in the sectors of construction, design, consulting and equipment required for renewable energy and in this sector. In fact, the South African government is working with tenders to give both national and international companies the right to develop these resources. The government of Angola has the same plans.

Water

The main needs in this sector are related to the construction of new water treatment and desalination plants, as well as their maintenance and sewerage.

Government and private initiatives cannot meet all the needs of the sector, so companies involved in the water sector have the opportunity to be among the first to fill this niche. Countries like Botswana are betting big on this as the sector has received multilateral funding.

In addition, there are other more specific business opportunities in the region, let's look at them on the example of specific countries.

Angola

Renovation of roads, construction of social housing, maintenance and improvement of telecommunications infrastructure and development of the agro-industrial complex.

Botswana

Mining and processing (diamonds, coal and nickel) and the exclusive tourism sector.

Mozambique

Construction of an important road network and development of the tourism sector.

South Africa

Equipment and materials for the automotive sector, crops depending on the season (agri-food sector) and the tourism sector.

Zimbabwe

Mining resources and their supporting industries.

North Africa

Let's consider investment opportunities in the north of the continent using the example of such countries as Algeria, Egypt, Morocco, Mauritania and Tunisia.

The energy sector, telecommunications and mining are identified as common sectors with great business opportunities.

Energy

The energy sector is very strong in countries such as Algeria (one of the world's major gas exporters), as well as in Egypt, with its powerful oil and related industries.

For its part, Mauritania concentrates most of its foreign investment in the oil sector, and Tunisia, despite its territorial size, has a small but efficient gas industry, which also receives numerous foreign investments.

As of 2022, 470 Russian companies operate in the Egyptian market, their investments amounted to about 8 billion dollars. Most of these investments come from Rosneft.

Telecommunications

Telecommunications in the region have been actively developing over the past twenty years.

Foreign investments in telecommunications have grown significantly in Mauritania, as well as Morocco or Tunisia, where this sector is more developed and there are specialized companies.

Loot

The mining sector in the region is of great importance for the economy of the continent. But as an alternative, industries are emerging that are considered more relevant in the medium term in the region. In this regard, Morocco has great prospects.

In addition, in Egypt, where the oil and gas industry is so strong, projects are being implemented to make 20% of the country's energy renewable in the coming years.

We will also consider other areas for investment in African countries.

Algeria

In Algeria, in addition to the extraction of energy resources, there are many opportunities for small businesses in the agri-food sector, primarily in the import of products from abroad.

The water sector also requires investment, as does tourism, especially in terms of renewing the hotel infrastructure.

Mauritania

There are many prospects for foreign business in Mauritania: from the fishing sector to the construction of a new, more modern airport. New opportunities are opening up in the sectors of housing construction and hotel infrastructure, as well as port construction.

Morocco

The tourism and automotive sector in Morocco is growing rapidly. The country has a lot of automotive production in addition to nascent summer tourism, which is positioned as an attractive alternative to other more crowded destinations.

Egypt

There is a very important business opportunity in Egypt. This is a renewal of the railway infrastructure from the north to the south of the country.

A major project will be the construction of a 528 km track from east to west of Egypt.

Tourism is also still a strong sector, in addition to this, cement production in the country is on the rise.

Tunisia

There are business opportunities in the country in the fields of auxiliary industry of agriculture, heavy engineering and renewable energy, taking into account the country's energy transition process.

Having considered the analysis of investment niches in Africa, we can safely say that many countries of the continent have great prospects for your business to enter. For a business to successfully enter the investment market in this region, it is necessary to conduct a thorough analysis and assess all the risks and opportunities, and this work should be entrusted to the appropriate specialists. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).