How Africa’s Changing Population Impacts ETFs

September 2nd at 1:00am by Tom Lydon

imagesAfrica’s economy is in a state of major transition that could translate into handsome performance for its related exchange traded funds (ETFs). The continent boasts a fast-growing population with bustling city centers and an emerging middle class.

The major demographic transition that Africa is following is that as families move up in status in developed areas of Africa, they are having fewer children. This is a trend seen in developed areas of the world – as countries become richer and more developed, they have fewer children per family, explains The Economist.

An emergent African middle class is taking out mortgages and moving into newly built flats, and two children is what they want. Restraining population growth is also seen in developing Asian countries and Latin America.

Will the “familiar” Africa become the “old” Africa?: a place of large families and high fertility, a continent in which societies are under extreme stress and where the young massively outnumber the old, environmentally degraded, ravaged by poverty, hunger, HIV/AIDS and civil war?

If the “demographic dividend” kicks in and the “new” Africa continues to develop, the societies may grow wealthier, they may move from high fertility to low, and their working age population will dominate. A successful cycle of growth will kick in but only if Africa chooses the right policies and takes initiative to solve their current problems.

Demography will decide if the next generation succeeds and changes the course for the future.

  • iShares MSCI South Africa (EZA): up 38.3% year-to-date

  • SPDR S&P Emerging Middle East & Africa (GAF): up 34.9% year-to-date

  • Market Vectors Africa (AFK): up 31.1% year-to-date

For more stories about Africa, visit our Africa category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.