ETF Trends
ETF Trends

We have all heard about the high potential for growth in the emerging markets, but Africa stands out from the rest. With a number of good fundamentals backing Africa’s growth, Africa may be a great investment locale, and investors may access the region through Africa-related exchange traded funds (ETFs).

Robert Powell for MarketWatch lists a number reasons why Africa may be a strong play:

  • Ian Bremmer, author of “The End of the Free Market” and president of Eurasia Group, recently stated that Africa offers one of the best investment opportunities today.
  • International brands are experiencing greater growth from Africa’s markets.
  • Philippe de Pontet, a director at Eurasia Group, remarked that Africa, rich in natural resources, is a play on commodities and the continent is host to a growing telecommunications market.
  • Larry Seruma, chief investment officer of Nile Capital Management, commented that African indices aren’t very correlated with the S&P 500, growth in Africa is expected to be strong with attractive valuations, other emerging markets are investing in the continent, infrastructure spending is high, debt is low and the population demographics is favorable.

Jorge Maia,head of research and information at South Africa’s Industrial Development Corporation (IDC), said that around $93 billion per year is required to build infrastructure for sub-Saharan Africa alone, according Mmegi Online. Africa’s economy is largely dominated by its mining industry, but the lack of infrastructure has kept costs of transporting goods relatively high.

The growing African middle-class wants quality goods, which prompted Wal-Mart Stores Inc.’s (NYSE: WMT) recent bid on Massmart Holdings, Africa’s third-largest retailer, reports Franz Wild for Bloomberg. Last year, Africa’s population hit 1 billion, and the average family income is around $20,000 per year, which exceeds India’s. Consumer spending on the continent has increased at a compound rate of 16% between 2005 and 2008, aided by economic and population growth.

Sub-Saharan Africa’s economy is expected to grow 5.5% in 2011. [Investing in the Last Frontier With Africa ETFs.]

For more information on Africa, visit our Africa category.

  • iShares MSCI South Africa Index (NYAR: EZA)
  • Market Vectors Africa Index (NYSEArca: AFK)
  • SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF)

Max Chen contributed to this article.

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.