As investors try to comb the world for the next big market, some may turn to Africa exchange traded funds to capture potentially more rapid growth.
There are a number of Africa-focused ETFs that investors can choose from. For instance, the Market Vectors Africa Index ETF (NYSEArca: AFK) weights countries determined by the size of its gross domestic product and includes companies that are headquartered in or generate the majority of their revenue in Africa. Top country allocations include South Africa 22.0%, Egypt 20.6%, Nigeria 16.0%, Morocco 6.9%, Kenya 3.6%, Tanzania 2.2% and Zambia 2.1%.
The SPDR S&P Emerging Middle East & Africa ETF (NYSEArca: GAF) may say it is a Middle East and Africa play, but the ETF has a heavy 76.1% weight in South Africa, along with 9.9% United Arab Emirates, 8.6% Qatar, 3.5% Egypt and 1.9% Morocco.
ETF investors can also take targeted exposure to South Africa, Egypt and Nigeria through the iShares MSCI South Africa ETF (NYSEArca: EZA), Market Vectors Egypt Index ETF (NYSEArca: EGPT) and Global X Nigeria Index ETF (NYSArca: NGE).
More global investors and companies are taking a look at Africa for the growth opportunities in some rapidly expanding frontier economies. According to the Corporate Council on Africa, over 180 multinational companies, are considering or are already investing in Africa, reports Dina Gusovsky for CNBC.
For instance, General Electric (NYSE: GE) will invest $250 million in capital expenditures and $800 million in operating expenses over the next three years in Nigeria.
Infrastructure development has been a major draw for foreign multinationals and other businesses. Paul Sullivan, vice president of international business development at Acrow, has said the company put thousands of bridges in over 20 African countries and plans to deliver 144 bridges to Zambia and 55 to Cameroon by the end of the year.
However, Paul Schatz, president of investment management firm Heritage Capital, remains wary of the short-term outlook in Africa due to political instability, terrorism, lack of government transparency and lack of liquid capital. Schatz, though, takes a more long-term view.
“While long term, I believe investing in Africa will provide China-like returns, I think that region is at least a decade or more away,” Schatz told CNBC.
While there is “typical business risk,” Ndubuisi Ekekwe, founder of the African Institution of Technology, is optimistic, pointing out that Africa is democratizing and could provide growth opportunity for businesses.
Market Vectors Africa Index ETF
For more information on Africa, visit our Africa category.
Max Chen contributed to this article.