Which country in emerging or frontier markets would you choose to invest your money for the next decade?
China is probably the most popular answer. With China’s metaphoric rise in the last 2 decades, one would really have to be living in a cave or up a tree to have never even heard of a China-focused fund or some other emerging market fund that has in one way or the other, largely exposure to China.
On the other hand, one’s mind would likely paint a very different picture when the word “Africa” is mentioned in the same breathe as “investment”. In fact, Africa is not even considered emerging market, but “frontier market”, a market “more emerging” than emerging market.
What is the first thing coming into your mind when the word “Africa” is mentioned?
- Thin, emancipated children (frequently in the context of some documentary or other);
- The hot Sahara desert; or
- Some large animal like the all-almighty elephant or zebras grazing in the grasslands.
To be frank, I was under the same impression until I met Steven Tam, director of Alquity Funds. He shared with me his life changing experience when he visited Africa (you will see him in the video below).
Uncover Myths of Africa
Africa is not a country, but a continent and it is not just covered by deserts
While this may seem obvious to many, I personally have met people who have no clue about the geography of Africa.
In fact Africa is the second largest, and second most populated, continent after Asia. At about 30.2 million km square including adjacent islands, it covers 6% of Earth’s total surface area and 20.4 percent of its total land area. With 1.1 billion people as of 2013, it accounts for about 15% of the world’s human population and comprises 61 different countries.
Large parts of Africa, especially central Africa, are ….. (surprise surprise) tropical rain forests and savanna plains. Yes, Africa is a diverse continent and most definitely does not consist of only deserts.
Africa has almost everything the rest of the world has
This is probably the most shocking fact to many. Contrary to popular thinking, not all African people live in mud and dung huts. There are buildings and towns and cities in every country in Africa.
It is not difficult to find a KFC or McDonald’s in many countries in Africa. There are restaurants where you can order a nice and juicy filet steak, seafood, pizza, pasta, burgers and basically whatever else you can think of.
Steven Tam told me when he visited Kenya, he was also shocked to see that the people there already started using the latest smart phones at the same time as everywhere else in the world does.
Now, how does Africa sound to you as an investment destination?
Perhaps you are thinking of doing some googling. And yes, you should.
Frequently, when it comes to investing, most people will listen to what is the latest and hottest “flavour of the month” and just choose something from what is offered to them. But really, how do you expect to profit from what everyone else is already investing in and already knows? There is such a thing as saturation.
Think of the dotcom bubble. When everyone rushes in at the same time and similarly makes a run for it at the same time when the first bad news come, then it is definitely not the right way for you to go.
In the Investment Basics of this website, you will find a behavioral finance video about “Home country Bias“. I mentioned that Diversification is critical to any portfolio and where you invest can be just as important as what you invest in.
It is crucial for you to expand your investment horizons, and look for opportunities beyond what is “popular” before other people discover them.
By the way, for those who think Africa funds are only for the brave souls, Alquity’s research shows that their fund in fact had lower volatility (suprise again) comparing to other markets such as USA, developed markets and emerging markets
So, go find out more about Africa and leave a comment to this question: Would you invest in Africa?
And watch the video below to have a mind blowing new perspective about Africa.
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