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Investing in Africa – funds at a glance

Africa is increasingly moving into the public eye as an attractive investment location. However, the continent comprises 55 states. In addition, the search for the perfect investment product for investing in Africa is being made more difficult by a growing number of providers. In this article we give an overview of providers of African investments.

Frontier markets as investment locations are increasingly moving into the focus of investors. Because the classic investment locations, such as Europe, the USA and certain Asian countries, are already very saturated and it is becoming increasingly difficult to achieve good returns. In addition, as the development status increases, so does the susceptibility to crises, as was shown again in the Corona year 2020. Frontier markets, on the other hand, still offer a lot of space to achieve high efficiency increases and corresponding returns through investments.

The African continent is particularly interesting because industrialization is only just beginning in many countries. The Foreign Office says about Africa: “No continent is growing economically and demographically as quickly as Africa. In the past ten years, investments by German companies have doubled. The African gross domestic product has grown by 30 percent in that time. The bad image that clings to the continent in terms of economy has long since not matched the dynamic development figures Afrika fonds investieren. “Chancellor Angela Merkel put it more succinctly:” Investments in Africa are investments in the future. “

Africa Industrialization Day: Moving from rhetoric to reality

street in kigali rwanda africa fund contribution mlc properties
View along KN 3 Rd., Kigali, Rwanda
THE BAD IMAGE THAT CLINGS TO THE CONTINENT IN TERMS OF ECONOMY HAS LONG SINCE NOT BEEN IN LINE WITH THE DYNAMIC DEVELOPMENT FIGURES

Ministry of Foreign Affairs
African states and regions
The economy needs a good political framework in order to flourish. However, not all 55 African countries meet this requirement. It is therefore important to separate the wheat from the chaff.

According to the IMF (International Monetary Fund), Africa as a whole grew by 3.2% in 2019 (Europe 1.6%). For the Corona year 2020, the IMF expects growth of at least -1.7% (Europe: -6.7%).

THE ECONOMY IN EAST AFRICA IS BOOMING
East Africa is particularly interesting for foreign investors. Because it is the fastest growing region in Africa. The entire region grew by 6.3% in 2019. The economy is also stable in the Corona year 2020. The IMF expects positive growth of 1.7%.

East Africa is increasingly positioning itself as one of the most popular destinations for investors in Africa, according to the BVMW (Federal Association of Medium-Sized Enterprises). According to the GIZ (Society for International Cooperation), practically all market segments in East Africa are unsaturated and offer good development opportunities.
INVESTING IN ETHIOPIA? – CAUTION IS ADVISED
Ethiopia’s growth has been impressive since 2004. Therefore, many investors wonder whether they should invest in Ethiopia. However, MLC Properties currently advises caution. First of all, as the headquarters of the African Union, the country has attracted a lot of attention in the past and thus also attracted foreign investments. Therefore, there is an increased risk of market oversaturation. However, restrictions on the free movement of capital are more important . There is no guarantee that foreign investors can easily get their capital back.

INVESTING IN AFRICA IS INVESTING IN THE FUTURE

Angela Merkel , Federal Chancellor
Bet on the whole of Africa with equity funds and ETFs
Reference of most African fund is the MSCI EFM Africa Top 50 Capped Index, which was defined by the MSCI Inc. . The index aims to represent the performance of the 50 largest stocks from the MSCI Emerging Frontier Market (EFM) Africa Index that meet the minimum liquidity requirements. In order to avoid concentration, the weighting of each country is limited.

INVEST WITH AFRICA EQUITY FUNDS
There are a large number of exchange tradable funds that invest in stocks from different African countries and industries, each with a different weighting, for example DWS Invest Africa (ISIN: LU0329759764), JPM Africa Equity (ISIN: LU0554776046), Nestor Africa (ISIN: LU0407232692) and Robeco Africa (ISIN: NL0006238131), but there are also a number of other funds.

The composition of the portfolios by industry differs depending on the fund manager’s preferences. For example, DWS Invest Africa and Robeco Africa invest primarily in companies from the financial sector and consumer goods manufacturers. By contrast, Nestor Africa relies heavily on mining companies. In regional terms, the clear investment focus is on stocks from South Africa, followed by stocks from Egypt, Morocco and Nigeria. East African stocks from Kenya are typically found with a weighting of around 10% in the portfolios.

INVEST WITH AFRICA ETF
In addition to actively managed funds, there are also ETFs that only track an index. The Lyxor Pan African UCITS ETF (ISIN: LU1287022708) and the Xtrackers MSCI Africa Top 50 Swap UCITS ETF (ISIN: LU0592217524) should be mentioned here in particular . Here, too, the regional focus is on South Africa, Egypt and Morocco, unless investments are made in mining.

Alternative Africa investments
INVEST WITH MLC PROPERTIES EAST AFRICA
MLC Properties is the provider of the German limited partnership “MLC Properties East Africa” ​​and enables sustainable investments in the East African countries of Rwanda and Tanzania. Investment objects are real estate in the commercial sector that enables a well-planned financial forecast. Distributions are made from the operating cash flow right from the start. The investment takes advantage of the high levels of returns on these markets.

INVEST WITH GREENTEC CAPITAL
GreenTec Capital is a German investment company that wants to achieve a social impact in addition to profitability. The focus is on supporting innovative and sustainable startups , where value creation potential can be raised by optimizing processes, building up capacities and implementing technologies. GreenTech Capital is also invested in East Africa, for example in digital logistics solutions or innovative and sustainable feed solutions for fish.

INVEST WITH AFRICA GREENTEC
Related in name and yet another provider is Africa GreenTec . The crowdfunding project aims to reconcile profitability with social impact by providing rural regions, e.g. B. in Mali, with the help of so-called solar containers with electricity – the income is to be used to make interest payments to investors.