How can we make money off Africa?

The continent is growing very quickly, faster than China in some places, but there are dozens of very diverse countries with different outlooks.  Are any of you investing in Africa?  If so: how? 

Maybe buy stock in telecoms and electric companies in countries that are just starting to develop?

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Comments (24)

  • Intern in IB-M&A
May 28, 2021 - 10:27am

Africa has been growing very quickly since 50 years. Truth is, African countries simply struggle at everything. You'd think a country as rich as South Africa would manage to ensure access to electricity and water to its citizens? Nope. There's corruption everywhere, governments are feckless. Infrastructure is a fucking joke. African countries are either trapped by their dependence to natural resources (oil and metals) or unable to develop their agricultural sector because 95% of farmers do subsistence farming and don't give a shit about increasing yields.

Africa needs to get its shit together

Funniest
May 28, 2021 - 11:01am

invade the country and talk shit about their political leaders, start a revolution, take the lead of the ship, restructure their political system and law, sell the weakest parts of your populations organs to china.

path less traveled

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May 28, 2021 - 1:09pm

I got blasted high once and thought about the hunger and lack of heavy industry issues there and thought about controlling real estate off of the Mississippi river leading into the port of New Orleans to drive further agricultural and machinery exports to west Africa. Didn't really think it through. A lot of US exporters are already doing this, but need to get export credit insurance cuz obviously the African market can be fucked with shadiness for business.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

May 28, 2021 - 3:43pm

Pierogi Equities

I got blasted high once 

Me too buddy, me too. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
May 28, 2021 - 2:21pm

There are some funds that do this - most of the ones in Africa itself are pretty small, but there are some larger ones elsewhere with African offices. Biggest Africa-focused fund I know is Helios, $1bn+ fund based in London with offices in Nigeria and Kenya. Carlyle used to have a $700M sub-Saharan sleeve that spun out into its own firm, and Abraaj had one that was $1bn or so before they collapsed - I think Actis bought their African assets

May 28, 2021 - 1:38pm

Realistically most outside investors need political stability or an acceptable enough level of corruption to get business done.

Neither really exist at the same time anywhere on the continent. Will see what China's belt and road initiatives do, but that raises its own issues going forward.

May 29, 2021 - 2:57am

Yes this is a key point - great stuff identifying it. Institutional money is difficult to place where there is political instability and/or poor optics with regards to getting business done. While Africa is certainly growing it isn't exactly an ideal environment for private fund money to park itself.

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  • Associate 2 in Consulting
May 30, 2021 - 7:35pm

If you're interested in the topic of institutional money in unstable places, you might be interested in the book "Red Notice" which is about a guy who make a killing investing in post-soviet Russia

  • Prospect in PE - LBOs
May 28, 2021 - 2:36pm

The problem with many African countries is not that they are poor but that investment in foreign countries and capitalism as a whole are fundamentally predicated on trust. You have to trust that your money and investment will not simply be seized by a corrupt government or some warlord in a highly unstable area. It's very easy to use the geographical territory of Africa as a strict resource farm and extraction site, as colonial powers did, but that's a pretty low value-add activity, and frankly contributed very little to the actual economic growth of European imperial powers.

The single best thing that could be done to increase the economic growth of African countries, in my opinion, is for developed countries to stop engaging in charity with no strings attached to the continent, and actually hold their governments and legal systems accountable to property rights and the enforcement of contracts. If they can't do this, nobody will want to touch them.

It's kind of like dealing with people, if you know someone who is dishonest and has all these "great investment ideas" that end up being scams, you're probably not going to want to ever do business with them, and they either learn from that and change their tune, or become a pariah.

May 28, 2021 - 8:00pm

You don't. In countries with high levels of corruption - esp with old economy businesses - the only ones who make money are sophisticated, well-connected locals. And most of that value creation happens in private markets, so getting access to it from the U.S. in public equities is highly unlikely. Also lots of value traps in such places, the juice isn't worth the squeeze.

There are easier ways to make a dollar, plenty of great businesses in the West (or ADRs for stuff in China / Southeast Asia / etc). 

Jun 1, 2021 - 5:34pm

Be a mercenary and serve in the Congo or Nigeria.

Be an industrial-scale farmer in Rhodesia.

Poach high value animals in the bush of Tanzania

Traffic arms for communists in Angola

Mine diamond and gold in South Africa

Traffic people to Europe from North Africa

Steal historical artifacts from Egypt and sell them

Join a Somali pirate crew

"Work ethic, work ethic" - Vince Vaughn

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