Africa theme persists argues Anthony Eaton at JM Finn
Africa has never been better placed for growth than it is now, according to Anthony Eaton, manager of the JM Finn Global Opportunities and JM Finn Africa funds.
With the BRIC story now in the investment mainstream, other new and exciting opportunities are beginning to emerge. In our view, perhaps one of the most exciting of these is Africa.
With a GDP growth rate of 4.9% in 2010 and 5.3% expected in FY 2011, the African economy is growing faster than that of any other continent outside Asia. Investors are finally waking up to Africa.
As the continent moves more of its resources into industry and services, Africa stands to become an economic powerhouse, making not only its citizens wealthier, but its influence more global.
China has been steadily ramping up investment into the continent over the past decade. It poured $5.6bn into Africa in 1996, which reached a whopping $127bn by 2010 and is expected to set a new annual record by FY 2011, with more than 2,000 Chinese companies currently invested in the continent.
Not only will this increased level of FDI boost local economies and economic growth, but as Eastern wages rise, so do labour opportunities.
According to Justin Lin, chief economist of the World Bank, some 85 million jobs will be transferred from China to low-wage countries, mostly in Africa.
The rate of change throughout the continent over the past decade has been staggering. A swiftly expanding middle class (eight countries in Africa have higher GDP per capita than China, and 14 compared to India) are rapidly demanding consumer goods as purchasing power rises.
This provides a sweet spot for companies such as Yum! Brands, Unilever, Diageo, Colgate and McDonald’s, which are all seeing incremental sales growth in this fast-moving continent.