Africa is widely considered as a ‘hot’ frontier market to invest in. Economic growth across the continent is outpacing other emerging markets. For example, Kenya has been growing at over 5% annually from 2004 to 2016, while Ghana’s economy has been growing at over 7% annually in the last 15 years. With a growing middle class and an increasing use of the Internet and mobile phones, Africa is fast becoming a consuming super power. These positive developments are leading to business opportunities for both locals and foreigners. This is turn, creates investment opportunities for those who don’t easily shy away from riskier investments. In this post, you will be introduced to three ways to invest in Africa as a small investor.
Real Estate Crowdinvesting with RealtyAfrica
Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. RealtyAfrica, a South African real-estate firm, has launched a real estate crowdfunding platform targeting foreign investors seeking to invest as little as $1,000 in the fast growing property sector in the Sub-Saharan region. The company, which provides property development investment options to clients mostly in Southern Africa, aims to raise capital to fund eco lodges, social housing, hotels, factories and other real estate projects across the African continent. To ensure accountability, international auditing firm Deloitte has been appointed to conduct the due diligence on all projects before they are promoted on the Realty Africa platform.
Investing In African Start-Ups & SMEs with Lelapa
The Lelapa Fund platform aims to help foreign investors to invest directly in African start-ups and SMEs and enables investors to contribute their skills as well as finances to their chosen ventures. This equity crowdfunding venture is advantageous in that it allows early stage start-ups to gather funds from the international community, and thereby stops the reliance on securing seed investments locally. Lelapa Fund facilitates the process of investment by conducting due diligence for each start-up prior to listing on the platform. If you want to hold shares in start-ups and small businesses in Africa, Lelapa offers this opportunity.
Peer-to-peer Microlending with Zidisha
Zidisha is a non-profit and also the first direct peer-to-peer lending service that aims to bridge the international wealth divide. Zidisha allows private investors globally to lend to and communicate with borrowers in developing nations without costly local intermediaries in between. While direct peer-to-peer microlending will most likely play a big role in Africa’s development and can potentially become a lucrative area for investors, it is still in its infancy and default rates are still rather high. Investing in microloans through Zidisha is very risky and should be considered more as a philanthropic action than a serious financially-motivated investment at this point in time. An interesting article about someone’s lending experience with Zidisha can be found on the Microfinance Transparency blog.
Investing in fast-growing markets, such as Sub-Saharan Africa, can generate strong returns. However, due to the risks involved it is best to only invest a small amount of your overall portfolio in frontier markets investments and to diversify your investments to reduce your overall risk.
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