With regards to its financial potential, Africa has transformed from “hopeless continent” to “interesting prospect” in the recent two decades.
The continent has abundant natural resources, a youthful and educated workforce, more stable administration, and better economic prospects than in the past.
Mutual funds and exchange-traded funds are the best choices for first-time investors who only want to invest a little amount of money. However, there are several other ways to get started with investing in Africa.
1. Invest with ADRs if based in the United States
Investors in the United States can select from a number of African equities that are traded on the New York Stock Exchange (NYSE) by purchasing American depositary receipts (ADRs). The Pink Sheets or over-the-counter (OTC) market offers a broader selection of African equities. They trade in smaller amounts and lack regulation on the Pink Sheets.
2. Invest in a fund that is focused on Africa
When it comes to investing in Africa, professional fund managers use their knowledge of currency movements, current political conditions, and the movement of fund flows into and out of the continent’s stock exchanges to select the most appropriate investments for their fund based on these factors.
In order to reap the rewards of Africa’s future growth, it’s best to put your money into a diversified portfolio through the use of a mutual fund.
3. Consider direct account trading through a broker
With renowned brokers present in one or more of the fastest developing African countries, you may choose to register a stockbroking account.
Brokers can give you current stock suggestions, and the process is quick and simple. It is critical that you thoroughly research the brokerage business before making a decision.
There may be more trading liquidity at larger brokerage firms, but the degree of customer support you receive may be worse than at smaller businesses.
4. Take advantage of the uncertainty
Many countries and regions in Africa have a variety of governance, compliance, and regulatory problems that must be taken into account by investors in the area.
There is a serious shortage of infrastructure and insufficient integration in Africa, which makes it difficult for them to conduct cross-border trade.
Because of this, it’s critical to work with business partners that are well-versed in a wide range of areas and industries. Investors, on the whole, enjoy a good challenge, but they dislike uncertainty.
Investors on the continent need access to the correct information and data in order to conclude agreements. Real knowledge is more important than market perception an investment’s success.
5. Adopt a flexible approach
In Africa, investors should never assume that one nation is the same as all of others. Despite their close proximity in terms of location, each of these countries is a world unto itself.
Many nations’ legal systems are also undergoing significant transformations, driven in part by a desire to attract international investment and, more importantly, by a determination to safeguard national interests and natural resources.
Therefore, it is best to treat each investment category and every country with its own investment strategy and approach.