Is it wise for the average person to invest in Africa? The continent has oil, diamonds, a plethora of minerals and a huge pool of cheap labor. Africa also has Al-Qaida linked terrorists in the sub-Sahara, terrorists kidnapping and selling school girls in Nigeria and a military government set upon eradicating an Islamic group in Egypt. South Africa produces diamonds and gold and is one of the BRICS nations. But this set of aspiring nations aspiring to reach first rank status has continuing problems due to the 2008 recession. Big oil can invest in Africa because they have the money and the clout. But, how can an individual invest in Africa. What are the opportunities? What are the pitfalls? And what sort of information is needed for sound fundamental analysis of investments in the continent that was the cradle of humanity? Let us start by taking a step back and looking at offshore investment in general and then deal with the specifics of how to invest in Africa.
There are many good reasons to invest offshore. As the US dollar depreciates over the years investing offshore can put your business and your retained earnings in a rising currency. Many offshore markets are just starting to develop. Much of the earnings of the US stock market in the 20th century were tied to the development of American infrastructure. When investing offshore one can take advantage of the same process. A strong argument for investing in the BRICS nations is that they have economies that are growing faster than the USA, Europe or Japan. Little countries like Panama essentially avoided the worst recession in three quarters of a century and kept growing. And there are true tax havens where foreign nations provide huge incentives, tax and otherwise, to invest offshore. As with all investing, successful offshore investing requires a clear idea of the investment is, how it will make money, what the risks are and backup plans for expansion of the investment or a hasty exit.
Invest in Africa
Where are the opportunities if you want to invest in Africa? South Africa has investment opportunities and you can invest via American Depository Receipts, ADRs. AngloGold Ashanti, DRLGOLD, Gold Fields, Harmony Gold, MiX Telematics, Sasol and Sibanye Gold all trade as ADRs on the New York Stock Exchange. There are 85 other South African stocks that trade as ADRs in the over the counter market. The ADRs listed on the NYSE will provide you with the sort of investing information you are used to with US stocks as you invest in Africa. The largest economy in Africa is Nigeria. There is also a lot of unrest in Nigeria so, again, ADRs may be your best bet instead of direct investment in the country. Access Bank, Afriland Properties and Diamond Bank are Nigerian companies available as ADRs in the USA. Egypt offers five ADRs for US investors, Commercial International Bank, GB Auto, Lecico Egypt, Orascom Construction and Remco Tourism Villages. If you want to invest in Africa as a private investor one of these may be the way to go. As always do your own home work, check out tips very thoroughly and do no invest if you do not understand just how a company makes money and what you exit strategy will be if the investment goes sour.