Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

How To Play It The Rise of Africa

Stock-Markets / Africa May 30, 2014 - 06:52 PM GMT

By: Casey_Research

Stock-Markets

By Adam J. Crawford, Analyst

Sub-Saharan Africa (SSA).

Say the words and most people think of poverty… famine… epidemics… political strife… sectarian violence. Yet, just recently, Microsoft announced a new investment on the continent, calling Africa a “game changer in the global economy.” So what gives?


Game Changer?

For starters, we concede SSA faces challenges… relatively low per-capita GDP, relatively low life expectancy, and more than its fair share of military conflict. Nevertheless, considerable progress is being made.

Politically, things have changed dramatically over the last two decades. In a recent report from financial advisory service firm KPMG titled “African Emergence—The Rise of the Phoenix,” researchers explained why…

The end of the Cold War more than two decades ago brought new freedom to Africa. People started to demand political representation and called on governments to be more transparent. Democratic features were introduced and a vibrant civil society emerged.

Influenced by this political renaissance, governments began to act more responsibly. Several ended hostilities with neighboring countries.

With political change came economic change.

Beginning in the 1990s, fledgling African democracies increasingly accommodated private enterprise by reducing trade barriers, cutting corporate taxes, and privatizing state-run industries. By the time the 2000s rolled around, these reforms started to gain traction. In 2000, GDP for all of SSA was a meager $331 billion. By 2012, it had quadrupled to $1.3 trillion.

As far as the future is concerned, with more stable political and economic environments and the unleashing of market forces, SSA will reap the benefits of two megatrends:

1) growing demand for natural resources;

2) increasing consumer spending by an expanding middle class.

Let me explain…

As the world’s population grows and per-capita consumption rises in emerging economies, the demand for natural resources will increase... and SSA has plenty of natural resources, such as gold, oil, chromium, and platinum. But as important as natural resource exports will be, they aren’t the region’s only engine for economic growth.

Consumerism is also a powerful factor, and it’s being driven by an emerging middle class. More and more SSA citizens are moving from subsistence farming to higher-paying urban jobs. In 2000, about 59 million African households were earning discretionary income; by 2020, discretionary income will be available to 128 million households.

All of this points to the expectation of continued economic growth. Economists at the International Monetary Fund estimate that by 2018, GDP for SSA will reach $1.9 trillion. That amounts to a compounded annual growth rate of 7%, which compares favorably with estimates for Latin America and developing Asia of 4.7% and 8.1% respectively.

Leapfrogging to the Tech Frontier

Microsoft is not the only big tech company betting on growth opportunities in SSA. Intel, Google, Hewlett-Packard, and IBM have also invested heavily in the region. But are these companies a little early? Won’t the benefits to tech come after the buildup of roads, power grids, and healthcare systems?

Not really.

Whereas in developed countries, high tech has been “bolted onto” existing infrastructures years after they have been created, in developing regions high tech can be integrated in as the infrastructure is constructed. For example, as the US struggles to mesh electronic health records with the healthcare system and smart-grid technology with the power grid, developing economies can build these features right into their nascent systems at the outset. In the words of John Kelly, head of research at IBM, Africa “can leapfrog straight to the tech frontier, without worrying about adapting old systems...”

In addition, the Cloud is adaptable to and quite useful in the early stages of an economy’s development. According to The Economist, “The ability to use software, computing power, and storage online ‘as a service,’ paying only for what you need and only when you need it, may put the cost of information technology within the budget of many small African businesses.”

The point is: the time for tech in SSA is now… not a decade from now. That’s why so many big tech firms are setting up shop in the region. Research firm IDC predicts that IT spending across Africa will increase from $30 billion in 2012 to $40 billion in 2016, and if telecom is included, spending will increase from $103 billion in 2012 to $130 billion by 2016.

But here’s the thing: Africa won’t significantly move the revenue needle for the global tech giants, so investors should look elsewhere for opportunities. Our advice? An African telecom.

The Gains Down in Africa

As mentioned before, over the next few years, millions of SSA households will be acquiring discretionary income for the first time. That means millions more in the region will have more money to purchase necessities, and they’ll begin to purchase things like mobile phones and mobile services.

According to GSMA, a global trade organization for mobile phone operators, there will be 250 million mobile phone connections in Africa over the next five years. That bodes well for African telecoms. But it’s a hotly contested space. So which telecom is the best bet?

We like MTN Group Limited (MTNOY). The company is on solid financial ground. It pays a nice dividend. Its network is superior to the competition’s, which is why MTNOY is the market share leader in SSA. Oh, and the stock is cheap—even after the 12% run the stock has gone on since we recommended it in the December issue of BIG TECH. If you want access to our comprehensive report on MTNOY as well as access to our other buy recommendations, which include a networking equipment provider with 90% near-term upside potential, then sign up for a risk-free trial of BIG TECH.

The article The Rise of Africa… and How To Play It was originally published at caseyresearch.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules