10 Best African Stocks to Buy Now

Aima Zaheer
8 min read

In This Article:

In this article, we will discuss the 10 best African stocks to buy now. If you want to skip our discussion on the economic outlook of Africa, go directly to the 5 Best African Stocks to Buy Now.

During the current period of rising interest rates and high inflation in the developed world, emerging markets provide an attractive opportunity for investors to diversify their portfolios. Emerging markets are rapidly growing as they have an increasingly young population and an emergence of a middle class with handsome disposable income. One emerging market that requires a closer look is Africa. The size of the African economy stands at $2.96 trillion as of 2022 and is experiencing strong growth. According to the International Monetary Fund (IMF), the sub-Saharan Africa region is expected to record YoY GDP growth of 3.6% in 2022 and 3.7% in 2023. On the other hand, if we look at the economic forecast for a developed economy like the US, the Organization of Economic Co-Operation and Development (OECD) anticipates the US economy to grow at a rate of 1.8% only in 2022. Furthermore, with a possibility of a mild recession, the GDP growth forecast for the US stands at 0.5% in 2023.

Africa has the youngest population in the world, with an average age of 18 years as opposed to 30 years for other continents. Furthermore, the continent is home to 313 million individuals belonging to the middle class. In the last three decades, the middle-class population has increased three times and represents 34% of the total population of the continent, according to a report issued by the African Development Bank (AfDB). Some of the prominent countries with booming economies in Africa are Algeria, Egypt, Kenya, Morocco, Nigeria, and South Africa. These economies are acting as economic hubs for underdeveloped regions surrounding them.

Strong Economic Outlook

The strategy to invest in emerging markets focuses on companies that fulfill the needs of the rising middle-class population with decent purchasing power. Usually, the companies addressing these needs belong to the commodities, infrastructure, and technology sectors. It must be noted that although emerging markets provide the potential for higher growth, they also come with higher risks. Africa is prone to economic and political uncertainty. There are always concerns related to weak governance, transparency, and regulation. However, this risk can be countered by diversifying investment through different countries and sectors across the continent.

The expansion of access to technology across the continent will also act as a significant impetus in the strong growth outlook. The sub-Sahara region of Africa is expected to have 613 million mobile subscribers by 2025 as opposed to 515 million in 2021, reflecting a compound annual growth rate (CAGR) of 4.5%. This would cover 50% of the population as opposed to 46% in 2021. Over half of these connections would provide access to 3G internet solutions. Meanwhile, a third would provide access to 4G internet connectivity. Furthermore, smartphone penetration is expected to rise from 49% in 2021 to 61% by 2025. Some of the best African stocks capitalizing on the emerging trends and developing infrastructure in the region include Kosmos Energy Ltd. (NYSE:KOS), Sibanye Stillwater Limited (NYSE:SBSW), and IHS Holding Limited (NYSE:IHS).

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