Investment opportunities in Africa: 5 industries to watch in 2023

Africa has been experiencing significant economic growth in recent years, with investors from all over the world taking notice.

The continent is rich in natural resources, has a young and growing population, and is home to a vibrant entrepreneurial spirit.

As we move deeper into 2023, several industries are capturing the attention of investors, including healthcare, agriculture, financial services, automotive, and energy. These industries have shown great potential for growth and innovation, presenting opportunities for entrepreneurs and investors. With the right investments, they can help spur economic growth and job creation, and generally improve the quality of life for millions of Africans.

Banking and Finance

The banking sector in Africa includes a diverse range of financial institutions, including microfinance companies, regional banks, and large multinationals. Many of these institutions have developed innovative products and services that cater for the unique needs of the African market, such as mobile banking and digital financial services.

The use of technology has revolutionised the way people access financial services, leading to a significant increase in financial inclusion. This has created a fertile ground for the development of innovative financial products and services. Thanks to the African Continental Free Trade Area (AfCFTA), there are many opportunities for foreign investors.

Healthcare

In Africa, healthcare has been a major concern for years, as many individuals still do not have access to affordable and accessible healthcare services. This has resulted in high mortality rates and low life expectancy in many African countries.

To address this issue, various initiatives have been launched to improve healthcare services in the continent.

One of the most significant initiatives are the respective national health insurance plans, which have affordably provided access to healthcare services and medicines to the public. The plans have made it possible for individuals to access quality healthcare services at lower costs, and are therefore helping to improve health outcomes in general. This provides good opportunities for investors.

The pharmaceutical industry in Africa has also been growing with the increasing demand for healthcare services and medicines. This growth has been driven by the need to produce affordable and high-quality medicines that are accessible to a majority of the population. In particular, generic medicines have become a significant contributor to the African economy, as they are affordable and effective alternatives to branded medicines.

Automotive

The light manufacturing and automotive industry is expected to experience significant growth in Africa due to sustained domestic demand for vehicles, improvements in foreign investment, regional trade, and the implementation of supportive policies. Investors would be wise to invest in JSE top 40 companies in the sector.

Multinational vehicle manufacturers are setting up production plants in countries such as Angola, Ethiopia, Ghana, Kenya, Namibia, Nigeria, Rwanda, and South Africa. Additionally, global policies aimed at climate mitigation have spurred companies to invest in project developments in South Africa, Rwanda, and Morocco, to take advantage of favourable business environments, policies, and market trends.

Energy

Africa has a major energy deficit, with more than half of the population lacking access to electricity and countries such as South Africa experiencing rolling blackouts. This has a significant impact on various aspects of life, from education to healthcare, as well as hindering economic development. To bridge this gap, there is a need for significant investment in the energy sector in Africa.

While traditional energy sources such as oil, coal and gas have been commonly used in Africa, there has been a growing push towards renewable energy sources such as solar, wind, hydro, and geothermal. Renewable energy not only helps to address the energy deficit, but also helps to safeguard the environment and mitigate the effects of climate change. Several private equity firms have already made investments in renewable energy assets in Africa, particularly in solar and wind power.

For instance, African Infrastructure Investment Managers (AIIM) has invested in several renewable energy projects across the continent, including the 50MW Kipeto wind power project in Kenya and the 78MW Bokpoort concentrated solar power project in South Africa.

Similarly, Actis, a leading investor in growth markets, has invested in renewable energy projects across Africa, including the Lake Turkana Wind Power project in Kenya and the Azura Edo Power Plant in Nigeria. These investments have not only helped to increase access to reliable and affordable energy, but have also created jobs and contributed to the development of local communities.