Emerging markets, particularly those in Africa, should be a central focus for any investor right now. Major brands are establishing footholds in the region, signaling that Africa is the next frontier for investment strategy.
The Stanford Institute for Innovation in Developing Economies recently announced that it will open a research, training and innovation facility in Nairobi this year, the latest in a line of think tanks and companies investing in the region. IBM opened its first Africa-based research laboratory in Nairobi, Kenya, in November 2013. The Royal Philips technology firm opened its own maiden research lab in Nairobi in March 2014.
Each of these landmark events is a testament to the hive of innovation and enterprise developing on the continent. In countries like Kenya, Ghana and Nigeria, there’s a renewed appreciation for the role of research and development in economic growth. And, beyond the local benefits, this emphasis on innovation and enterprise poses a promising benefit for investors seeking opportunities in this region.
Here are the key sectors to watch:
The financial tech industry has proven pivotal to accelerating commerce in Africa during the past decade, and it’s now poised to significantly influence economic development in the coming years.
SokoniSMS64, a new text messaging platform from mobile provider Safaricom, sends farmers updates on market pricing so they can adjust their planting projections. Such innovations provide rural, subsistence-based communities with an unprecedented access to data. This trend is fueling new growth engines for the African economy -- along with investments in the region.
2. Online retail
Despite rapid growth in the wholesale and retail segments of various nations' economies, online shopping remains a fairly nascent concept, even in ICT- (information and communication technology) savvy markets such as Kenya and Nigeria.
Given Kenya’s recent 67 percent smartphone and 54.8 percent Internet penetration rates across the population, ecommerce is ripe for development. As incomes rise and consumers become more accustomed to online retail, the online shopping industry will explode in Kenya and other emerging markets as a result.
Mobile solutions that address unfavorable medical personnel-to-patient ratios hint at an ongoing evolution within the healthcare sector. In Kenya, the Sema Doc telemedicine platform is allowing users to connect with doctors via mobile phones. They can receive diagnoses, locate treatment options, secure medical loans and access cash benefits for hospital fees. Healthcare solutions offer a new frontier for investors, as these initiatives are vital to economic growth in developing markets.
4. Public transportation
Transport management is poised to be the “next big thing” in Africa as countries grapple with rapid urbanization and rising mobility needs. Across the ocean, in Brazil, which is grappling with its own transportation issues, the government is using big data analytics for improved public transportation management.
For Africa, investors can expect to see governments there following suit in the next decade or two; that's why technology will factor heavily in foreign investments in this space.
Companies such as Kenya Power are already tapping into the power of big data to streamline their business processes, and other emerging markets will rely on analytics to address their own mobility concerns. Investors will find lucrative opportunities in tech-based transport solutions.
5. ICT industries
Rwanda ranked first globally for ICT promotion in 2015. Tech hub organizations such as KLab provide a much-needed confluence between enterprise and ICT solutions in that country and serve as models for other emerging markets. Last year, Singapore’s CrimsonLogic and the Rwanda Development Board launched the Rwanda Technology Associate Program, aimed at cultivating young IT talent in the African nation.
Talent-development strategies can boost long-term investment prospects significantly in emerging markets, as human capital plays a critical role in development.
Sustaining this pace of growth will be vital to engendering new pockets of investment. Investors have reason to believe the trend will hold as governments enact supportive policies throughout the region. Increasingly favorable policy environments and private sector cooperation make Africa’s emerging markets particularly appealing to investors right now.
By paving a smoother road for investment, Africa's emerging economies are unlocking an enterprise spirit previously hindered by bureaucratic bottlenecks. As credit access and technology infrastructure improve, foreign investors will be able to partner with a multitude of African counterparts and tap into an array of business opportunities. Is yours one of them?