Africa in transition: transformation opens up investment opportunities

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  Serge Nussbaumer
  Chefredaktor

For the vast majority of private investors, Africa is still largely unknown as an investment region. Buzzwords such as corruption, poverty, political instability and civil wars tend to be spontaneously associated with the continent. The continent is often generally described as a failure – a cliché that no longer does justice to reality. Africa is a huge and diverse continent with a wide range of cultures, economies and investment opportunities. It is true that some countries have been mired in political and economic problems for decades. At the same time, however, there are many countries that have successfully modernized and diversified their economies in recent years and are experiencing dynamic growth. Among the more advanced African emerging markets are South Africa, Egypt and Morocco. The real opportunity for investors lies in the fact that this transformation process is continuing and is increasingly affecting other regions of the second-largest continent. The conditions for this are in place.

Africa’s economic influence is slowly but noticeably increasing

The continent still plays a very minor role in the global economy. According to the International Monetary Fund (IMF), Africa only contributed 3.2% to global gross domestic product and 1.6% to global exports of goods and services in 2024. However, its share of the global population is disproportionately high at 14%. With these IMF figures, it should be noted that the organization’s classification only includes the 45 sub-Saharan African countries. One point that should make investors sit up and take notice is the IMF forecast, according to which the gross domestic product of the African economic region (sub-Saharan Africa) will grow by an average of 4.5% per year until 2030. This is according to the “World Economic Outlook” published in April 2025. With this forecast momentum, Africa is the fastest growing region in the world alongside the “Emerging Asia” market category (see chart 1).

Historic opportunity through free trade agreement

The International Monetary Fund is not alone in its positive forecasts for Africa. Other supranational institutions such as the African Development Bank and the World Bank as well as research institutes such as Oxford Economics also see the continent on a good path in the coming years. This raises the question: where will the growth come from? The African Continental Free Trade Agreement (AfCFTA) could be a key driver. The agreement, which came into force in 2021, is a project of the African Union (AU) that aims to establish a large common internal market for goods and services. It was signed by all 54 AU member states, 49 of which have now ratified the treaty. The signatories undertake to dismantle trade barriers in order to exchange more goods and establish new value chains.

Opportunity for intra-African trade

“The free trade area is Africa’s master plan for its economic renewal,” said Claver Gatete, Executive Secretary of the ECA (Economic Commission for Africa) at this year’s Conference of African Ministers of Finance, Planning and Economic Development. Given the precarious global economic situation, heightened geopolitical tensions and unfair trade tariffs, Gatete said African countries had no choice but to adapt to the rapidly evolving global economic situation. According to Gatete, the Pan-African Free Trade Area has the potential to increase intra-African trade by 45% by 2045. Despite the challenges of implementing trade rules with so many participating countries, economists see the pan-African free trade agreement as a historic opportunity to strengthen Africa economically and make it less dependent on commodity exports. If the venture succeeds, it would create the largest single market in the world with more than 1.4 billion inhabitants.

Plus point: abundance of raw materials

Even if this does not apply to all regions of Africa, the continent has the potential to become an economic success story in many areas. Similar to the rise of the Southeast Asian emerging markets. One area in which Africa is even ahead of other growth regions is its wealth of raw materials. The continent is home to large parts of the known deposits of minerals, metals and fossil fuels. The African Development Bank Group’s “African Economic Outlook 2025” states that resource wealth can be a source of development and prosperity, provided the revenues are used to finance structural transformation.

Sustainability and digitalization open up new investment opportunities

Other important growth areas are sustainable and renewable energies, digitalization and innovative start-ups. Projects in the field of renewable energies, such as solar parks in Morocco or wind turbines in Kenya, offer attractive potential. The African start-up scene is also flourishing, particularly in Nigeria, Kenya and Egypt, in areas such as FinTech and mobile banking.

The agricultural sector and infrastructure as growth drivers

The agricultural sector and infrastructure projects also offer considerable investment opportunities. Attractive investment options include modern agriculture, sustainable agricultural production and infrastructure projects in the areas of transportation, logistics and telecommunications.

How to invest?

When weighing up the opportunities and risks, it can make sense for investors to include Africa in their portfolio as a satellite investment. However, investment vehicles in the form of ETFs, funds and structured products are relatively rare. DWS offers the Xtrackers MSCI EFM Africa Top 50 Capped TRN Index an ETF and with the DWS Invest Africa LC an actively managed fund. The index on which the ETF is based tracks the performance of currently 41 large and mid-capitalization companies from Africa. According to the latest index factsheet, however, the index is currently made up exclusively of companies from South Africa (48%), Morocco (38%) and Egypt (14%). The management of the DWS Invest Africa fund focuses on countries such as South Africa, Egypt, Nigeria and Ghana. The stock selection is based, among other things, on a fundamental analysis of the companies. Depending on the decision of the fund management, the asset allocation may also include large proportions of liquid assets and other financial instruments.

South Africa: Will the outperformance continue?

Investors wishing to invest in South Africa can use the SIX-traded ETF SRSA a pure country strategy. With a gross domestic product equivalent to USD 400 billion and a per capita income of USD 13,770, South Africa is not only the largest, but also one of the most developed economies on the continent. The MSCI South Africa Index comprises the 29 largest South African companies and thus represents around 85% of the country’s free market capitalization. The index is led by the media group Naspers, the mining companies Anglogold and Gold Fields and the banks FirstRand and Standard Bank Group. The MSCI South Africa Index has outperformed its benchmark, the MSCI Emerging Markets Index, both over the past twelve months (plus 31.5%) and over the past five years (annualized 12.7%) in USD terms. However, it remains to be seen whether this outperformance will continue. South Africa’s economy is facing major challenges. The IMF has lowered its GDP growth forecast for 2025 to just 1.0%. The US tariffs on steel and aluminum and the possible end of the African Growth and Opportunity Act (AGOA) could prove to be negative factors. On the other hand, the significant decline in inflation, which is providing relief for consumers, is a positive factor.