Investing in Africa: Risks and Opportunities

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00:00Investors around the world are now looking at the 54 nations that make up Africa with fresh eyes.

00:07Tens of billions of dollars have poured into African industries this year

00:11as government bodies and businesses across Asia, Europe and the Middle East

00:16look to tap into the continent's young population and rapid economic growth.

00:22According to a report, China alone inked more than $30 billion in construction contracts across Africa

00:29in the first half of 2025, which is five times more than the same period last year.

00:36The appeal is clear. Africa is home to the world's youngest population

00:41and some of the fastest growing economies.

00:44Today, the continent is home to 1.6 billion people.

00:48And by 2070, the UN expects this number to more than double to 3.2 billion,

00:53which will contribute to the region's growth prospects.

00:56By 2050, Africa is expected to have 2.5 billion people

01:01that will account for one quarter of the world's population, but there are too few jobs.

01:06Unemployment is high in South Africa, but a third of the labor force is unemployed.

01:12In the rest of the continent, the majority of young people are forced to find jobs in the informal sector.

01:18Trade deals that would help Africa secure investments, particularly in the manufacturing sector,

01:26that absorb this labor would help in terms of accelerating growth on the continent.

01:34The African continental free trade area, which was officially introduced in 2021,

01:39is expected to be fully operational by 2035 and is forecast to become the largest free trade block

01:47in the world, unlocking access to a $3.4 trillion market.

01:52But every boom has its bottlenecks.

01:56According to the African Development Bank, the continent faces a massive infrastructure financing gap

02:01of as much as $108 billion a year.

02:06Policy uncertainty, skill gaps, high youth unemployment and rising debt burdens

02:11are also challenges many economies are facing on the continent,

02:15making it tougher for foreign capital to find stable footing in Africa.

02:19To help understand where investors should deploy capital, Bloomberg Economics developed a risk-o-meter.

02:26It's a scorecard where countries are rated based on their economic and fiscal strength,

02:31governance, infrastructure and external vulnerability.

02:35On our risk-o-meter, we found that the countries with the lowest risk were South Africa, Botswana and Mauritius

02:41and was a common theme for that.

02:43Firstly, we found that the institutions and governance were strongest in those three countries

02:50compared to other African economies.

02:52Secondly, the infrastructure was by far more superior, particularly in the case of South Africa,

02:57which is the most industrialized economy on the continent.

03:02The countries that had higher risk on our risk-o-meter were the likes of Mozambique and Senegal

03:09and the reason, and of course, the Democratic Republic of Congo.

03:13The reason for that was the flip side for the lowest countries, which was poor institutions,

03:19particularly in the case of the Democratic Republic of Congo.

03:23Also, the infrastructure was a lot more poorer, is a lot more poorer in those economies.