Why Africa Offers Long Term Investment Growth

A new generation of political and business leaders focused on growth and creating environments where business and economies can flourish has emerged in Africa

T. Rowe Price 12 November, 2014 | 12:03PM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Oliver Bell, manager of the T. Rowe Price Frontier Markets Equity Fund, discusses the longer term drivers for Africa’s fledgling economies as part of Morningstar's Guide to Emerging Market Investing.

Africa has made huge economic strides in recent years as economies and capital markets have liberalised. The impressive reforms many countries have undertaken over the last two decades have resulted in smaller public and private deficits, more prudent use of commodity windfalls, lower inflation, lower levels of debt and higher international reserves. The region now offers access to one of fastest-growing areas of the global economy. Most tellingly, foreign investment is pouring into the region, with China contributing $100 billion from 2005 to 2010, one-third of its entire foreign direct investment during that period.

The uncertain political environment within the region has long been used as a reason to limit investment. However, we have seen greater political stability in recent years from a number of countries. Between 2011 and the end of 2013, 50 of the 54 countries in Africa conducted a democratic election. Within the region, we are also increasingly seeing a new generation of political and business leaders focused on growth and creating environments where business and economies can flourish. Policies are now being increasingly targeted to encourage growth, while foreign investment is being harnessed to help build sustainable conditions for this growth.

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T. Rowe Price  T. Rowe Price is a global investment management firm dedicated to helping clients achieve long term success.

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