Africa's Growing Population Boosts 3 UK Stocks

Younger African consumers have not only become important to the region's economies, they have also become more brand-conscious and technologically savvy

R.J. Hottovy, CFA 22 December, 2014 | 12:26PM

Morningstar's long-term approach to analyzing companies requires careful analysis of Africa, which we expect to become an increasingly fertile region for consumer spending over the next several decades.

Several tailwinds drive these expectations: favorable demographic trends, including a large, young, and rapidly growing population; wealth creation and the growth of Africa's consuming class; urbanization and infrastructure investments; and favorable regulatory reform.

Many consumer staples firms have been slow to act because of historical government instability, commodity price swings and the impact on consumer spending and raw material costs, and the perception of poor returns on infrastructure investments. These fears have slowly been placated, however, with consumer companies coming to the realization that Africa offers an opportunity to extend their brand and develop economies of scale. Companies with moats are especially poised to take advantage.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Diageo PLC2,932.50 GBX1.30
Unilever PLC4,326.00 GBX1.00

About Author

R.J. Hottovy, CFA  is a director of equity analysis with Morningstar.

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