In this piece, we will take a look at the ten best African stocks to invest in. If you want to skip our introduction to the African business environment and want to take a look at the top five stocks in this list, then check out 5 Best African Stocks To Invest In.
Africa is one of the largest continents in the world both in terms of its size and its population. However, despite this, decades of colonialism and an inability to achieve lasting peace in the region have also left it among the most impoverished as well. Africa's gross domestic product per capita (GDP per capita) is $2,151 if we assume that the continent's GDP is worth $2.9 trillion and its population is 1.39 billion. This implies that an average African earns roughly the equivalent of the monthly rent of an apartment in an American city in an entire year. Additionally, this is the average figure, which is naturally controverted by the fact that the largest African nations in terms of GDP contribute the most to the GDP so the smallest nations often have a couple of hundred dollars as their GDP per capita.
However, as any astute businessperson and investor is likely to remind you, where there's underdevelopment, there's opportunity. After all, while a vast number of Americans enjoy basic services such as healthcare and medicines, populations in Africa don't. Therefore, for the sharp business people, the under served population in the country offers potential for new business and market growth.
One of the biggest attracting factors for Africa is the continent's expected population growth. Estimates suggest that Africa's population is slated to touch 1.1 billion by 2040, making it one of the largest work forces in the world. More people of working age means that the demand for products such as cars and houses will also rise, not to mention healthcare and discretionary products and services such as travel services and apparel. Naturally, this creates a large market and underscores the potential for investment in the continent. This also means that while traditional investments in Africa have focused on the natural resources and mining sectors (with several firms on our list being such companies) recently, the trend is shifting to also focus on other industries such as telecommunications.
At the same time, trade within African countries isn't where analysts would like it to be. According to data from McKinsey, only 10% of Africa's imports and 17% of its exports are within the continent. These figures are lower than in other developing regions such as Asia and Latin America, with the percentage of imports and exports underscoring the potential for African businesses to trade with countries within the continent. The underdeveloped nature of the continent also means that its cities are growing too fast, which creates fears that the supporting infrastructure for millions of people who live in these cities might not develop as fast as their population is growing. On a positive note for African businesses and even international companies that seek to develop a foothold in the continent, the region is also estimated to have the world's youngest population by 2050, opening up the doors to vast amounts of spending power should these people be able to secure gainful employment.
As if a rapidly growing population and a potentially vibrant workforce weren't enough, Africa is also home to vast amounts of natural resources. Estimates from the United Nations show that 30% of the world's minerals, 12% of oil, and 8% of natural gas resources are in Africa alone. The continent is a literal gold mine too, as it holds 40% of global gold reserves and an astounding 90% of all the platinum reserves in the world. Summing it up, not only does Africa stand to gain from rapid population growth, but it can further expand its share of the global commodity food pie by exporting the valuable products and earning foreign exchange.
However, the continent is not immune to the events that have shaped the global economy since the 2019 outbreak of the coronavirus pandemic and the 2022 Russian invasion of Ukraine. While we had estimated Africa's per capita income to sit above $2,000 at the start of the piece, data from Bloomberg shows that as of 2023, Africa's per capita income is $1,710. This is a worrying figure since it marks a drop from the $1,824 reading in 2011 and shows that the region has lost a decade of economic prosperity. The drop also becomes more resounding when we consider the fact that per capita income had been consistently growing since 2002. The pandemic was particularly hard on the continent as it saw the figure drop to $1,488 in 2022 - lower than the levels it was in 2008 - another time of crisis in the global economy. 2023 has already seen a military coup in Africa as well, and political instability is the continent's hallmark as you'll find out if you read 30 Most Unstable Countries in the World.
But what about African companies? Today we'll look at some top ones that are seeing interest from hedge funds and the notable names are Barrick Gold Corporation (NYSE:GOLD), Kosmos Energy Ltd. (NYSE:KOS), and Royal Caribbean Cruises Ltd. (NYSE:RCL).
10 Best African Stocks To Invest In
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Our Methodology
To compile our list of the best African stocks to invest in we first scanned the VanEck Africa Index to select companies that trade on American exchanges. Then, our previous coverage of the best African stocks was also used to compile a list of 15 companies. Following this, the number of hedge funds that had bought their shares as of Q2 2023 was determined through Insider Monkey's database of 910 hedge funds and the top ten African stocks to invest in are as follows.
MakeMyTrip Limited (NASDAQ:MMYT) is an Indian travel company headquartered in Gurugram, India. It allows consumers in Africa to plan their trips. Despite a slowdown in the global economy, a gradual recovery in the travel industry in the wake of the coronavirus pandemic seems to have done the firm well as it has grown its EPS consecutively in all four of its latest quarters. Additionally, it has beaten analyst estimates in three of these, and the stock is rated Strong Buy on average with a roughly $5 share price upside.
During Q2 2023, 12 out of the 910 hedge funds polled by Insider Monkey had invested in MakeMyTrip Limited (NASDAQ:MMYT). Paul Marshall and Ian Wace's Marshall Wace LLP is the company's biggest stakeholder among these courtesy of its $42.9 million investment.
Along with Barrick Gold Corporation (NYSE:GOLD), Kosmos Energy Ltd. (NYSE:KOS), and Royal Caribbean Cruises Ltd. (NYSE:RCL), MakeMyTrip Limited (NASDAQ:MMYT) is a top African stock.
Harmony Gold Mining Company Limited (NYSE:HMY) is one of the biggest gold mining companies in Africa. It is headquartered in South Africa and has nine mines in its home country. The firm is currently in the midst of a management shakeup, with its chief executive officer slated to retire soon.
As of June 2023, 14 hedge funds out of the 910 that were part of Insider Monkey's database were the company's investors. Out of these, Harmony Gold Mining Company Limited (NYSE:HMY)'s largest shareholder is David Iben's Kopernik Global Investors since it owns 15.5 million shares that are worth $65.4 million.
IHS Holding Limited (NYSE:IHS) is a telecommunications carrier that is headquartered in the U.K. but has significant operations in different African regions. Despite the fact that the shares are rated Strong Buy on average, the firm reported a hefty loss during its second quarter earnings which added to a string of analyst EPS estimate misses.
By the end of this year's second quarter, 12 out of the 910 hedge funds part of Insider Monkey's database had held a stake in IHS Holding Limited (NYSE:IHS).
AngloGold Ashanti Limited (NYSE:AU) is a South African gold mining company. It has operations in several African nations such as Ghana and Tanzania. The firm is currently going through a historic phase that is seeing it switch the primary listing of its shares from South Africa to the New York Stock Exchange (NYSE).
After digging through 910 hedge funds for their June quarter of 2023 shareholdings, Insider Monkey discovered that 16 had bought the firm's shares. Out of these, the biggest shareholder is Howard Marks' Oaktree Capital Management through a $99.7 million investment.
B2Gold Corp. (NYSE:BTG) is a Canadian gold mining company headquartered in Vancouver, Canada. It has significant exposure to Africa through mines located in Mali and Namibia. It pays a 4 cent dividend and is currently seeking to expand its mining presence by growing its production in Mali.
During Q2 2023, 17 hedge funds out of the 910 that are part of Insider Monkey's database were B2Gold Corp. (NYSE:BTG)'s investors. Jim Simons' Renaissance Technologies is the largest investor among these since it owns a $110 million stake.
Barrick Gold Corporation (NYSE:GOLD), B2Gold Corp. (NYSE:BTG), Kosmos Energy Ltd. (NYSE:KOS), and Royal Caribbean Cruises Ltd. (NYSE:RCL) are some top African stocks to invest in.
