Time for Family Offices to invest in Africa

Geneva - Investing in Africa presents a wealth of opportunities for family offices and  UHNWF, yet many remain hesitant to explore the continent's potential due to perceived risks and uncertainties. Despite Africa's vast resources, growing consumer markets, and potential for high returns, several factors contribute to the apprehension that some investors feel towards allocating capital to this dynamic and diverse continent.

Africa, a continent rich in resources and opportunity, is emerging as a promising investment destination. For family offices seeking diversification, high growth potential, and impactful investments, Africa offers a compelling case. Let’s explore the reasons why family offices should consider investing in Africa, highlighting the continent's economic growth, demographic trends, and opportunities in various sectors.

Africa's economic landscape has transformed significantly over the past decade. Many African countries have experienced robust economic growth, outpacing global averages. According to the African Development Bank, Africa's GDP growth rate is expected to remain steady at around 4% over the next few years, driven by improvements in infrastructure, increased investment, and a growing consumer market.

Overall, real gross domestic product (GDP) growth for the continent is expected to average 3.8% and 4.2% in 2024 and 2025, respectively. This is higher than projected global averages of 2.9% and 3.2%. The continent is set to remain the second-fastest-growing region after Asia.  Countries like Ethiopia, Kenya, Ghana, and Rwanda have become notable examples of economic resilience and innovation. By investing in these high-growth markets, family offices can benefit from substantial returns while participating in the continent's economic transformation.

Africa's young and rapidly growing population is a key driver of its economic potential. With over 60% of its population under the age of 25, Africa boasts a dynamic workforce that is increasingly urbanized and educated. This demographic trend presents significant opportunities in sectors such as education, healthcare, and consumer goods.

The youthful population also fuels technological adoption and innovation, particularly in the fintech and mobile technology sectors. Family offices investing in African tech startups can tap into a burgeoning market with the potential to leapfrog traditional development stages, creating scalable and impactful solutions.

Africa is endowed with abundant natural resources, including minerals which are essential for global industries. Investments in these sectors can yield high returns, particularly as global demand for these resources continues to grow.

Additionally, Africa's vast arable land offers tremendous potential for agricultural investments. With increasing food demand due to population growth, investing in sustainable agriculture and agribusiness can provide stable returns while contributing to food security and economic development. FORAFRIKA is such a unique organization creating value by setting up Social Enterprise Hubs which make the agribusiness more efficient across sub Saharan Africa where they have a forty year presence withing local communities. 

Infrastructure development is crucial for unlocking Africa's economic potential. Many African governments are prioritizing infrastructure projects, including roads, ports, and energy, to enhance connectivity and support industrialization. Family offices can participate in public-private partnerships (PPPs) or direct investments in infrastructure projects, which often come with favorable government incentives and long-term revenue streams.

Family offices are increasingly seeking investments that align with their values and contribute to social and environmental goals. Africa offers a unique opportunity for impact investing, where investments can generate positive social outcomes alongside financial returns. From renewable energy projects that provide clean power to rural communities to healthcare initiatives that improve access to medical services, family offices can play a pivotal role in driving sustainable development in Africa. These investments not only address critical challenges but also enhance the reputation and legacy of family offices as responsible investors.

One of the primary concerns that deter family offices and UHNWF from investing in Africa is the perceived political and economic instability prevalent in certain countries across the continent. Political uncertainty, governance issues, and regulatory challenges can create barriers to entry and hinder investment decision-making processes. Furthermore, concerns about corruption, legal frameworks, and property rights may discourage investors from committing capital to African markets. While risks such as political instability and regulatory challenges exist, they can be mitigated through thorough due diligence, local partnerships, and a long-term investment perspective.    DFIs can play a paramount role in de risking the opportunities and supporting blended finance solutions and attract more private capital.

Collaborating with Local Family Offices can be an excellent way to get to view the local opportunities and overcome these perceived risks.  Due Diligence with a local partner or a large local business leader is yet another way. Attending AVPA Conferences is a gateway to meet such Family office representatives and partners.

If we aim to  close the  USD 194B  SDGs gap by 2030, Africans need to emphasize the potential of the continent rather than disadvantages as every investment can pose.

Africa is the 2nd largest continent with 54 countries. It has 14% of the worlds population and a young population. Over 500 M cellphones in use, an 110 M internet users. 22% of the earth’s land area. 19 Nobel Prize winner   65% of the world’s diamonds.

The consequences of not investing in Africa are a envisioned exodus from the continent to the North. This scenario can be avoided by investing in social enterprises in Africa. The world is not short of capital, it is short of ‘patient risk capital.’

Africa's rising economic prospects, demographic advantages, rich natural resources, and opportunities for impactful investments make it an attractive destination for family offices. By taking a strategic and informed approach, family offices can unlock significant value while contributing to the continent's sustainable development.  The time to invest in Africa is now. As global economic dynamics shift, those who recognize and act on the continent's potential will not only achieve impressive financial returns but also leave a lasting positive impact on millions of lives.