Africa’s economy is composed of growth; presently African countries are adopting a Democratic political system which ultimately encourages development. Focused exchange-traded funds are a fairly safe way to embrace this growth from the bottom up as various regions attempt to industrialize.
Although many of the greatest investment opportunities of the next decade will likely emerge from the frontier, these markets are often characterized by limited research coverage and low liquidity. However, investing in frontier markets offers a good deal of potential for investors who wish to increase their exposure to developing nations, including the majority of the African continent. Africa remains the world’s highest growth continent, as we see over the last 10 years how much growth has taken place linked to real income per person grow, amounting to 30% growth, and GDP is set at around 6% over the next 10 years.. War, starvation, and dictators are becoming less common while life expectancy has grown by 10% and school enrollment is evolving into a major priority.
The S&P SPDR Emerging Middle East & Africa ETF is a play in South Africa and a few Sub-Saharan African countries. The 3% dividend yield will appeal to most investors and the expense ratio is 0.59%. Telecom, consumer discretionary and consumer staples make up most of the holdings. GAF has $73 million in assets under management. Another option is the iShares MSCI South Africa Index (NYSEArca: EZA) which tracks the most developed region on the continent. The 3% yield and 0.60% expense ratio mirrors GAF. This ETF is not as diversified as the Spider fund, so investors should take a close look at the holdings to figure out which one suits their strategy best. EZA has $488 million in assets under management, the most liquid of the African-focused ETFs. The Market Vectors Africa Index ETF (NYSEArca: AFK) is expensive at 1.07%. There are around 51 corporations in the portfolio, and about 50% of the portfolio is allocated to the financial sector. This can prove volatile over time, so investors who want to buy and hold should consider this. AFK has round $97 million in assets under management.
After all the up’s and down’s the continent has faced, Africa’s leading institutions are on the right path.