World Cup draws attention to investment opportunities in Africa

The World Cup in South Africa is drawing attention to the investment opportunities in Africa.

J.P. Morgan Asset Management,  which currently manages USD 2.1 billion in African equities, believes the continent offers good growth and investment potential due to unexploited markets and domestic demand long after the World Cup is over. Sonal Pandit, Manager of the JPM Africa Equity Fund at J.P. Morgan Asset Management explains, "The fact that the World Cup is taking place in South Africa highlights the stability of the country and also draws attention to how it is recovering from the global recession. However, we believe Africa as a continent, not just South Africa, presents a compelling investment opportunity for long-term investors. In recent years, many countries have undergone political reform and moved towards democracy. Obviously, Africa is more appropriate for those with a higher tolerance to risk, but it is a demographic inevitability that investors will look to Africa for investment returns."

Pandit went on to explain that according to the UN, population growth in Africa through 2015 is forecast to rise faster than anywhere else in the world, at a rate of 2.2%. As a result the increasing youth population will create appealing investment opportunities as a growing working population increases spending, thus increasing domestic demand.

Although commodities underpin much of Africa's success historically, as with many emerging markets, Africa is also growing structurally. The need to embrace infrastructure development and to continue to make improvements in economic policy are drivers to ensure Africa can maintain export demand from resource hungry countries such as China and India, as well as sustain rapidly rising populations.

Pandit explains this demand is a key investment opportunity to gain exposure to Africa now and cites China's trade with Africa which has grown from c.USD10bn in 2000 to c.USD100bn in 2010. As a result, Pandit points out that gaining investment exposure to Africa is a natural selection for those with exposure to China.