Wal-Mart, Mugabe And The Middle Class: Things To Consider When Investing In Africa (WMT)

As developed markets struggle with their economic recoveries and emerging market economies slow, some investors are turning to frontier markets like Africa for investment opportunities.

Business Insider spoke with Robert Scharar of Commonwealth Funds who has visited Africa for 16 years.? He started his Africa Fund in November 2011.

Most people focus on commodities and invest in the resource rich areas of Africa.? However, Scharar believes great opportunities exist in sectors like finance and retail as Africa's middle class expands.

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What are the investment themes that make Africa such an interesting investment opportunity?

Africa is experiencing this sort of evolution to a broader Middle Class where education, through improvement of access to food supplies, through political stability, and I think out of that comes some of the themes of investing in Africa.?

My view is if you want to start with a broader context on this, one of those would be infrastructure. Clearly the continent is going to have major projects in that area. You hear a lot about the mineral and resource plays and sure they?re there. That?s a story for Africa but it?s a story in a lot of places in the world. You can go to Indonesia, you can go to Australia. Resources are resources and they?re somewhat independent. The story for Africa really revolves around the companies that supply resource support for the people that do the mining, for the communities that develop around the mining, the transportation, export etc. So that?s a second story.

So, Africa is more than just a play on resources.

Tourism is a big story. Consumer goods. The middle class has money to spend and you?re starting to see them do that. Agricultural products which is harder to do in Africa although you can buy a company like Illovo which is a sugar company, which is in several countries, although you can get companies actually in the processing of growing crops but its not that easy to actually do that.?

And the other play I thought about is the consumer, the financial services and this is huge, in a big way ?South Africa is the same way. Capitec for example is a bank doing these very kind of innovative banking the masses so to speak, figuring out ways to identify people that don?t have any identification, things of that nature.

Now the next thing is the middle class starts to evolve and you have more of an urbanization, people need services that they might not have worried about in the village for example life insurance, protection for your family, you?re now buying a house. What if you die, how do you get the loan paid off? Those things don?t matter when you?re on tribal land and you?re sharing the land with the village and you have all that infrastructure, but once you urbanize a population that group of people has demands very much like? other developed country demands. So the financial services,? whether it be insurance for their motorcycle ?this huge need for financial services and those are somewhat the themes if you will as far as the investment themes.

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