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Africa: The Final Frontier For Investment?
Traditionally investors have looked towards developed countries for investment opportunities and, more often than not, investment decisions have been based on the economic development and growth of such countries. However, recently investment strategies have shifted towards emerging markets rather than established markets. Taxand South Africa discusses why it is time for investors to stop favouring BRIC countries and look to African markets.
It is a well established principle that those investors who enter a relatively new high-growth market first, will often reap the rewards of their bold decision as such markets offer higher returns for investors, due to the fact that the market is not yet saturated. According to research conducted by the World Bank, emerging markets in Africa are set to experience strong growth within the next few years, whereas much slower growth is expected in established global markets.
Several regions within Africa have made immense progress in improving their investment, business and regulatory environments, primarily as a result of the motivation to benefit from increased trade and investment into Africa as a whole. Countries such as Burundi, Rwanda, Kenya, Tanzania and Uganda have all bettered their rankings in terms of the ease of doing business in such jurisdictions and this has been achieved by means of regulatory and tax reforms. In addition to the countries listed above, many other African jurisdictions have improved their rankings in this regard, by streamlining processes relating to licensing and registration, obtaining credit, payment of taxes and cross border trading, to name a few.
In preparing a strategic growth plan, it is important to ensure that any actions or decisions are taken at the right time. At this stage, Africa is set to house some of the few remaining frontier markets in the world. As frontier markets generally have not yet experienced any meaningful economic development, they have a potential for rapid growth and sizable returns, which often attracts the interest of investors having a healthy appetite for risk. Multinationals should investigate the incentives, including tax breaks, of expanding operations to Africa.