Investors are becoming a lot less risk-averse toward putting money on African soil, but the continent’s small to mid-sized economies still struggle with unique market fundamentals, chief of which is volatility.
While earning off volatility is no impossibility in elsewhere markets, replicating the approach in Africa is not unlike attempting to fit a square peg in a round hole.
Barring the lack of highly contextual metrics, the major reason to-Africa investments are riskier than usual is the age-old problem of currency volatility. In fact, the region is home to several very volatile currencies, including the South African Rand, the Zimbabwean Kwacha, and even the Nigerian Naira.
Because these economies are heavily dependent on natural resources, changes in the price of traded physical commodities are always reflected in the value of fiat money. Inflationary realities put most of these countries at a disadvantage, especially when it comes to foreign exchang...