Social media and the news may have fooled you into believing otherwise, but Africa is the most profitable continent at the moment. We’re not making this up. The United Nations has confirmed this.

According to a UN Conference on Trade and Development report, Africa offered the highest ROI (return on investments) on foreign investments. Africa’s ROI was 11.4%, compared to the global average of 7.1% — almost double. The IMF (International Monetary Fund) also backs this up, projecting Africa with the highest global growth prospects from 2018 to 2023.

However, like every other cross-border investment, investors must select a profitable sector to ensure maximum ROI. We discuss seven of these sectors below.

7 Profitable Business Sectors in East Africa

East African countries are among the fastest-growing regions in the continent, with Rwanda, Uganda, Kenya, and Ethiopia at the top. Tanzania is also prominent on the list as it stepped from its low-income status to middle-income rank in 2020, joining Kenya and Djibouti.

The EAC (East African Community), inclusive of Uganda, Congo, Rwanda, and several other countries, is also a part of the MIGA (Multilateral Investment Guarantee Agency), which offers political risk guarantees for projects in member states to promote foreign investments.

But MIGA is not the only incentive driving business growth in the region. A McKinsey survey found that 35% of respondents believe a rise in consumer spending to drive Africa’s growth. Which businesses will these consumers buy from? Here’s our list of potentially profitable business sectors.

1. Solar Energy
   Statista data shows 597 million people in sub-Saharan Africa cannot access electricity in 2021. The situation was worse in rural areas, where over 70% of the population did not have electricity.

   Power outages are common even in areas with electricity connections, making people rely on noisy generators. Solar energy provides a clean and abundant solution to this problem since the region gets about 300 days of sunlight annually.

2. Fintech
   The fintech industry has been growing at an impressive rate in Africa, with its revenue increasing from $3.8 billion in 2020 to a projected $12 billion in 2025. A McKinsey study found Africa to be the second-fastest growing payments and banking market in the world.

   Part of the reason fintech is snowballing in sub-Saharan Africa is that 45% of the population is unbanked. Due to this, most people depend on mobile money, making the region a global leader in this fintech segment.

3. Agriculture
   There’s a huge potential for agribusiness in Africa. The World Bank projects the region’s agriculture industry to have a valuation of $1 trillion by 2030. East Africa provides ample agriculture opportunities due to year-round sun, abundant labor, and fertile soils.
4. Real Estate
   East Africa accounts for 5.71% of the total global population, ranking first in Africa in terms of population count. A large population translates to rising demand for homes, apartment units, and commercial spaces.

   The African real estate market has grown rapidly in the past few years. For example, the Kenyan real estate market grew by 5.2% towards the end of 2022. International entrepreneurs and investors can profit through the renting, leasing, and buying of properties, both residential and commercial.

5. Logistics
   From Ethiopia and Kenya to Nigeria and Ghana, logistics businesses are booming across Africa. In 2022, the Suez Canal recorded its highest monthly revenue of $704 million. Investors interested in logistics can dabble in warehousing, courier services, and freight forwarding.
6. Smartphones
   Lower income levels in East Africa mean that most people cannot afford high-end smartphones from Apple or Samsung. That’s why 60% of all smartphones sold in sub-Saharan Africa are under $100.

   International entrepreneurs can introduce low-priced smartphones running on the Android operating system to attract consumers. Varun Mishra, a Counterpoint Research analyst, says these phones should be “priced as close to the feature phone as possible” to incentivize consumers to consider them.

   Besides affordability, investors should also account for poor infrastructure and connectivity options in the region. Phones that run some applications offline, such as YouTube, and come with cheap data plans can potentially do well.

7. Private Schools
   Due to inadequate education budgets, a rise in population, and political corruption, the quality of education in African government schools has declined alarmingly. Parents now prefer sending their children to private schools for better education opportunities.

   Establishing low-cost private schools in Africa can be highly profitable for international investors. Jay Kimmelman’s Bridge International Academies is one of the ventures catering to regions where the parental income is under $2 per day. These schools have been doing exceptionally well across the continent, outperforming the national average in Kenya. In Uganda, students from these schools have a 100% pass rate.

Conclusion

By now, you should have some idea of how you want to enter the African market. But where do you get the money from? Many of the mentioned sectors, such as solar energy and fintech, require exorbitant amounts of funding.

At Trans African Investments, we connect you with investment opportunities to bring your vision to life. We have a team of licensed financial experts and lawyers to provide regulated services, like pre-investment due diligence and post-investment banking to help cement your position in the East African market. Contact us today to learn more.