Now is the time to invest in Africa. Today, the continent’s population of over 1 billion can boast some of the world’s strongest Gross Domestic Product (GDP) growth rates, urbanising communities and expanding consumer class — facts that are increasingly recognised by the Gulf Corporation Council member states.

In September of this year, for example, Trojan General Contracting (TGC), part of the Royal Group owned by Shaikh Tahnoun Bin Zayed Al Nahyan, announced its participation in a $16 billion investment programme to build roads and railways across West Africa.

TGC is not alone in recognising the potential offered by the continent’s strong GDP growth and demographic dividend. Over the past decade, Africa has continued to attract investment from an increasingly varied and international investor base. With Foreign Direct Investment (FDI) flows to developed markets now at only 44% of their pre-financial-crisis highs, FDI flows to developing economies reached a new high of USD 759 billion in 2013 (53% of total flows). Of this, Africa attracted USD 56 billion, an increase over the 2012 figure of USD 53 billion.

Having invested globally for over 30 years, with an Africa focus that is supported by being part of one of Africa’s largest banking groups (South African listed FirstRand Limited), we have experienced the steady maturing of the market, which continues to offer an increasing number of investable sectors, countries and asset classes. Given Africa’s growth prospects, the challenge for international investors is to identify the best avenue for entering the market.

Due to its relative liquidity (over private equity, for example), listed equity is the natural starting point for many investors considering the African opportunity, and good valuations combined with continued growth expectations have put the asset class centre stage with investors in Europe and the United States. As well as providing returns to investors, stock markets can also be invaluable in aiding the broader economic development of a country. According to IMF reports, if supported by the right policies and reforms, stock markets can help African companies expand operations, in turn creating jobs and contributing to wider economic growth.

However, there are other factors impacting the perceived attractiveness of the listed markets such as stock valuations, cost of trading, quality of the exchange and the depth and breadth of sector access. Due to the developing nature of Africa’s 28 stock exchanges, there is a constraint on the number and types of business that have listed, resulting in a degree of sector concentration (e.g. financial services) which does not reflect the breadth of the country’s economic activity. In these cases, investment managers like Ashburton Investments, achieve greater sector diversification by investing in number of different asset classes, such as both private and listed equity.

And business conditions across the continent are improving according to the World Bank further benefiting listed companies. Their data shows that even as the world has become easier and easier for businesses, Africa has improved faster. Despite setbacks in some countries we are encouraged by the trend in the leading economies and regional powerhouses where the pace of improvement tends to be increasing. More importantly, in the World Bank’s latest analysis, out of the top ten improving countries globally over the previous year, five were from Sub-Saharan Africa. Sub-Saharan Africa countries also accounted for the largest number of regulatory reforms in the year with 70% of these economies having at least one reform that improves the business environment.

Listed markets in Africa are evolving, and trading conditions are looking up. Expected regulatory changes are likely to result in an improved investment environment, with reduced trading costs, deeper sectoral access, greater liquidity and increasingly attractive market valuations.

Stock exchanges are not the only entry point for investors looking to access the African growth story, nor are they, as yet, fully evolved. Yet with the right policies and incentives, African countries can encourage the growth of their stock exchanges to become important vehicles for companies to raise capital, as well as providing returns to investors.

— The writer is the African Equities Specialist for Ashburton Investments, the international investment management arm of the FirstRand Group.