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You Can Invest In The World’s Fastest Growing Continent Through These 2 Companies

With China’s size and its stupendous economic growth over the past two decades, it might be easy to envision Asia as a strong contender for the fastest growing continent in the world.

But hold that thought. In 2013, the African Development Bank, a multilateral finance institution (members include nations from Europe, South America, Asia, North America, and of course, Africa), boldly stated that “Africa is now the fastest growing continent in the world.”

Africa is a continent made up of about 48 countries and its peoples have diverse cultures, histories, languages, and religions (sometimes this is true even within the same country!). Although many of the countries in the continent still depend greatly on the export of natural resources, improvement and growth has been seen in areas like agriculture.

It’s hard to tell if Africa has managed to hold onto its crown after 2013 (for some perspective, the African Development Bank stated that “the growth rate of its low-income countries exceeded 4.5% in 2012 and it is predicted to remain above 5.5% in the coming years”) but either way, it’s a fact that there are companies in Singapore which have been paving the way in Africa’s agriculture sector.

The buccaneering duo

Two of the largest companies in Singapore with agriculture businesses in Africa would be Olam International Ltd (SGX: O32) and Wilmar International Limited (SGX: F34).

Olam is a global food commodity trader and it has a huge presence in Africa. In fact, the company was actually founded in Nigeria in 1989. Many of the company’s agriculture products like rice, grains, cocoa, and sesame are still sourced directly from farms in Africa even today.

In Olam’s fiscal year ended 30 June 2014, 16.6% of its products by volume were sourced from Africa and 21.3% of its revenue came from the continent.

Meanwhile, Wilmar had started out as an Asia-centric company with palm oil plantations in Indonesia and Malaysia and a strong consumer edible-oils business in China. But, the company has long since ventured into Africa some 15 years ago beginning with the import of its edible oils into the continent. Over time, Wilmar even started developing palm oil plantations in that region.

Africa is still a tiny part of Wilmar’s business (the continent accounted for just 4.7% of the company’s total revenue in 2014), but as a symbol for where the firm sees the most potential in, its 2014 Annual Report was titled as “Wilmar in Africa.”

Currently, Wilmar is in 13 different African countries and has business operations in both the upstream and downstream portions of the oil palm industry as well as interests in sugar and rubber plantations.

Foolish Summary

According to a study made by Wilmar, 60% of the world’s unutilised agricultural land sits in Africa and the continent is home to a “young and growing population.” These can be significant tailwinds for both Olam and Wilmar.

But all that said, it’s worth remembering that Africa is not a major part of both companies’ business and a careful consideration of all other areas of their businesses is needed before any investing decision can be made.

If Olam and Wilmar’s core geographical markets are to suffer, even strong growth in Africa may not compensate for it.

For more investing analyses and important updates about the stock market, sign up for The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns Wilmar International Ltd.