Emerging markets, particularly those in developing economies, have garnered significant attention in recent years due to their potential for rapid growth and attractive investment prospects. One such market that has shown remarkable resilience amidst global challenges is The Gambia, a small West African nation that has demonstrated a gradual recovery and favorable economic outlook. In this article, we will delve into the opportunities and risks associated with investing in The Gambia, examining its economic performance, key sectors, and the factors that shape its investment landscape.
The Gambian economy: an overview
Gambia, with a population of approximately 2.4 million people, has faced its fair share of challenges in recent decades, including economic mismanagement, weak governance, and the impact of climate change. However, following its democratic transition in 2017, the country has experienced a period of relative stability and positive economic growth. In 2023, despite a sluggish global environment, The Gambia’s real GDP grew by an impressive 5.3%, signaling a continued recovery from the COVID-19 pandemic and persistent external headwinds. This growth was primarily driven by improved agricultural production, which accounts for around 20% of the country’s GDP and employs over 70% of the workforce. Increased public consumption and a rise in both private and public investment contributed to the positive economic performance. The World Bank projects that The Gambia’s GDP will continue to grow at a rate of 5.6% over the period of 2024-2026, fueled by increased economic activity across all sectors and a commitment to maintaining macro-fiscal stability.
Inflation and monetary policy
One of the key challenges faced by Gambia in recent years has been rising inflation, which reached a high of 9.6% in 2022 due to the global price of commodities. In response, the Central Bank of Gambia has taken a proactive approach to curb inflation by tightening monetary policy. The policy rate was raised to 17% in December 2023, up from 13% a year earlier, demonstrating the central bank’s commitment to maintaining price stability. While the inflation outlook remains a concern for investors, it is essential to recognize that the central bank’s actions are aimed at creating a more stable and predictable economic environment in the long run. As global commodity prices stabilize and the effects of monetary tightening take hold, it is expected that inflation will gradually moderate, providing a more favorable backdrop for investment. The IMF projects that inflation in Gambia will decrease to 9.1% in 2024, further supporting the country’s economic recovery.
Sectoral opportunities
The Gambia’s economy is primarily driven by agriculture, tourism, and services. These sectors present unique opportunities for investors looking to capitalize on the country’s growth potential.
Agriculture
Agriculture plays a vital role in The Gambia’s economy, employing over 70% of the workforce and contributing around 20% to the country’s GDP. The sector has shown resilience in recent years, with improved production serving as a key driver of economic growth. In 2023, the agricultural sector grew by 6.2%, outpacing the overall GDP growth rate of 5.3%. Within agriculture, key sub-sectors such as crop production, livestock, and fisheries offer promising investment opportunities. For instance, the production of major crops like rice, millet, and groundnuts has been steadily increasing, with rice production reaching 69,000 tons in 2022, up from 62,000 tons in 2021. Similarly, the livestock sub-sector, which accounts for about 5% of GDP, has seen growth in recent years, with the population of cattle, sheep, and goats increasing by 3.2%, 4.1%, and 4.5%, respectively, between 2020 and 2022.
Tourism
Gambia is renowned for its pristine beaches, vibrant culture, and unique eco-tourism offerings. Prior to the COVID-19 pandemic, the tourism sector was a significant contributor to the country’s economy, accounting for around 20% of GDP and employing over 150,000 people directly and indirectly. In 2019, the country received a record 235,000 international tourist arrivals, generating revenue of $128 million.
While the pandemic had a severe impact on the tourism sector, with international arrivals dropping by 62% in 2020, the industry has shown signs of recovery in recent years. In 2023, the number of international tourist arrivals reached 180,000, a 50% increase compared to 2022. As global travel restrictions ease and consumer confidence recovers, the tourism sector is poised for further growth. Investors can consider opportunities in hotel and resort development, tour operations, and the promotion of sustainable tourism practices. The government’s Tourism Development Master Plan 2020-2025 outlines strategies to diversify tourism offerings, improve infrastructure, and attract foreign investment in the sector. With a focus on eco-tourism, cultural tourism, and niche markets like bird-watching and sport fishing, Gambia offers a range of investment opportunities in the tourism industry.
Services
The services sector, including financial services, telecommunications, and IT, has been growing steadily in The Gambia. The sector contributed around 60% to the country’s GDP in 2023, with financial services and telecommunications being the key drivers of growth. In the financial services sector, the number of commercial banks has increased from 12 in 2020 to 14 in 2023, indicating a growing market for banking services. Mobile money transactions have also surged, with the value of transactions reaching $1.2 billion in 2023, a 40% increase from the previous year. This growth is supported by the government’s efforts to promote financial inclusion and the adoption of digital financial services. The telecommunications sector has experienced significant growth in recent years, driven by increasing mobile phone penetration and internet usage. The number of mobile phone subscriptions reached 3.8 million in 2023, representing a penetration rate of 158%. Internet penetration has also improved, with the number of internet users reaching 1.2 million in 2023, a 30% increase from 2022.
With an increasing focus on digitalization and financial inclusion, there is potential for investors to participate in the development of innovative financial technologies, mobile banking solutions, and the expansion of digital infrastructure.
The government’s efforts to create a more conducive business environment and attract foreign investment have opened up new avenues for growth in the services sector.
Specific Investment opportunities
Agro-processing: The Gambia’s abundant agricultural resources, including fruits, vegetables, and groundnuts, present opportunities for investments in agro-processing. There is potential for the development of value-added products, such as processed fruits and vegetables, groundnut oil, and animal feed. The government has identified agro-processing as a priority sector and offers incentives for investments in this area.
Renewable Energy: With its abundant sunshine and potential for wind and biomass energy, Gambia offers opportunities for investments in renewable energy. The government has set a target of increasing the share of renewable energy in the electricity mix to 35% by 2030. Opportunities exist in the development of solar power plants, wind farms, and biomass projects, as well as in the distribution and maintenance of renewable energy systems.
Affordable Housing: Gambia faces a significant housing deficit, particularly in urban areas, creating opportunities for investments in affordable housing. The government has launched initiatives to promote private sector participation in housing development, such as the National Housing Policy and the Social Housing Programme. Investors can explore opportunities in the construction of low and middle-income housing, as well as in the provision of housing finance.
Infrastructure Development: The Gambia’s infrastructure gaps, particularly in the areas of energy, transport, and water and sanitation, present opportunities for investment. The government has launched several infrastructure development projects, such as Gambia’s Electricity Restoration and Modernization Project and the National Roads and Bridges Programme. Investors can participate in these projects through public-private partnerships (PPPs) or by providing financing, construction, or maintenance services.
Risks and challenges
While Gambia presents compelling investment opportunities, it is crucial for investors to be aware of the risks and challenges associated with investing in a developing economy. As the majority of residency seekers come from neighboring African countries, thay are aware of the adversities plague the region such as developing infrastructure, political instability and climate change since they are similar to the situation in their homebase. However, Gambia has an advantage of a fast developing economy and competitive labor cost making it attractive for residency seekers.
Residency, Investment strategies and considerations
When investing in The Gambia, it is important to adopt a strategic and informed approach that takes into account the unique characteristics of the market. Due Diligence and Local Partnerships Conducting thorough due diligence is essential when investing in any emerging market. Investors should assess the regulatory environment, market conditions, and potential partners or collaborators. Engaging with local experts, legal advisors, and financial institutions can provide valuable insights and support in navigating the complexities of the Gambian market. NTL Trust’s expansive expertise in the Gambian market can help investors navigate the economic landscape. What we can help you with is a residency processing for foreigners, assistance with a company formation and multi-currency bank account opening. Tax incentives: Gambia offers a system of Special Investment Certificates (SIC) offering exemptions from taxation. From the moment you land at Banjul International Airport, our experienced staff take care of you, saving you time and money.
Long-term perspective
Investing in emerging markets often requires a long-term perspective. The Gambia’s economy is still in the early stages of development, and investors should be prepared to weather short-term volatility and challenges. By focusing on long-term growth potential and adopting a patient investment approach, investors can position themselves to benefit from the country’s economic progress over time. Keep in mind that we can help you with tax incentives as the Gambia offers a system of Special Investment Certificates (SIC) offering exemptions from taxation, Taxpayer ID number (TIN) registration and the Gambian Driver’s License application.
A unique opportunity
Investing in emerging markets, such as The Gambia, presents a unique blend of opportunities and risks. The Gambia’s resilient economic performance, favorable growth outlook, and sectoral potential make it an attractive destination for investors seeking to diversify their portfolios and tap into the growth potential of developing economies. It is crucial, though, to approach investing in Gambia with a well-informed and strategic mindset, taking into account the various risks and challenges associated with operating in a developing market. The country’s improving business environment, as evidenced by its rise in the World Bank’s Ease of Doing Business index from 155 in 2015 to 149 in 2020, and strong partnerships with international development organizations and financial institutions further enhance its attractiveness for renewable energy investments.
However, investors should also be mindful of the challenges and risks associated with investing in The Gambia, such as limited local technical capacity, regulatory uncertainties, and foreign exchange risks, and take appropriate measures to mitigate these risks. By conducting thorough due diligence, adopting a long-term perspective, implementing robust risk management strategies, and considering socially responsible investing principles, investors can position themselves to capitalize on the opportunities present in Gambia while navigating the complexities of the market.
As Gambia continues on its path of economic recovery and growth, supported by a commitment to macro-fiscal stability and structural reforms, the country is poised to attract increased investment and solidify its position as a compelling investment destination in West Africa. With the right approach and a keen understanding of the market dynamics, investors can play a vital role in shaping The Gambia’s economic future while also realizing the potential for attractive returns.
To know more about investing in Gambia, contact NTL Trust today.
