In yet another sign the global economic growth remains fragile at best, the Organization for Economic Cooperation and Development (OECD) cut its global growth forecast in a report published earlier this week. When it last released its global growth outlook in November, the OECD estimated that the global economy would likely grow by 3.6 percent in 2014. Now, however, the group estimates that growth will likely only come in at about 3.4 percent largely due to sluggishness in the developed economies.

In what was unusually direct language for the OECD, the report said that the European Central Bank should immediately reduce its main refinancing rate to zero and take a much more inflationary stance to prevent stagnation in the European economy. While it was generally supportive of US monetary and fiscal policy, it also said that a less accommodative Federal Reserve will potentially slow growth while Japan must make more fundamental reforms to maintain growth there. The organization also fretted that while it estimated that the Russian economy would likely growth by 0.5 percent this year – down from its 2.3 percent forecast in November – there was significant danger that it could slip into recession as a result of increasingly aggressive economic sanctions.

Interestingly though, while most supranational organizations such as the OECD and the International Monetary Fund (IMF) have been slashing their growth forecasts for much of the world, the outlook for Africa remains consistently optimistic.

While the South African economy is likely to face significant challenges this year due to slowing growth in China and ongoing labor disputes, sub-Saharan Africa more broadly is expected to see economic growth of 5.5 percent this year after growing by 5 percent in 2013. In fact, according to the IMF, the region is expected to outgrow the world’s advanced economies by a margin of more than 3 percent, second only the emerging economies of Asia.

Most of that growth is being underpinned by a growing African consumer class, creating strong domestic demand for goods and services. In fact, thanks to relatively subdued commodity prices and anemic global economic growth, domestic demand has been the primary driver of economic growth in sub-Saharan Africa for about two years now.

It’s currently estimated that of the 1 billion people on the continent, about 300 million Africans are considered middle class consumers with annual incomes of more than USD5,000. It’s believed that by the end of this decade, more than 500 million Africans will be middle class consumers with a large percentage of them making more than USD10,000 per year.

Additionally, African infrastructure spending is also providing strong support for domestic economies. It’s currently estimated that about $55 billion is being spent on infrastructure projects across the continent, a sum expected to rise to about $90 billion by the end of the next decade. While a number of countries are making significant investment in roads, railways and power infrastructure on the continent – China alone has pledged $1 trillion in investment – most of Africa’s infrastructure spending is financed domestically by tax payers. That reduced dependence on foreign funding sources helps to ensure that projects remain on track despite global macroeconomic vagaries.

Still, despite domestic political challenges, foreign direct investment (FDI) in Africa has remained strong for years now, even in the wake of the global recession. In fact, last year Africa was the only region to achieve growth in new FDI, mergers and acquisitions and flows, up 16 percent to a near-record $43 billion in 2013 and accounting for about 5 percent of regional GDP.

 With strong growth forecast to continue for at least several more years, Africa remains one of the most attractive investment destinations in the world.

Investing in Africa

Unfortunately, Africa is a tough region for US-based investors to access, though not impossible.

To tap into the growing consumer trend on the continent, portfolio holding Shoprite Holdings (OTC: SRGHY) has an American Depository Receipt which trades over-the-counter here in the US.

With a chain of almost 300 stores stretching across the continent, it captures consumers all along the income chain. Its supermarkets cater to mid to high-income consumers, while smaller Usave markets cater to lower-income, budget conscious shoppers. It also operates a string of Hungry Lion fast food shops and liquor stores, plus furniture shops and pharmacies.

To support its geographically diverse network, Shoprite has invested heavily over the years in developing a massive logistics infrastructure. On any given day, Shoprite’s trucks travel enough miles to circle the earth twice. While that leaves the company with large exposure to volatile fuel costs, that network ensures timely delivery of fresh product and drastically reduces its shipping costs versus its competitors, allowing Shoprite to offer some of the lowest prices on the continent. As a result, Shoprite has a clear competitive advantage in its markets.

In the final half of last year the supermarket chain came close to setting a new sales record with revenue of ZAR51 billion. It’s net profit increased by 7.5 percent, reaching ZAR2.7 billion while its earnings per share were up 7.9 percent to ZAR3.41.

According to management, sales across its network of stores off to a stronger than expected start in the first two months of the year. At the same time food inflation has also been running about 6 percent, typically a positive for the company as it is usually able to pass along those higher costs with extra margin built in. As a result, it is likely to generate both revenue and earnings growth in excess of 10 percent in the first half of this year.

Buy Shoprite Holdings up to USD21.

For a more diversified play on African growth, Market Vectors Africa Index (NYSE: AFK) holds a basket of 112 companies across 17 countries. While its exposure to the financial sector is relatively high at 39.3 percent of assets, the remainder of its portfolio is spread across the energy, materials and consumer staples in line with the region’s economies.

With an expense ratio of just 0.81 percent, it is one of the cheapest, broad-based African funds available. It also offers an attractive 2.54 percent yield given that African companies commonly pay dividends. It also has the added advantage of trading on the NYSE, minimizing both liquidity concerns and trading costs.

While the S&P 500 has returned just 1.3 percent this year, Market Vectors Africa Index is up by nearly 7 percent, making it one of the top performing regional funds so far in 2014. And while it can be highly volatile depending up the tide of economic news or new or renewed conflicts on the continent, given that Africa is one of the last under-penetrated markets in the world it should provide solid growth for years to come.