These days, oil, cocoa and precious metals aren't the only things that are attracting foreign investors to Africa.
A middle class has formed on the continent, and it's transforming Africa's investment landscape, according to experts. Instead of focusing on extracting commodities, investors are shifting gears to take advantage of Africa's increasing consumer demand.
Estimates of the size of Africa's middle class vary, and depend on how it's measured. The African Development Bank said in October that Africans who spend $2 to $20 a day qualify as middle class, which puts the figure at 370 million—about a third of Africans. The Standard Bank, the largest lender in Africa, uses a spending range of $15 to $115 a day, which means that among the 11 biggest Sub-Saharan countries, including Kenya and Nigeria, there are 15 million households that qualify as middle class.
East African countries like Uganda and Ethiopia are poised to gain traction, though it will probably take at least 5 to 10 years for a sizable middle class to grow and foster a consumption-driven economy.
The Standard Bank predicts Nigeria will lead the growth of middle class households, with about 7.6 million additional middle class households in the next 16 years.
As incomes rise and living standards improve, Africans are altering their spending habits, said Mthuli Ncube, Oxford University's senior research fellow.
The former African Development Bank chief economist found that as Ghanaians have moved out of poverty, for example, the percentage of income they spend on travel, technology and retail has grown. Expenditures on mobile phones doubled, car ownership and leisure travel spiked— even as the percentage of income spent on basic needs like food shrank. Ncube also noticed similar spending transitions in South Africa.
These changes in consumer demand, paired with increasing disposable income, are creating investment opportunities. Africa could be the emerging market story of the decade, said Mark Mobius, executive chairman of the Templeton Emerging Markets Group.
He sees demand rising in retail, transportation, and telecommunications. George added that consumer businesses, which include retail manufacturing, banking, hotels and restaurants, hold the most promise.
Mobius's team invests in African companies that cater to those consumption-driven sectors. He said his team visit each company in person, in order to try and ensure they have solid long-term growth prospects supported by rising domestic consumption and good corporate governance.
"We are bottom-up investors and invest on the basis of individual companies, and not by sector or country," he said.
firms are also increasingly investing in Africa, according to Ama Baafra Abeberese, a Wellesley College development economics assistant professor who researches developing countries. Those firms are also looking to middle-class Africans for capital.
As Africans move from hourly wage jobs to salaried positions with pensions, private equity firms see the growing number of pension funds as new sources of capital available to private equity fundraising.
Instead of investing in African companies, some foreign companies are establishing local bases that cater directly to Africans' consumer demand. Wal-Mart is expanding food retail with a particular focus on West Africa, a company spokeswoman told CNBC. L'Oreal, Nestle, and Unilever are establishing manufacturing bases in Africa. Marriott, the leading hotel operator in Africa, plans to open 30 new properties by 2020 to a total of 150 properties.
For companies that want to get money into consumer-facing sectors, Oxford's Ncube suggested shopping malls, which allow a high number of businesses to concentrate in one area—an efficient way to cater to consumer demand.
Ncube said foreign companies that want to form African bases are best served by finding reliable partners on the ground who are familiar with the local market, and can help maneuver through infrastructure challenges like power outages. "The right partner also helps the investor build proper social capital to be successful," he said.
"While it is important to be prepared for a few inevitable growing pains and challenges along the way, growing incomes, higher living standards and improvements in infrastructure and trade all have the potential to bring the patient, long-term investor exciting opportunities," Templeton's Mobius said.
One of the best ways to speed up the growth of the middle class is through more investments, said George, of Deloitte. As more companies enter the continent, they will create jobs which will lead to income growth and more consumption—and that ultimately paves the way to new investment opportunities. George has noticed that so far, Asian and European investors have exhibited the strongest appetites to invest in Africa.
Some investors may be holding back because they're not be fully convinced about the existence of an African "middle class." Definitions of the term are based on comparatively lower costs of living, in places where the dollar is able to buy more goods. Therefore the numbers may not fully reflect the discrepancy between Africa's middle class and what the West or Asia considers middle class, said Abeberese.
"Do they have access to health facilities, education, can they afford leisure? Those questions are more important than coming up with arbitrary cutoffs," she said. The majority of Africans still live below the $2 poverty line, she reminded, and using a qualitative measure that focuses on asset ownership and living standards is more realistic to estimate the middle class population.
Regardless of which definition is used, Abeberese acknowledged that a consumer base with growing purchasing power and demand is in Africa now, and it's expanding.
"Companies say generally they want to be part of the growth, rather than pulling back and waiting," George said.