Buy into Africa

Africa is booming. From Mauritius to Botswana, Ghana to Uganda, African economies are growing at a rate of 5-6% a year. Hedge funds, retail fund managers and private equity investors are swarming all over the continent, with the biggest potential seen in an area called SSA, or sub-Saharan Africa.

Naive investors would probably attribute this new-found fortune and enthusiasm to just one spectacularly successful industry – the resources business. And it’s certainly true that SSA has more than its fair share of oil – both Angola and Nigeria are now huge producers of oil for western markets. Other important African export commodities include iron ore, timber, manganese, cobalt, copper and chromium.

But the resources sector is only half the story. Successful investors such as Jamie Allsop – a classic value investor – are scouring the continent using old-fashioned value ideas, looking for solid trading companies benefiting from the much bigger economic transformation under way.

Greater prosperity has created a growing middle class – the World Bank estimates that the sub-Saharan middle class will be 43m strong by 2030, up from 12.8m in 2000, with most in South Africa but other countries such as Zambia, Nigeria, Kenya and Ghana featuring prominently. That means billions will be spent on consumer goods, telecoms, and infrastructure projects. And there are already many well run, solidly profitable companies in all these markets – they form the core of a vibrant and growing equity culture taking root in Africa.

Two decades ago, there were just five stock exchanges in SSA. Today, there are 18 with 1,500 separate listings. It has been reported in Fortune magazine that, excluding South African shares, African stocks have climbed an annualised 43 per cent since the end of 2006. In particular, since 2001 the Mauritian, Botswanan, South African and Namibian stock exchanges have outperformed the Dow Jones index by 483 per cent, 375 per cent, 202 per cent and 188 per cent respectively.

London-based research and broking firm Exotix, which specialises in frontier markets, also boasts its own large-cap index of SSA companies – its top 30 increased their market capitalisation by 126 per cent or $40bn in the period between 2006 and 2008, outperforming South Africa and the MSCI indexes for Eastern Europe and the Far East. It also noted that volatility was lower.
For further information on how SIMI help your project become a reality contact us
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