Issue: June 2005
INTERNATIONAL INVESTING:CHARITY BEGINS AT HOME!
at Investec Asset Management,
suggests that African investment
offers exciting opportunities for
IS THE AFRICAN CONTINENT THE BEDROCK OF YOUR
SHOULD IT BE?
Last year, five of the world’s 10
best-performing stock markets were
African. Positive changes sweeping
the continent are increasingly being
recognised by the global investors.
South African retirement-fund
trustees are particularly well
positioned to appreciate the
dynamics. They need to know
what these changes mean for
their investment portfolios.
The past decade has seen markets
rapidly develop across Africa.
Established stock exchanges now
operate in over 18 countries as
far-flung as Algeria, Cote d'Ivoire,
Uganda and Malawi. Most African
capital markets are still in the
‘frontier’ stage of development –
young, small and illiquid even by
emerging market standards.
But there are also markets with
significant development prospects in
terms of depth (listings), breadth
(size and trading volumes), and
Interest from the developed world
in Africa is increasing. G8 leaders
have prioritised debt write-off. Major
western countries are preparing for a
new era of economic engagement.
And the NEPAD initiative is forging
Debt write-off will substantially
improve Africa’s capital account
and underpin many of its currencies.
Surprisingly, African currencies
correlate lowly (ie, do not move in
line with one another). So funds
spreading investments through Africa
will derive currency diversification.
Historical returns from African stock
markets have been remarkably good.
Africa has strong potential because it
is a vibrant, resource-rich continent
with a youthful population base
whose skills and education levels
are developing apace.
WHAT TRUSTEES CAN DO
They need to think about Africa in
their investment strategies and ask
their South African managers what
they can do outside our South
Five percent of South African
retirement-fund portfolios can now
be invested into Africa through an
appropriate listed pooling vehicle
beyond the allowable 15 percent
international exposure. This additional
five percent provides a unique
opportunity for trustees to participate
in development of the continent and
bring greater diversification to their
portfolios outside South Africa.
Sir Sam Jonah, president of
Anglogold Ashanti, was asked at the
recent Investec Asset Management
investment conference what we as
South Africans could do to help
promote Africa. He replied simply:
"Invest in Africa, and talk positively
about our continent."
In future TT editions, we’ll explore the
opportunities in greater detail.
FIVE REASONS WHY AFRICA
- Feeding the Dragon. China’s
growth depends on resources,
many necessarily from Africa;
- Frontier market. That African
stock markets are developing
provides superb opportunities
for early investors. Telecoms,
retail banking, beverages and
construction show promise;
- International interest. Debt
relief and foreign aid will
underpin growth and improve
- Global markets are
expensive. By contrast,
African markets offer higher
earnings growth and stronger
- Dissipating risk. During the
past five years, more than
two-thirds of sub-Saharan
Africa countries have held
multi-party elections and
improved their fiscal discipline.