African equities in general have not been a success story in the last ten years, at least not when compared to other regions. The MSCI US and the MSCI Developed World index rose 232% and 159% respectively in the last ten years, while the MSCI South Africa and MSCI EFM Africa ex. South Africa only gained 33% and 23% respectively in USD terms. Did African equities lag because of volatile politics, falling commodity prices, currency problems and/or economic mismanagement? Not really. Of course, such factors have a negative impact on earnings and currencies, but corporate earnings growth has been quite similar in Africa versus the rest of the world. The big gap in equity returns is almost entirely caused by an expansion of valuation differences.
After enduring a trying decade under the mismanagement and malfeasance of Jacob Zuma, South Africa enters the new year in a better place than 2019, economically and politically. Under President Cyril Ramaphosa, South Africa has much work to do to recover the “lost decade”, but the country and economy are finding some footing and making progress – even if limited at most.
As Africa moves into 2020, great excitement will remain over the continent’s emerging opportunities for investment and trade. For example, Mozambique will attract over $100bn in fresh capital over the next few years to develop its massive natural gas resources. Following recent African investment summits in Russia and Japan, both the UK and France will hold high profile events early next year to expand their commercial relations across Africa’s 54 countries.
What opportunities does Africa hold for private equity firms and their investors?
Investment performance has always been shadowed by ESG (environmental, social and governance) factors. In line with investment theory, protecting the downside is more important to portfolio returns than the outperformance on a few glory days. ESG may not guarantee happy returns, but it will narrow the opportunity for nasty things popping up in the portfolio and open new doors faster, writes Graham Sinclair, Principal at SinCo - Sustainable Investment Consulting LLC
AGF speaks with Abhimanyu Yadav, Head of Fixed Income & Currency, MCB Investment Management, about the attractiveness of the growing African fixed income asset class and the company's MCB Africa Bond Fund.
Our continent is hurtling towards an uncertain future that is being shaped by the forces of the Fourth Industrial Revolution. It's too early to tell how exactly the confluence of rapid change and exponential technological advances will play out. But this much is clear: change will be constant and widespread. The uncertainty this creates has the potential to lead to insecurity.
AFG is talking to Eugene Stals, Chief Investment Officer, Phatisa. Eugene is a seasoned private equity and investment professional with deep operational experience. He was a senior partner at Ethos Private Equity in Johannesburg, South Africa. During this time, Eugene was instrumental in the formation of Ethos. In all, he spent 18 years in executive, board and investment committee capacities at Ethos. He has a successful track record over the whole private equity value chain. More recently, he has fulfilled roles as an executive in, and consulted to, companies on strategic and operational issues.
It is important that Africa is viewed through the right lens or it risks being consistently dismissed by international investors. Africa is a youthful frontier story that has a long runway for growth uncorrelated to the rest of the world. The real story is the fortune at the bottom of the pyramid. This market is there right now and it doesn’t depend on politicians, commodity prices or even a growing middle class. It depends on finding the right company that is sensitive to these consumers’ needs by delivering a product that is good quality, offers convenience and at the right price point. In this note, we unpack our thinking behind such companies as well as the current mega-trends driving growth.
In July, OP and Finnfund announced plans to establish Finland’s first impact fund - the OP Finnfund Global Impact Fund I - that will invest into emerging markets. AGF’s Anna Lyudvig speaks with Tuomas Virtala, CEO of OP Asset Management and Markus Pietikäinen (pictured), CIO of Finnfund to learn more.
The total wealth held in Africa rose by a modest 14% over the past 10 years (2008-2018) with three of the largest economies on the continent, South Africa, Egypt and Nigeria performing poorly on most economic indicators according to the AfrAsia Africa Wealth Report 2019, released by Mauritius based AfrAsia Bank. The total wealth refers to private wealth held by all the individuals living in each country and includes all assets (property, cash, equities, business interests) less any liabilities.
Mauritius has forged a reputation as a safe, trusted and competitive financial centre. At the private sector level, Mauritius has been at the forefront of driving quality investments into Africa. AGF’s Anna Lyudvig speaks with Yogesh Gokool, Senior Executive – Head Global Business at AfrAsia Bank to discuss the African strategy of Mauritius, investment opportunities in Sub-Saharan and AfrAsia’s activities on the continent.
After a strong growth in 2017 and early 2018, the global economy is losing momentum and expected to slow down from 3.6% in 2018 to 3.3% in 2019 before returning to 3.6% in 2020. This slowdown is attributable to a confluence of factors affecting major economies. The factors weighing down on growth prospects include, the elevated trade tensions between the United States and China, the natural disasters in Japan, the introduction of automobile fuel emissions standards in Germany, the tariff increases enacted in the United States and China earlier this year, the sovereign and financial risks in Italy, the weakening financial market sentiment as well as the deeper-than-envisaged contraction in Turkey.
Prior to the global financial crisis of 2008 – 2010 the so-called “big” banks, both internationally and within the local context, were stamped by investors and depositors alike with the “too big to fail” label. There was a sense of comfort that, due to their systemic importance, the government would never allow a big bank to fail. And to a large extent, they may have been right. But if we have learned anything since the global financial crisis it’s that banks can and do fail.