After registering the worst decline in over two decades, economic growth in Africa is showing signs of rebounding, with the continent’s aggregate growth expected to rise to 3.2% in 2018 and 3.5% in 2019. However, as was recently highlighted by the World Bank following their analysis of the state of African economies, improved infrastructure is a key requirement for stimulating this necessary growth. Africa’s critical requirement for core infrastructure, coupled with the increased development of private investment programmes, is driving a strong pipeline of opportunities in infrastructure investment.
Central banks in the developed world are contemplating an end to their dalliances with quantitative easing. Crucially, the US Federal Reserve announced its intention to commence balance sheet normalisation by ceasing to reinvest maturing principal of its bloated holdings of US Treasury securities and mortgage backed securities. Currently, the Fed’s balance sheet is 25% of US GDP. Normalisation will, therefore, require many years, but there will be important implications for the international cost of capital.
Vakayi Capital has recently invested in Homelux Property Development, making its first investment since its launch. The firm is the country’s only small and medium enterprise (SME) focused impact investor. It is uniquely positioned in Zimbabwe to tap into investment opportunities in businesses with proven business models, strong growth prospects and the potential to significantly create jobs and impact the lives of low-income people. Africa Global Funds speaks with Chai Musoni, Partner & CEO at Vakayi Capital, to learn more.
Most Africa and frontier funds have a very limited part of their portfolio invested in Ghana and for emerging markets funds Ghana is apparently a no-go area. This is understandable as no or very few Ghana-listed stocks meet the minimum liquidity thresholds of these funds. And with hindsight ignoring Ghana has worked well for frontier investors, especially in the 2014-2016 period. In 2017, Ghana has performed very well boosted by optimism regarding the new president and a normalization of interest rates. We believe it can run further as lower interest rates make equities more attractive for local investors. In the long run there could also be a rerating when more international investors buy into Ghana, but it is difficult to predict when that would happen.
Walk into any conference involving emerging or frontier markets, and the subject of impact is on everyone’s mind. While some organizations have engaged in this type investing for decades, impact investing as a formal discipline developed only over the past 10-15 years. The concept itself is simple: investing into companies, organizations, and funds with the intention to generate financial returns as well as measurable social or environmental impact.
By 2050, the world’s population will exceed 9 billion, and we’ll need to be producing at least 60% more food than we are today. As farmers the world over face increasing environmental threats, where will this additional food come from?
Africa Global Funds (AGF) catches up with Vincent Destieu, Deal Principal, Phatisa, to discuss new office in Abidjan and trends in agri-food in sub-Saharan Africa
In March, Mediterrania Capital Partners, a private equity firm focusing on growth investments for companies in North African and Sub-Saharan countries, announced plans to raise €250m for its third fund, Mediterrania Capital III (MC III). AGF speaks with Albert Alsina, CEO and Managing Partner, on the progress and investment strategy.
On June 22, 2017, South African Minister of Water and Sanitation Nomvula Mokonyane delivered her National Council of Provinces budget review in parliament.
The Fund for Peace, a Washington-based organisation working to prevent violent conflict and promote sustainable security, has published its Fragile States Index (FSI) for 2017. This year’s index indicates that Ethiopia experienced the biggest increase in fragility worldwide over the past year, which is perhaps unsurprising as the country went from relative stability to being rocked by the Oromo protests that spread and threatened to destabilise the regime – resulting in a state of emergency that remains in place. Other African states that showed significant deterioration in their scores included South Africa (6th worst deterioration worldwide), Gabon (11th) and Zambia (16th). However, African countries were also amongst the biggest improvers, with Mali the 5th best improver over the year. The Fund for Peace notes, however, that in Mali’s case the long-term trend indicates that the improvement over the last year was due to “bounce back” from earlier shocks.
African equity markets experienced an unprecedented decline for just over two years following the peak of the MSCI Emerging and Frontier Markets index for Africa excluding South Africa in September 2014. This followed the collapse of the oil price from its level of over USD 100 per barrel, where it had been for more than three years, as well as weaker commodity prices in general. Investor appetite for emerging and frontier markets reduced as the underlying economies are often considered to be largely driven by commodity exports. This is true for many of these economies, but in Africa there is also a distinction to be made as many African economies are benefiting from improved demographics and better political leadership combined with better economic management.
President Jacob Zuma has been facing a revolt after replacing a highly respected finance minister with yet another crony which was immediately followed by investment downgrades by foreign ratings agencies. This has widened the chasm within the ruling party but despite this, and public protests, we expect the president to dig his heels in even harder. He will go down kicking and screaming for sure. In essence, there now is a battle for the soul of the ANC.
Currency returns play a decisive role for US$-funded investors into African equities. To highlight some examples, the annualized total return for the FTSE/JSE Africa All Share Index during the last five years in South African Rand is 13.5%, while the US$ return for the same period is 4.1%. A benchmark index for Egypt, the EGX30, has delivered an annualized total return of 26.7% in Egyptian Pounds during the same period, but in US$, this impressive return shrinks to a meagre 1.8%. Same story for Nigeria, where the Nigerian Stock Exchange Main Board Index has returned a negative annualized return of -3.6% in US$ for the last five years, while local equity investors have enjoyed a healthy 10.4%, despite a balance-of-payment crisis and the first recession since 1991. It doesn’t matter if we are comparing annualized returns in local currencies and US$ for various 10- to 20-year periods – a negative currency attribution of 5% to 10% on a yearly basis seems to be almost a rule for most African equity markets.