There is an opportunity to increase the presence of Funds that focus along the agribusiness value chain, writes Paul Kamau, Director, Finaltus
Despite the uncertainty about the domestic and global economy, financial markets have staged a rapid recovery since the COVID-19 pandemic triggered a severe sell-off in February and March this year. The fiscal and monetary stimulus of economies contributed to the improved sentiment in markets since April, but the question is to what extent this can be sustained? We are also faced with a variety of problems in South Africa that will not disappear overnight.
The impact of COVID-19 on global economies has triggered unprecedented central bank responses. Since the virus made its debut in December 2019, the US Federal Reserve Bank (Fed) has lowered the targeted fund rate and kept it between a range of 0% to 0.25%. This marks the lowest level since the 2008 global financial crisis. Locally interest rates are at 50-year lows after the South African Reserve Bank (SARB) trimmed interest rates by 3% this year.
Due to the impact of COVID-19 on the South Africa economy and particularly the poor socio-economic situation of many South Africans, the value of Impact Investing has been amplified and investors realise the integral role it plays as part of their investment portfolio.
Despite the global COVID-19 pandemic, technology and construction opportunities in Africa remain. Urbanisation and economic diversification continue to fuel the urgent demand for improved physical infrastructure. This is reflected by the development of major projects, such as the vast hydropower projects underway at Mambilla in Nigeria and Caculo Cabaça in Angola.
The Johannesburg Stock Exchange has proved itself remarkably resilient during the global COVID-19 crisis, according to Leila Fourie, Group CEO of the JSE, so much so that the JSE All Share Index is not just in positive territory, but on a like-for-like basis, it is producing better returns than it did at this time last year despite enduring some of the most volatile trading times in recent history.
The most recent figures released by the Association for Savings and Investments South Africa (ASISA) show a historic influx of investment into local unit trusts over the last quarter. In fact, according to ASISA, this is the highest net quarterly inflow on record, at R88bn. Of this amount, around R44bn was invested by individual investors, and a big portion of that was brand new money that had not been invested before.
Mining in Egypt has been in the headlines recently by virtue of a propitious combination of ample resources, changing regulation and new investment.
Headwinds caused by the COVID-19 pandemic have made investors reconsider the traditional risk-return dynamic of asset classes. They realised that risks can be found anywhere in the investment world. Even in developed markets - considered a safe bet in the previous cycle. But what plausible investment opportunities could emerging markets offer in the next few years?
With the various threats to the Mauritius model caused by negative FATF and OECD listings, the question of “if not Mauritius, then where?” has been raised by many investors and managers in Africa. It is in this context that at the end of 2019, the World Bank and the CREPMF published proposed rules to create a legal framework for PE/VC funds and asset managers in the West African Economic Monetary Union region (WAEMU). WAEMU covers eight countries of West Africa, including the fast growing economies of Cote d’Ivoire and Senegal.
A Group of 30 report, published late last year, estimates that the world’s top economies will face a pensions shortfall of just over $5trn by 2028 and $15.8trn by 2050. It is anticipated that this shortfall will be even greater given the impact of the COVID-19 pandemic once this report is updated. The likelihood is that the pandemic has brought the crunch-point forward for many retirees.
The COVID-19 pandemic struck Africa later than other regions of the world, but its effect on African economies should not be understated. The World Bank has predicted that the continent will face its worst recession in 25 years, write Kwadwo Sarkodie (pictured), Partner, Ed Bentsi-Enchill, Associate, and Thomas Ajose, Associate, Mayer Brown.
Can you build wealth at times like these? The COVID-19 pandemic has undoubtedly derailed markets and economies across the board. It is raising questions about the viability of many industries and businesses which have been part of our everyday lives until now. There have been precious few places for investors to hide, and the impact on investor portfolios has been severe. Despite how uncomfortable the market mayhem makes us feel, it also provides the opportunity to build great future portfolios – provided we can distinguish noise from material information and overcome emotion, to act rationally and take a longer-term view.
Every 75 to 100 years, an event occurs that will forever define how generations to come live. This is our Black Swan event. According to Ray Dalio (legendary hedge fund investor) we are entering a global depression, not unlike what the world experienced in 1929 (hopefully cushioned by the various monetary and fiscal initiatives by the various governments). Many would say this is self-inflicted, i.e. this was not a systemic failure of capitalism but a choice of lives over livelihoods. How we react will largely define how well we emerge from this. Nothing will be the same again, hence we cannot go on with business as usual.