Revised regulatory allowance for African investments can be a lucrative opportunity for pension funds, says Brett Mallen: Acting CEO, Sanlam Africa Investments
The 2017 African Economic Outlook predicts that Africa’s average growth is expected to reach 4.3% in 2018. The private equity (PE) and venture capital industry in Africa continues to witness strong performance across diverse sectors. Returns to investors are expected to remain strong with considerable growth in robust asset classes such as infrastructure, which provides stable, long-term cash flows. Despite the prevalence of lucrative deals, investors in Africa face high transaction costs stemming from unique risk factors, such as exposure to market volatility, as well as political and credit risk. The insurance and credit enhancement products required to offset these risks lead to higher transaction costs.
Environmental Social Governance (ESG) awareness must be spread through all industries, business sectors, and geographical regions if we are to achieve better qualitative development in those emerging markets that need it most. For Africa in particular, scrutinizing business activities for ethical behavior is particularly important, given the sensitive history of this region rich in natural resources. But in Africa and around the world, there is little doubt that the growing importance of ESG is a powerful and even irreversible trend.
Sustained commodity price growth and reduced costs are combining new technology trends with synchronised global growth to present Africa’s mining sector with the best prospects in over a decade.
In Africa today, local capital markets, domestic institutions and favourable demographics are converging. This is seeing many countries take control of their own investment and growth agendas.
The economy is expected to rebound in 2018 following a difficult 2017. Some of this rebound will trickle down to the Real Estate market but developers and property owners should not expect things to normalise immediately. In this instance, where should Real Estate Investors focus their attention in 2018? The year 2017 saw a significant reduction in consumer spending and both local and international investment. This slowdown was largely due to two factors: the prolonged presidential election, and a legislation driven slowdown in lending.
It seems 2017 flew by at a blinding speed. At the end of last year, we were wondering what a Trump presidency would look like. Now, the first year of Trump’s term in office is nearly behind us. Unexpected election outcomes left us reeling in 2016, and 2017 has certainly proven no less turbulent.
Blockchain refers to a distributed or decentralised public ledger or database of records of executed and shared digital events among participating parties. When persons transact in a blockchain system, a public record of all transactions is automatically generated and are visible to all participants which increase trust and reliability since participants can access the transactions from different nodes if one-point node fails. These transactions are verified by computers using sophisticated algorithms to confirm transfer of value and create a historical record of all activity which are impossible to change thus it contains an accurate and verifiable record of each and every transaction ever made which reduces opportunity for fraud.
Infrastructure as an asset class can provide a distinct addition to African pension and investment portfolios and is increasingly being considered.
Africa’s has the potential to become the next private equity hotspot. Merely looking at the energy infrastructure sector, “600 million Africans are not connected to the electricity and public investment will not be sufficient,” says Graham Sheward, Managing Director of SGG Mauritius.
When it comes to investing, the quote above from Albert Einstein is extremely apt; especially today, when many investors are concerned about where future returns will come from.
The recent ruling by the Supreme Court of Kenya to nullify the results of the presidential election caught Kenyans and the rest of the world off-guard. After a tension-filled election period most Kenyans were trying to settle into their normal routines amid calls by the international community that the election results of the August polls should be accepted.
In an industry-changing move, the amended Pension Fund Act regulations which came into effect on September 1, 2017, bring about welcomed reforms. But, implementation could pose challenges for trustee boards that are already grappling with limited governance bandwidth.
Africa has the fastest-growing economies in the world as well as the youngest population expected to double by 2055. This growth presents an opportunity to transform this youth boom into a catalyst for industrialising Africa or it can undermine the progress that has been made. The real question is "what do we do with the youth and how to develop their capacity to unlock their potential to be positive agents of change and contribute towards job-creation?
