Africa continues to turn global investors’ heads, despite its challenges. Attracted by its many fast growing economies and burgeoning consumer and business spending – expected to reach $6.7trn by 2030 – savvy investors are finding opportunities on the continent.
When FOCAC was established in 2000 to strengthen China-African economic cooperation and trade, the rest of the world was perhaps bemused. Bilateral trade and investment was minimal and African economic prospects unpromising. China’s embrace of China – as framed by FOCAC – has ushered in exponential growth in commercial ties. Now, just 18 years later, China is Africa’s largest trade partner and bilateral trade and investment ties are growing rapidly.
Sabvest is an investment holding group that has been listed on the JSE since 1988. The company has an exceptional long-term investment record, having generated a return to shareholders of 54 times capital over its 30-year history under the steady hand and sharp eye of founder, Christopher Seabrooke. Despite this prodigious long-term result, Sabvest is generally unknown to South African investors, and flies under the radar.
Investors should bank on digitisation to accelerate African deal origination, write Will Hunnam (left) & Lanre Oloniniyi (right), Co-founders of Orbitt
As Africa’s relationship with China matures and deepens, the use of the Renminbi as a medium of exchange holds the potential to increase the efficiency and reduce the risk and cost of both intra-African as well as Africa-China and broader Asian trade.
Last Tuesday, China pledged to invest $14.7bn in South Africa and grant loans to Eskom and SAA. While this investment brings the country closer to President Ramaphosa’s target to raise $100bn in foreign direct investment, some argue that China’s intentions are not what they seem. It is said that China is a mercenary lender, determined on weighing Africa down with debt to gain political influence access to the continent’s natural resources and precious metals.
Zimbabwe is at a turning point, write Kwadwo Sarkodie (pictured), Partner, and Joseph Otoo, Senior Associate, Mayer Brown. The need to attract investment is critical to kick start the economy. The current economic situation in Zimbabwe is dire, with continuously contracting per capita income, a significant fiscal deficit and an official currency, which trades on an informal market at a premium of about 30%. However, there are significant investment opportunities across almost every sector of economic activity, including energy, mining, infrastructure development, tourism, hospitality and agriculture.
Persistent economic and social disparities between urban centers and outlying communities present an ongoing source of instability for countries in the Maghreb. Nevertheless, Tunisia is rightly lauded for the democratic progress it has made since the popular uprising that toppled longtime strongman Zine El Abidine Ben Ali in January 2011. But regional asymmetries pose significant challenges to the country’s nascent democracy.
Exposure to alternative investments like art, wine and cars only changed 9% in the past year for Africa’s wealthy compared with a global average of 29%, according to the 2018 Wealth Report published by Knight Frank, Standard Bank Wealth and Investment’s global property consulting partner.
With less than a year until the end of Article 50 talks between the UK and EU – the future remains uncertain. Recent progress is welcome but detailed negotiations on the big issue – the UK’s future relationship with the EU, including market access – have only just begun. This could present opportunities to African investors but also risks that need to be mitigated.
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.