Seeking societal outcomes to investment is a growing theme to watch as more wealth is directed towards making a difference.
With the macroeconomic picture characterised by green shoots on oil revenue, FX liquidity and structural reform and with equity and fixed income valuations largely reflecting well understood concerns, the case for investment of fresh foreign capital merits a revisit.
Sir Bob Geldof said “Aid isn’t the answer. Africa must be allowed to trade its way out of poverty.”
What a difference a century makes. If we stepped back in time to a hundred years ago we'd find a primitive China; a Middle East that had yet to discover the riches of oil and most of Southeast Asia consisted of countries that were barely distinguishable from medieval societies. It was an entirely different world.
Share buy-backs have become a very common mechanism for exiting an investment in a South African company since the introduction of dividends tax in April 2012.
Investing for impact in Africa has long been the preserve of development finance institutions (DFIs), foundations and ultra-high-net-worth individuals. If the United Nations’ Sustainable Development Goals (SDGs) are to be achieved, it is crucial that additional sources of capital be brought to bear, and providing mechanisms through which all categories of investors are able to invest for impact is key to unlocking private capital.
Everybody is talking about infrastructure. Infrastructure provides the framework under which an economy performs and the state of roads, the quality of telecommunications and the stable supply with power, to name just a few examples, more often than not makes the difference between a successful and a struggling economy.
Over the last three years, GDP growth in sub-Saharan Africa (SSA) has been on the downtrend due to a crash in commodity prices (oil and natural resources), weak external demand, drought, and security problems. The real GDP in SSA grew at 1.5% in 2016 (the weakest since the 2008–09 global financial crisis); global expansion for 2016 was estimated at 2.3%. The GDP growth rate for SSA averaged about 6% during 2010–14, declining to 3.4% in 2015 from 5.1% in 2014.
Over the last decade, there’s been an increased vocalisation of investors’ concerns about the cost associated with investing. This concern has stemmed partly from the growing income disparity evident in society, which was epitomised by the Occupy Wall Street movement which started in Manhattan in September 2011. The Occupy movement sought to highlight the inequality in society, but unfortunately six years later has all but disappeared. The tragedy is that the extent of income disparity remains a socio-economic issue which requires resolution and may well have been the undercurrent which has been surfed by populist political agendas in the last year. A further driver of this investor focus on cost has been the dearth of excess return or alpha amongst active managers. As a result investors responded by moving “en masse” into passive beta products, which offered market exposure at a discount to traditional active management fees. Since this initial response, passive ETF (exchange traded fund) flows have exploded. Deutsche Bank estimates that global ETF AUM has increased to $3.5trn in 2016 from just over $500m in 2006 (See chart below).
By Jonathan de-Lance Holmes (pictured), Investment Management Partner, Linklaters, Johanna Monthe, Investment Management Lawyer, Linklaters and Nicole Paige, Private Equity Partner, Webber Wentzel
In 2016, real GDP growth in sub-Saharan Africa is estimated to have been the weakest since the 2008-09 global financial crisis. This was largely because of the weak performance in its two largest economies, South Africa and Nigeria, which together make up about half of sub-Saharan Africa's GDP.
The “Africa Rising” narrative is increasingly giving way to that of “Aspiring Africa”, as the Base of the Pyramid (BoP) shrinks and the new middle class burgeons, says Wim van der Beek, founder and managing partner of Goodwell Investments
Over the past decade Mauritius has earned an enviable reputation as Africa’s preferred risk-mitigation centre, attracting a wide range of corporates and funds seeking to understand, navigate and access African growth.