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Is Africa the Next Big Thing?
Posted on October 31, 2007 by Richard Beddard
Filed Under Markets |
Controlled Greed is wondering about Africa:
Africa could be — note the words “could be” — the perfect contrarian emerging markets play. That is, everyone is raving about Mainland China and India (and even Asia). Yet a few years from now we all wake up and start reading — after the fact — that pan-African investments have outperformed the emerging markets darlings.
New Star, the fund management group, is offering investors the opportunity to “get ahead of the investment pack” as it plugs its new Heart of Africa Fund in newspapers and magazines.
It will invest in Africa south of the Sahara, excluding South Africa. In other words, the bits of Africa traditionally considered a basket case.
It seems Sub-Saharan Africa is emerging from debt, buoyed by Chinese investment, demand for commodities and political stability. Its economic growth rates may not match China’s, but they’re a lot better than ours.
Citywire’s blog spies a few more exotic-sounding Africa funds in the works.
CG’s looking at Lonrho:
…the conglomerate trading in London. It offers Western style corporate governance and the company is investing in a range of diversified businesses in a variety of African countries. The problem is it has shot up in price a good bit since I found out about it. And, even more importantly, I have a hard time finding hard information about it (other than its Website).
Under Tiny Rowland, Lonhro was an African conglomerate until the acquisition boom ran out of steam and commodity prices collapsed in the 1990’s. Now a new chief executive, David Lenigas, is rebuilding the empire and I’ve got news for CG…
Lonhro is this weekend’s Stock to Watch on the Interactive Investor mothership. You’ll be able to read Edmond Jackson’s thoughts here by late on Friday.
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4 Responses to “Is Africa the Next Big Thing?”
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Arfrica is a different story this time around from previous attempts in the 80s and 90s to turn it into the next big thing. It has better infrastructure and the whole natural resources and commodities story means it has an economic raison d etre that it didn’t have before. The weight of Chinese money, in particular, gives it an economic validity that it hasn’t had before.
[...] by the emergence of Africa as a target for investment, here’s a photo taken by Stephen Eckett on a recent visit to [...]
Hi Lawrence,
Thanks for the comment. Maybe higher levels of democracy and lower levels of debt-dependency might also make the story different this time round. Not just from an investors’ point of view but that the knock on effect might be the economic development of these countries. Let’s hope so.
If you take India and China out of the equation, sub-Saharan Africa is actually growing faster than Asia – which everyone thinks of as being packed with investible emerging markets. And as Patrick Collinson points out in The Guardian, the number of African nations seeing a decline in growth has fallen from 17 in 2003 to just six in 2006. Overall, the region is forecast to keep growing by at least 5% a year. There will be huge variations between countries, but the general direction is encouraging: much of Africa may be a shambles, but progress is being made.
The wall of money coming into Africa reflectes both genuine reforms and a global hunt for higher yields as investors weigh up the relative risk of investing in Africa or intangible, complex financial securities and derivatives.