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Looks a sure thing
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Stafford Thomas
Financial Mail
Friday, July 02, 2010
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Good news stories out of Africa seldom get the applause they deserve. But one that cannot be ignored, and is changing perceptions of investors worldwide, is the 2010 soccer World Cup.
“The fact that the World Cup is taking place in SA highlights the stability of the country and draws attention to how it is recovering from the global recession,” says Sonal Pandit, manager of US investment bank JPMorgan’s JPM Africa Equity Fund (AEF).
Pandit says JPMorgan feels that not only SA but Africa as a whole presents a “compelling investment opportunity”. She stresses that though Africa has greater appeal for those who are not risk averse, the continent’s annual population growth rate of 2,2%, the world’s highest, and its expanding workforce make it a “demographic inevitability” that investors will look to Africa for returns.
As in the case of many emerging markets, commodities underpin much of Africa’s success, says Pandit. She says this is spurring infrastructure development and improvements in economic policy to ensure that the continent continues to meet demand from resource-hungry countries such as China and India.
The need for infrastructure, Pandit says, offers a key investment opportunity. She cites China’s trade with Africa, which has grown from US$10bn in 2000 and is expected to reach $100bn in 2010. Pandit points out that for those with exposure to China, investment in Africa is a natural extension of their strategy.
Other asset managers share her optimism. “There is an increased appetite among foreigners for African investments,” says Chris Derksen, one of the four investment principals of Investec Asset Management’s $150m Africa Frontier Private Equity Fund. “It’s all about high growth potential.”
Another sign of interest in the continent is pan-African private equity firm Kingdom Zephyr Africa Management’s recent closure of its second fund with total commitments of $492m.
In AEF’s case the interest is underscored by its performance since its launch in May 2008. Though its US dollar unit price has fallen 8% since then, this is minimal compared with the Morgan Stanley world index fall of 30%.
With assets of $180m, AEF has investments in 10 African countries, the largest exposure being to SA (38%), followed by Nigeria (20%), Egypt (11%) and Kenya (7%).
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