Despite recent political unrest across the continent, Africa is still offering a compelling investment case and will be the great investment story over the next 50 years.
This is according to Diane Radley, CEO of Old Mutual Investment Group, speaking at a media roundtable on African investment, who says that the investment manager is planning on raising R5-billion to R10-billion for investment in multiple asset classes including infrastructure, private equity and agriculture funds across the continent.
Radley says that private equity will play a major role in the African investment story, particularly for middle-sized opportunities, which currently has low penetration, but is likely to present good investment opportunities going forward.
“We will also be looking to raise funds for an Africa-based private equity fund,” she says. “Additional sources of investment will come from domestic pension funds, such as what is now happening in Nigeria, in search of above average long-term yields.”
While notoriously illiquid and high risk, Radley says that there are a number of factors that point to investment opportunity areas across Africa.
“Infrastructure neglect that was seen during the post-colonial era is now being addressed in countries such as Nigeria, Kenya and Ghana. Infrastructure, energy, telecommunications and agriculture are widely regarded as the sectors most likely to benefit from the infusion of capital into Africa over the next one to two decades,” she explains.
“Compounding this is the fact that by 2050, one in three youths in the world will reside in Africa, making it arguably the most exciting consumer market of the future.”
Radley believes that, combined, these factors are creating an increasingly positive investment environment.
“While, historically, we saw interest coming mainly from emerging market fund managers who are accustomed to higher risk environments, we are now seeing interest in Africa from fund managers with different investment mandates, such as pension funds, both passive and active investors, infrastructure funds and private equity.”
Also speaking at the event was Old Mutual African equities portfolio manager, Cavan Osborne, who highlighted the listed equities investment opportunities across the region.
“With a young and growing population demographic, Africa is showing huge economic growth prospects owing to its low base and supported by its demographics,” he says. “Adding to this investment case for Africa is the low correlation of its markets to world markets.”
Osborne points out that even though Africa has seen significant recent political upheaval, opportunity continues to grow across the continent.
“Following the recent Westgate Shopping Mall terrorist attack in Kenya, the markets didn’t react at all. In Egypt the stock market is still strong, despite the violent protests, and after a brief period of uncertainty following its elections in July, Zimbabwe continues to be attractive to investors due to high quality management, similar infrastructure to South Africa and a lack of currencies risk.”
When it comes to specific opportunity regions, Osborne warns that Africa is a huge continent, and it is dangerous to generalise.
“However, we see particularly exciting opportunities in Nigeria and Kenya, and to a somewhat lesser extent in Zambia, Ghana, Ivory Coast, Mozambique and Mauritius, owing to their domestic growth opportunities and investment in key growth sectors such as infrastructure, energy and agriculture.”