Africa: Opportunities are hiding in full view
In the early part of last century Africa was a staple part of British and European investors’ asset portfolio. With the rise of the BRIC economies and Far Eastern markets, Chris andrew (pictured) of Clarmond Advisors decides it time to revisit the ‘Africa story’.
When I mention I am doing research on Africa with a view to investing there, colleagues have reacted with a roll of the eyes, a shrug of the shoulders and, in a couple of instances, a questioning of my sanity.
I therefore know I am onto a good thing. Once an investment elicits such negativity (Japan is now also in this category, and on our radar), it should mean the opportunity is at its ripest.
One of the unexpected statistics to emerge from my African research came to light after reviewing the stock selection of the renowned portfolio manager John Maynard Keynes.
The UK index at the time, in the 1930s, included a number of African stocks, specifically: Consolidated Goldfields, Union Corp and the British South Africa Company.
All of these companies still exist, although with different names. Almost a century ago, African companies were an important part of global portfolio allocation, but over the past few decades this allocation has almost entirely disappeared.
Looking at the dates African companies were listed, it is clear that nearly half of the listed firms are more than 75 years old. African corporates have been forgotten; perhaps it is time to review them.
Facts and Figures
In Africa, it is relatively easy to point to single stock success stories. It is even easier to cite a number of problems, both at corporate and country level.
But it is more instructive to turn to some of the facts and figures that underpin the Africa story.
Demographics: There are 500 million people of working age. By 2040 it is estimated this will reach 1.1 billion. Put another way, one in five young people on the planet will be in Africa.
Urbanisation: About 40% of Africa’s population lives in cities, up from 28% in 1980.
This trend looks set to continue and already puts Africa ahead of India on a percentage basis.
Consumerism: Africa’s middle class (defined as people with an income in excess of $20,000 pa) is already larger than that of India.
According to Global Insight, by 2020 consumer spending in Africa will be in the $1.4trn to $1.8trn range.
There will be at least five cities spending more than $25bn, with another seven in the $15bn-$25bn range.