SEB strategist highlights Africa for Swedish investors
Johan Hagbarth, investment strategist at SEB in Sweden, has highlighted investment opportunities in Africa in his latest note for local investors.
He says that the continent has experienced considerable change in recent decades, that many of the world’s fastest growing economies are located there, and that the IMF forecasts that sub-Saharan Africa will have the next highest rate of economic growth in 2012 behind Asia.
Add to that demographic shifts, such as the large number of youth set to become bigger consumers, and Hagbarth believes that an Africa fund will become a far more common part of many investors’ portfolios.
“Africa is on its way to becoming a big player in the global economy. Although it still is a continent with a lot of poverty, there is also a large and young population with increasing purchasing power. Of the roughly 1 billion people living in Africa, the World Bank estimates that 600 million belong to a global middle class in the consumption phase,” he said.
Aside from commodities it is telecoms, construction and household goods that are the sectors considered to have great potential. Kenya is an example: its 37 million inhabitants have increased their internet use from just 300,000 five years ago to many millions per month on mobile broadband.
A high oil price may result in inflationary pressures remaining in several countries. High food prices also risk increasing inflation for all countries that have to import food, higher budget deficits to finance subsidised prices, and increased deficits in their balance of trade.
A number of countries are still struggling with bureaucracy and corruption, but others have done better. Hagbarth notes that a number of African countries are considered by the World Bank to be more stable and safer than Russia for doing business.
The opportunities seen in the region explain why SEB launched the Silk Africa Lions fund in May this year for its local clients. The fund focuses on nine countries – South Africa, Egypt, Morocco, Nigeria, Kenya, Tunisia, Ghana, Mauritus and Botswana, with a focus on investments in companies benefiting from domestic growth in consumption.
African investments are still considered high risk, but it is the same with other emerging markets funds, said Hagbarth.