US president Donald Trump caused major upset in Africa recently when he reportedly referred to the continent as being made up of “sh*thole” countries. While the term has gained notoriety in a short space of time, fund managers at Ashburton Investments say it would be silly to discount Africa as an amazing investment opportunity.
According to Paul Clark, a fund manager and Africa specialist at Ashburton Investments, news, like Trump’s comments, often focus on the worst issues facing the African continent. But on the ground, growth is continuing, infrastructure is improving, and business conditions are getting better.
“As investors who travel across the continent regularly we observe these trends first hand, but these are also clear from surveys and economic measures,” Clark said.
Ashburton pointed to data showing why Africa is a good bet, including growth rates, inflation rates and index performances.
The key data comes from the International Monetary Fund, which shows Africa’s expected growth compared to other regions.
The data shows that the continent, especially in countries that have equity markets and are typically more developed, are expected to grow faster than the world over the next five years and significantly faster than Advanced Economies.
“Of course there are also quite a few countries in Africa that are not performing as well and, even though they tend to make the news more often, are usually smaller economies that are less developed than those that have equity markets” Clark said.
Outside of projected growth, Ashburton pointed to the inflation outlook for African countries with equity markets. While global inflation is rising, many African economies are just coming out of an inflationary spike:
“As inflation declines through 2018 we expect local interest rates to decline. This reduction in interest rates is expected to create further demand for equities,” the fund manager said.
With many economies across the continent on a recovery path and inflation declining, we expect interest rates to start coming down soon. This will be positive for equity markets that will also start anticipating the generally improved economic outlook for the continent in 2018 and beyond.
“We believe investors should diversify their returns by investing in the rest of Africa – even if some people call them sh**hole countries,” the group said.
Culled from: Businesstech.co.za
Image credit: businesstech.co.za