IN THE FIRST SEVEN MONTHS OF 2007, Africa saw $ 8.2-billion of new listings, already 13% higher than last year. Nigeria, not South Africa, was the largest recipient of inflows for new listings. Africa has seen foreign investment inflows triple in the past decade from $1 0-billion to $30-billion a year. In a sense, Africa is coming on to the radar screen of foreign investors.
Political and economic stability has resulted in GDP growth for the continent at 5.8% in 2007 and market performances are outstanding, with countries like Nigeria showing returns in excess of 100% in dollars. Since 1995 there has been, at least, one African equity market among the top 10 best-performing markets in the world. And it is not only oil and other resources that are fuelling growth. Some favourite picks in the Investec Africa fund include Egyptian cellphone provider Orascom and Nigeria’s Access Bank.
Orascom has seen a 100% growth in its subscriber base this year. Since 2005 it has grown its subscriber base from 15-million to 50-million. Analysts say Orascom’s current PE of 12 times is not unduly expensive. In Nigeria bank consolidation has been a major theme with the number of banks decreasing from 89 to 25 in two years. Access Bank grew its bottom line 500% in 2007 and is growing its loan book at 100%. No wonder Standard Bank of South Africa bought into IBTC, one of Nigeria’s 25 banks. Investec launched its Africa Fund two years ago and inflows have been way ahead of expectation. When it launched it considered that having inflows of $500-million to $1 -billion within five years would be a real achievement. In two years it has already had inflows of more than $500- million, with a further $250-million committed to the fund. Even countries such as Zimbabwe are attracting attention. Imara’s Zimbabwe fund had to be closed temporarily in April 2007, because the demand was overwhelming with $9-million flowing in the first two weeks after launch. There has been a switch in the type of investor looking at Africa from high-net-worth European and United Kingdom individuals to more institutional investors, including the United States. Investec is hosting a group of trustees from US retirement funds coming to check out Africa. They represent massive local government retirement funds and make minimum investments of $250-million. While the appetite for Africa is growing, liquidity is not growing at the same pace and remains a constraint. However, commentators believe that as interest increases, so will liquidity. In the meantime the low levels of liquidity can go in investors’ favour.