RisCura, investment advisors specialising in emerging markets, specifically Africa, today said that the global search for yield and diversified return will continue to see investors viewing Africa with interest this year, despite industry unease about the continent.
To the end of last year, the ‘MSCI EFM Africa ex ZA’ index, the most well-known and credible index on the continent, returned a remarkable 34.93% in GBP. Looking at individual bourses, Nigeria stands out with the highest return of 55.75%, followed by Kenya at 54.79% and Ghana, which rewarded investors with 22.42%.
Petri Greeff, Director of RisCura UK commented; “ Diversification in assets is not strong enough in the UK and, where there is emerging market investment, it tends to be a very small portion not allowing the fund to really reap the returns that can be found in this asset class.
“It’s no secret, amongst those that know, that Africa is where the growth will be for the foreseeable future. GDP rates of anywhere between 7% and 10% depending on the country, compare extremely favourably to the 2% expected for the Eurozone and the USA, and around 3% for South Africa. Further, African equities are a lot cheaper, with price to earnings ratios averaging around a multiple of 7.”
Greeff continued; “Africa’s potential is enormous. The continent is where China was 30 years ago, and India was 20 years ago, with a similar population to both those countries – but with vast amounts of undeveloped land, not to mention rich resources.
“Investing in Africa should be approached as a long-term strategy, and this won’t change in 2013. Together, the lack of liquidity and the volatility of African markets, many of which are classed as ‘frontier’, dictate an investment horizon of at least five years. In order for schemes to avoid the mistakes of the past by not sufficiently diversifying, they should be exploring more of these areas of potential growth – where initial volatility can be a small price to pay for realising strong performance over time.”