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Investment returns in Sub-Saharan Africa outperform emerging market rivals

Investment returns in Sub-Saharan Africa outperform emerging market rivals

African equity market returns have outperformed those of other emerging market regions over the last 12 months  (October 2012 – October 2013) boosting the investment allure of a continent once

synonymous with war and famine. 

Thomson Reuters data for Africa’s market performance show that investors who placed their faith in African equity markets over the last year would have earned an average 19.7% return in local currency terms, outperforming the likes of:

  • Latin America (4.2%)
  • Emerging Europe (5.7%)
  • Emerging Asia Pacific (9.3%)

These impressive returns were led by:

  • Ghana (115%)
  • Kenya (58.2%)
  • Cote d’Ivoire (46.5%)
  • Nigeria (38.7%)
  • Uganda (31.7%)
  • Zambia (30.8%)

while the world global average was at 19.4% 

“It’s been a tough year for investors in most emerging markets but those who chose to place their money in Africa would have been handsomely rewarded,” says Keith Nichols, managing director, Africa for Thomson Reuters. “Although it stands to reason that one has to find a smart way of managing the risk of potential currency swings when investing in Africa, the local currency returns we’re seeing in these markets certainly seem to justify the burgeoning international interest in the continent.”

Africa’s appeal as an investment destination will be interrogated at the third annual Thomson Reuters Trading Africa Summit sponsored by 27four Investment Managers, Bourse Africa and iPro Investment Professionals. This year’s event takes place at Cape Town’s One & Only Hotel on 6 and 7 November. Carrying the theme, ‘AFRICA – the hype, the myth or reality?’ it will provide a reality check to Africa’s investment opportunities through a series of thought provoking panel discussions featuring experts and guest speakers from all over the continent and overseas.

Delegates will have the opportunity to meet with investment experts from across the globe and gain greater insight into cross asset investment flows in Africa as well as the latest trends in trading on the continent. The highly interactive conference will feature roundtable discussions and talks by selected industry experts in a format that will be segmented by investable regions.

“Global investors are becoming increasingly cognisant of the fact that they cannot simply view Africa as a single, homogenous entity but rather as an extraordinarily diverse continent of 53 nations, each of which have their own opportunities and risks,” says Nichols. “There’s a greater emphasis on being selective when investing in Africa when looking at specific regions on the continent as well as at individual countries.”

The diversity of Africa’s investment landscape is underscored by the fact that political upheaval and civil strife in North Africa has negatively impacted markets such as:

  • Tunisia    (-7.3%)
  • Egypt (-0.5%)
  • Morocco (0.3%) over the last year.

By the same token, investment returns in South Africa (20.6%) appeared to track those of more industrialised nations such as North America (21.6%) and Developed Europe (19.6%)

“Investors looking for higher yields in Africa are also being more selective about which sectors they choose to invest in,” says Nichols. “The data we have reveal a fairly wide variance between the performances of the various investment sectors in Africa over the last year.”

Healthcare (57%) was the top performing sector in Africa over the last twelve months followed by:

  • Consumer Cyclicals (38.2%)
  • Technology (34%)
  • Utilities (27.2%)
  • Telecommunication Services (25%)
  • The worst performing sectors in Africa over the last year were:
  • Energy (-0.2%)
  • Basic Materials (6.1%)

“It’s all about backing the right horse,” says Nichols. “Our hope is that our upcoming Trading Africa Summit will give delegates more insight into how to achieve that objective.”

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