Investors temper Africa expectations
NEW YORK — Just a year ago, Africa was touted as the next investment El Dorado. Two decades of record growth, a rapidly urbanizing population of 1.1 billion, rising incomes and vast untapped mineral reserves would lead to the creation of a broad middle class, the theory went.
General Electric Co. and Marriott International Inc. announced African expansion plans, while buyout firms Carlyle Group LP and Helios Investment Partners set up funds targeting the continent. The region attracted $128 billion in foreign direct investment last year, up from $52.6 billion in 2013, according to accounting firm EY.
Now a slowdown in China, Africa’s largest trading partner, a commodity price rout and a power shortfall are separating the losers from the winners. The MSCI EFM Africa Index of shares has dipped 18 percent this year, five percentage points more than a gauge of stocks across 24 frontier markets.
Twenty-two of 24 African currencies tracked by Bloomberg have lost ground against the dollar as the Federal Reserve prepares to raise rates.
To Marlon Chigwende, sub-saharan Africa managing director for Carlyle, the world’s second-largest private-equity firm, the message is simple: Africa is not a country.
“There are individual forces at sustainability changes presented by the 21st century,” Ms Montši said.
On his part, MMB Managing Director Tom Mpedi said the project aimed to harness the skills of young people to ensure the establishment of sustainable businesses.
“This group of young men and women managed to convince our judges that there is something within them that can be tapped and should be supported for the betterment of their lives and the economy of the country,” said Mr Mpedi.
“So far, they have been selected on the potential of their ideas. They will undergo work within each of the 55 countries that make up Africa,” he said. “There will continue to be investment opportunities.’’
The combined economies of subSaharan Africa should expand 4.4 percent this year, the International Monetary Fund said in July. That’s one percentage point less than predicted a year earlier and below the 5.4 percent average of the last decade. The peak was 7.1 percent in 2007.
The data is driven largely by Nigeria and South Africa, which together account for 55 percent of the 48 sub-saharan African nations’ gross domestic product. A collapse in oil prices saw growth in Nigeria slump to 2.4 percent in the second quarter, the slowest pace in at least five years. South Africa’s economy contracted by an annualised 1.3 percent as power shortages curbed output.
“It’s about the weakness of the giants,’’ said Akinwumi Adesina, president of the African Development Bank. He spoke from Abuja, Nigeria’s capital. “The countries Africa exports to have slowed down significantly.”
Bright spots remain: Democratic Republic of Congo is expected to be Africa’s top performer this year, forecast by the IMF to grow by 9.2 percent, followed by Ethiopia, with a projected expansion of 8 percent. Congo is emerging from a decade of training which will leave no stone unturned in teaching them how to plan a business properly and showing the risks and opportunities of their businesses.
“Thereafter, they will write their business plans for MMB’S consideration, with the proposals’ viability and potential employment opportunities some of the factors that would be considered.”
He said it was also their intention for the project to benefit entrepreneurs from across the country and not just from Maseru.
“The business ideas that have been presented vary. They are in the fields of health, civil war, while Ethiopia is opening up to foreign investment and improving its transport links.
Besides Nigeria, the commodities rout has hit oil producers such as Angola and Ghana, as well as Zambia, the continent’s second-biggest copper producer. The price of Brent crude has plummeted 51 percent over the past 12 months, while copper has slumped 22 percent on the London Metal Exchange.
“Investors that look for risk-adjusted returns will continue to look at the continent, but they’ll certainly have to temper their expectations,” said John Mackie, head of Johannesburg-based Stanlib Asset Management’s Pan-african Investment portfolios. The possibility of U.S. interest-rate increases and China’s failure to curb its stock slump are manufacturing, construction, food, technology, machinery, finance, clothing, arts, farming and media,” Mr Mpedi said.
“Unlike the first edition, we have candidates from districts other than Maseru such as Qacha’s Nek, Mokhotlong, Butha-buthe, Mohale’s Hoek, Mafeteng, Berea and Leribe.
“Our hope is that in future all the districts can be represented in a pool of candidates who are selected. Basotho youth should not feel like the only way they can prosper is if they live in the capital city of Maseru. There is a lot that can be done in the other parts of the country as well.” having “a massive impact.”
Mark Mobius, the Franklin Templeton Investments money manager who’s been investing in emerging markets for more than four decades, remains optimistic.
“The growth scenario is still excellent,” he said in an e-mailed response to questions. “We do not want to scale back our investments. The problems are here to stay but they pale beside the opportunities.”
General Electric, Marriott, Carlyle and Helios haven’t signalled an intention to curtail their African expansions.
Shoprite Holdings Ltd., Africa’s largest retailer, is among companies benefiting from a consumer spending surge: Its supermarket sales outside South Africa, its home base, grew 13.5 percent in the year through June. The company has outlets in 15 African nations, including the Democratic Republic of Congo, Angola, Lesotho, Nigeria and Uganda.
“There are countries that continue to do well,” Christo Wiese, Shoprite’s billionaire chairman, said in an interview. “Taking a mediumterm view, you ignore Africa at your peril.”
Most African countries are net commodity importers and should benefit from lower prices, according to Mark Bohlund, an economist with Bloomberg Intelligence in London. Ethiopia and Kenya, which are making progress on building infrastructure, stand to gain while exporters Angola and Nigeria will grow less, he said.
Topping the list of Africa’s infrastructure concerns is a power shortfall. An estimated 600 million Africans lack access to electricity. While about 95 energy projects worth more than $50 million were being built in Africa last year, most are nowhere near completion, according to a study by Deloitte LLP.
“Africa should’ve been growing at 7 or 8 percent if it had sorted its power out a decade ago,” said David Cowan, an Africa economist in London at Citigroup Inc. Even given sound economic fundamentals in many countries, “The Africa-rising narrative was just an oversold story.” — Bloomberg
SHOPRITE sales outside South Africa grew 13.5 percent in the year through June.