The A-Z of investing in Africa in 2018
Africa’s local-currency and dollar securities outperform those of emerging markets overall.
Africa’s local-currency and dollar securities easily outperformed those of emerging markets overall as investors piled into a continent offering high yields and starting to recover from the commodity bust of three years ago.
But risks abound, among them policy tightening in advanced economies, local and global politics, weakening currencies and another fall in oil prices. And then there is credit risk.
This year, Mozambique and Republic of Congo missed Eurobond payments, while countries including Cameroon and Zambia agreed or began talks on bailouts with the International Monetary Fund. And since Namibia and South Africa were downgraded to junk, the continent has been left without any investment-grade foreign-currency issuers.
Here’s a guide to what investors should watch for in 10 key African markets in 2018:
Angola
Investors are waiting on the Opec member to devalue its currency, the kwanza, to help ease a shortage of dollars and revive what was, until the 2014 oil crash, a fast-growing economy.
Egypt
Elections in the first half of next year will signal whether President Abdel-Fattah El-Sisi, or his successor, will carry on with the deep economic reforms that have gone down well with portfolio investors.
Ghana
Ghana’s economy grew 9.3% in the third quarter as oil production increased. If sustained, it would mark a turnaround for the west African nation, which has been been under an IMF programme since 2015.
Kenya
Kenyans and foreign investors will hope that east Africa’s biggest economy finally ends a political crisis triggered by this year’s disputed elections.
Mozambique
The southern African nation has been ravaged by a financial crisis caused by the government taking on too much external debt, much of it in secret.
Nigeria
Nigerian politicians are already gearing up for elections in early 2019. President Muhammadu Buhari is yet to say if he’ll run again. Either way, any signs that officials are putting much-needed reforms on hold to concentrate on the vote may unnerve investors.
Republic of Congo
Will it default again? The oil-producing central African country, which was about a month late on a coupon earlier this year, is considering halting payments on some debts, its prime minister said in October.
South Africa
Investors will be watching Cyril Ramaphosa, the new leader of the ANC, closely. February’s budget will be crucial.
Zambia
The copper producer’s immediate prospects hinge on whether it can get a bailout from the IMF.
Zimbabwe
Not a market for bond investors. But Zimbabwe may become tempting for global equity traders again after Robert Mugabe was ousted as president in November. That could open up the country to much-needed foreign investment.