25.10.2013

With rapidly-growing foreign investment, abundant commodity reserves, a fast-improving economic climate and emerging large consumer markets, Africa is a continent investors cannot afford to ignore. The WIOF African Performance Fund gives investors access to a wealth of investment opportunities in a leading growth region with a strong future.

IMPROVING ENVIRONMENT

Africa has in the past often been perceived as a continent plagued by poverty, famine, war, lawlessness and insurmountable infrastructure problems. But while parts of the continent do face challenges, the broader picture is increasingly positive.

 

Some simple statistics about Africa underline its enormous potential:

 

  • Africa has 13% of the world’s population.
  • It is bigger than the USA, China, Europe, India and Argentina combined, making up 20% of the world’s land mass
  • It has 12% of the world’s farming land.
  • It holds over 30% of the world’s mineral/mining resources.

 

And more specific indicators show how far the continent’s economies have developed in just over a decade:

 

  • Africa’s economy has grown by 5% per year for the last 15 years.
  • Average annual trade between Africa and the rest of the world has increased 200% since 2000.
  • Foreign direct investment (FDI) projects have more than doubled in the last decade.
  • Consumer markets are emerging and rapidly expanding across the continent while consumer spending is expected to more than double in the next 15 years.

 

The business environment is also improving as countries implement economic and capital market reforms. Over the last five years 13 African countries have been included in the World Bank’s Top 10 business reformers. And of the 30 economies which have improved their business regulatory environment the most over the past five years, one third are in sub-Saharan Africa, according to the bank.

COMMODITIES AND MORE

The continent’s massive wealth in natural resources, including precious metals, oil, copper and iron ore as well as vast areas of arable land mean that commodities are a vital part in the African economic growth story. But there are huge opportunities in other areas as well. The financial services sector is one such area as it grows and becomes more sophisticated. While the banking industry in Africa is well established and is one of the most active sectors on many stock exchanges, other areas within the sector are less developed, for instance, insurance and mortgage financing. Opportunities in the consumer goods and services sectors, including the telecoms industry, are expanding exponentially amid the rapid growth of Africa’s middle class and as household disposable income rises. The African Development Bank has projected that by 2030 much of Africa will have middle-class majorities while consumer spending will have grown to USD2.2tn – more than double current levels. Nigeria, Africa’s largest consumer market, has a population of 158 million which is set to more than double by 2050, highlighting the huge potential for consumption.

 

SECTOR BREAKDOWN

 

ATTRACTIVE INVESTMENT

The continent’s attractiveness is underlined by the growing investment pouring into it. Africa is now one of the world’s major investment destinations and foreign direct investment (FDI) is expected to almost double to USD150bn by 2015. This FDI produces positive feed through effects to the wider economy and will continue to push GDP per capita upwards and, in turn, boost capital markets and improve annual GDP growth.

 

What is equally encouraging is that investment is booming on an intra-continental level. Investment between African nations has grown by 47% since 2007 with South Africa, Kenya and Nigeria leading the way in intra-African investments. Intra-African investment helps overcome existing barriers between the continent’s diverse economies, allowing them to move forward more closely as an overall region, re-enforcing Africa’s ability to attract further foreign investment and its attractiveness as a place to do business. This rising investment is also helping address infrastructure shortfalls as the needs of foreign investors to get goods in and out of countries means major upgrades of transport channels are planned or in process and governments are prioritising infrastructure development. This in turn is driving private sector investment and promoting the development of bond markets to raise finances for infrastructure spending. African corporates, such as Dangote Industries across Africa and the likes of Coop Bank across East Africa, are already looking to improve integration, hedging country specific risk and opening up the chance to draw on opportunities across a continent which overall is growing faster than most other regional blocks.

 

DEMOGRAPHIC POTENTIAL

Africa’s demographics also underline its market potential. While many countries in the developed world have ageing populations, almost half of Africa’s 1 billion population is aged between five and 24, making Africa’s youth potentially one of the biggest drivers behind the continent’s sustainable economic development. Moreover, Africa’s population is set to double by 2050 to 2 billion.

 

OUTLOOK

While it is not all plain sailing in the Egyptian market, opportunities there remain and investor confidence is still relatively strong. There is also positive momentum in Nigeria with banks in particular attractively valued. Meanwhile, Kenyan corporates have done the right thing with recent diversification in the East African region – something which should be supportive from a valuation perspective. Overall, the prospects for the Fund’s focus markets are very positive as a clear decoupling of African markets from negative trends seen in developed western markets continues. Regional trade and resources should provide positive support to the Fund’s investment markets going forward.

 

INVESTMENT ADVISER

The Fund’s investment adviser is Sanlam Investment Management (Pty) Ltd (“SIM”), a multi-specialist asset manager offering its clients a broad range of portfolio management services and collective investment schemes for retail and institutional investors.

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 17 December 2010 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser/legal adviser/tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser/legal adviser/tax adviser, they should consider whether the WIOF is a suitable investment for them.