30.01.2014

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 recent years:

 

  • Africa’s economy has grown by 5% per year for the last 15 years and some of its economies are among the fastest growing in the world.
  • According to IMF data, six of the 10 fastest-growing economies in the world over the period 2001–2010 were in Africa. The IMF’s most recent forecasts are that Africa will have 11 of the world’s 20 fastest-growing economies through 2017.
  • Africa’s total GDP (which is this year forecast to be more than USD2 trillion) has tripled since 2000 and services now close to accounting for 60% of average value added.
  • 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 continent’s trade with the rest of the world has grown over fourfold since 2000. The EU is its largest trading partner, but trade with partners, particularly those in the emerging world, has grown. According to data from Standard Bank, BRICS’ total trade with Africa stood at USD340 billion in 2012 – the same as Africa’s total external trade in 2000.

 

GEOGRAPHICAL BREAKDOWN

 

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 while important, commodities account for less than a third of the continent’s growth since 2000, according to global consultancy firm Ernst & Young. The remainder is from a healthy mix of other sectors. 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 USD2.2 trillion – 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 fact that it is now one of the world’s major investment destinations. While greenfield Foreign Direct Investment (FDI) projects were down in 2012 y-o-y (as was the case generally for most regions across the world), as a proportion of global inflows, greenfield projects in Africa actually grew y-o-y. Preliminary data from the UN also shows capital inflows into the continent increased last year. This contrasts with the fact that in every BRIC nation, apart from South Africa, capital inflows were actually down. Meanwhile, as FDI projects from developed markets into Africa declined, those from emerging markets continued to grow and the trend of intra-African investment continued. South Africa was one of the biggest investors among emerging markets into the rest of the continent. Since 2007, greenfield investments from emerging markets into Africa have grown at a compound rate of over 20%. Among the top investors are China, Kenya, Nigeria, and South Korea.

 

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

The prospects for both the economies in the region and the markets where the Fund invests look good. African frontier markets are some of the highest growth markets in the world and the Fund is optimally poised to benefit from this growth.

 

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.