31.08.2015

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.
  • Africa’s population is expected to more than double from 1.1 billion to 2.4 billion by 2050, the biggest increase of any continent.
  • The median age of its people is just 19.4 years and is forecast to rise only slowly in the coming decades, providing the continent with a young consumer base and workforce to drive economic growth.

 

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 similar levels of growth are forecast in many African countries this year and the end of the decade.
  • Africa had 9 of the world’s 15 fastest-growing economies last year.
  • Africa’s total GDP has tripled since 2000 and services are now close to accounting for 60% of average value added.
  • Consumer markets are emerging and rapidly expanding across the continent - consumer spending in Africa reached USD 600 billion in 2010 and is forecast to rise to USD 1 trillion by the end of this decade.
  • Half of Africa’s countries are now classed as middle-income states and Africa’s middle class is expected to grow from 32 million in 2009 to

57 million by 2020 and reach as much as 107 million by 2030.

  • 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.

 

As Peter Townshend, portfolio manager for the WIOF African Performance Fund says: “Africa is the last great frontier for investing. The continent holds enormous mineral wealth, has over 1 billion inhabitants, is growing faster than anywhere except Asia and has a young, rapidly urbanising population and emerging consumer class.”

 

PERFORMANCE (USD)

COMMODITIES AND MORE

The continent’s massive wealth in natural resources – it has 8.6% of the world’s proven oil reserves and 7.2% of its natural gas as well as vast reserves of precious metals, copper and iron ore - mean that commodities are a vital part in the African economic growth story. Natural resources will account for at least USD 30 billion per year of governments’ revenues in Africa in less than 20 years, according to the African Development Bank. 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, especially consumer-focused industries which are expanding exponentially amid the rapid growth of Africa’s middle class and as household disposable income rises. Indeed, consumer-focused sectors, including technology, retail and financial services, attracted the most foreign investment activity in 2014.

 

 

GEOGRAPHIC BREAKDOWN

 

ATTRACTIVE INVESTMENT

The continent’s attractiveness is underlined by the fact that it is now one of the world’s major investment destinations. Africa’s share of global capital investment and job creation rose to a new historical high in 2014: Capital investment into the continent stood at USD128bn, up 136% on 2013. FDI was responsible for 188,400 new jobs, which was a 68% increase on the previous year. South Africa, Nigeria and Kenya – three of the fund’s major investment markets - are regional hubs driving FDI while Egypt has won back investors after turbulent recent years. The North African country was the second-most attractive FDI destination in Africa during 2014, as investors noted its greater political stability and key economic reforms. The government’s focus on infrastructure will only enhance that investment appeal further.

 

Kenya is seen by many investors as a gateway into other East African consumer markets while the sheer size of Nigeria makes it an attractive investment prospect – its GDP accounts for more than 80% of West Africa’s total output. Its population of almost 170 million and its improving business environment is also a major draw for investors. This investment is also diversified globally. The US and western European states are the largest investors in Africa but Middle East and Asian investors are looking to take advantage of opportunities in Africa. China has in recent years emerged as a major investor in the country as it looks to Africa as a source of much-needed raw materials to drive its economic growth and an export destination for its manufactured goods. But Chinese firms are increasingly using African countries as low-cost manufacturing bases.

 

Meanwhile, intra-African investment – which economists see as vital for improving countries’ economic growth and expanding industries, and subsequently investment opportunities – is also growing. Africa has a number of regional economic communities, including the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC), improving conditions for intra-African trade and economic development and Intra-African investors were once again among the top sources of FDI in Africa in 2014.

 

OUTLOOK

Some of the fund’s focus markets are facing headwinds, including the impact of lower oil prices on the Nigerian economy and sluggish growth in South Africa. However, growth in sub-Saharan Africa is expected to be better than the emerging markets average for this year and Kenya is among a number of countries on the continent which should see growth of more than 5% in 2015. Meanwhile, the Egyptian economy is continuing to recover as political stability grows and FDI investors return to the country. However, as in all its focus markets, the investment advisor continues to focus on valuations derived from a fundamental bottom-up research process which will remain the source for the continued sound long-term performance of the Fund.

 

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.