Western analysts and fund managers discuss the investment case for Africa
By definition, we are taking a top-down view and are led to bigger-scale businesses. Some of the best businesses operating in Africa have colonial origins and are not listed there. For example, we have a business with five million acres of hardwood forest in Gabon in Congo, West Africa. That company is listed in Paris. We have a business that operates more port concessions, warehouses and trucking fleets in Africa than any other business in the world, also listed in Paris, so you don’t only need to invest in Africa-listed businesses.
Indeed, some of the best businesses from our perspective aren’t there. Do we want to invest in a computer peripherals business in Nairobi? No, we’re not interested in that. We are interested in the businesses that are going to build the eleven billion project from Lamu seaport up to South Sudan, and put in place all the logistics for the entire East Africa area.
Could you give us some more examples of companies that you are particularly excited about?
Anthony Eaton: I’ve just come back from Africa where I did a lot of internal flights. When I read the in-house magazines I was very struck by the commercials which were for nightclubs, Range Rover Discoveries, cosmetics, education, hospitals etc. These are adverts for Africans not for foreigners.
On the same vein we have built up positions in several fashion businesses listed in South Africa, operating across Africa. One we are invested in is called Foschini. It sells expensive, fashionable stuff to young Africans on their way out to the nightclubs. There’s a fortune to be made from the rising consumption in Africa.
There is a Knight Frank index of the world’s property hotspots. Last year the greatest rise in desirable properties took place in Nairobi and on the Kenya coast. Value is being added in Africa so quickly and so strongly.
Mark, what do you think is the best way for investors to access this growth potential?
Mark Dampier: Anthony runs an African fund and a global fund focused on urbanisation. What Anthony is saying, you could have said in 18th and 19th century England and in America as well. It’s just a huge industrialisation story – everything we take for granted in the West is what they want and are beginning to get. This is why it’s quite difficult for the West. In a normal recession the price of oil would have probably dropped to $10 or $20 a barrel but it’s still over $100 a barrel. Why? Because all these people want what we have so I think that’s the most exciting story.
How you access that depends really on your own risk profile. Clearly the potential is there but people have heard potential before. You could invest a very small part of your portfolio (1-2%) in a single country fund or an African fund, or go for a more general fund. You could specifically invest in the companies yourself, but now we are really drilling down to higher risk. I think most investors should take the theme and buy the funds.View article on single page