Investors in Africa should consider 2011 a successful year, says Sven Richter, head of frontier markets at Renaissance Asset Managers.
“GDP growth is still high while resources and infrastructure development continue. It even prompted The Economist magazine to put Africa on its cover and declare that Africa is the continent with the most potential,” notes Richter.
Although African stock markets experienced a significant drop in 2011, overall performance was on par with global emerging markets. “Africa markets are down around 22% in US$ terms. But, we must consider this against the context of where we are in the world. Global Frontier Markets are down 23% and Emerging Markets are down 22%.”
According to Richter, the continent can boast a number of successes during 2011. These include the election and cabinet chosen in Nigeria; the discovery of a huge gas field off the coast of Mozambique; oil production coming on stream in Ghana; and increased or new investments by a number of companies from Latin America through to Asia. “When we travel, we see continued investment and infrastructure development,” he says.
However, 2011 was not without its challenges. “Nowhere in the world does everything go right though. There were the developments such as the Arab Spring and the formation of Southern Sudan which, while holding much promise for the future, will need time to bed down. In East Africa, we must be careful what we wish for, high commodity prices, especially food, have driven-up inflation and Central Banks have upped rates shaving growth in Kenya from five, to the low four percents. Kenya has also had to up its game in terms of security after kidnappings threatened its valuable tourism industry.”