Africa’s investment comeback to gather pace in 2011

Africa’s great comeback as an investment destination is already under way and is set to accelerate in the year ahead, says Pan-African financial services group Imara.

The company has broad sub-Saharan representation and is well placed to judge investor interest as its range of investment funds takes positions in numerous markets across the continent.

Alun Thomas, CEO of Botswana-based Imara Africa Securities, an Africa-wide share-trading service, says trading volumes at African stock exchanges and international buying enjoyed a significant uptick in the final quarter of 2010 – stirring memories of 2007 when international fund managers took growing positions in Africa’s so-called frontier markets.

He notes: “In October and November 2010, Imara Africa Securities had its best trading months since 2008. We topped the volumes we achieved that year before the international financial crisis prompted offshore investors to retreat from Africa.

“Africa’s investment resurgence has begun. We see this in many jurisdictions and numerous sectors.”

Upbeat sentiment has been fuelled by speculation that 2011 inflows could be swelled by yield-hungry private equity funds.

Low correlation with developed markets (and one another) is another plus for Africa as many investors prefer to avoid contagion risk. Demand is also supported by credible research from Africa-based investment professionals with an eye for long-term value.

Thomas says within Africa (ex-South Africa), market valuations often understate the true potential of listed companies with dominant market positions. Investors also look to exploit strategic themes such as infrastructure development.

He adds: “Africa’s resource wealth is helpful, but the continent’s status as a significant investment destination is much more broadly based than that.”

Among developments attracting investor interest are cement manufacturing in Nigeria, brewing and banking in Zambia, micro-lending in Botswana, Tanzania, Swaziland, Uganda, Namibia and Zambia and a resurgent agricultural sector in Zimbabwe and neighbouring states.

“The breadth of outside interest is hugely encouraging and supports the Imara view that the African comeback has reached a tipping point with more investor interest to follow,” says Thomas.