Mark Mobius is widely considered to be an emerging markets investment guru. For more than 30 years, this executive chairman of Templeton Emerging Markets Group has been scouring for investment opportunities in lesser-known countries. His personal blog, which is hosted on the Franklin Templeton website, is called Investment Adventures in Emerging Markets.
Mobius recently published a blog post about his thoughts on Ghana’s economy. While he did highlight some negatives, Mobius seems to be generally upbeat about the Ghanaian market.
Economic growth and elections
Mobius said he is encouraged by Ghana’s rapid economic growth of 14% in 2011, and hopes that the country’s elections at the end of the year will run smoothly. “Presidential and parliamentary elections are slated to be held by year-end, the results of which are almost sure to impact the shape of the country’s future. President John Atta Mills has stated in the press that he will ‘take all necessary constitutional steps to ensure the conduct of free, fair and transparent elections’.”
He highlighted the west African country’s “abundant natural resources, including timber, oil, silver and manganese, but perhaps most important are cocoa and gold, two prized commodities for which Ghana is a key producer. What is generally considered the most important gold mining company in the country is listed on a number of stock exchanges around the world. In the Western world, chocolate is ubiquitous, showing up in everything from instant hot chocolate powder to artisan truffles. In India, gold glitters just about everywhere and the wedding season is fully festooned with it. The global consumer market for these commodities is evident. As important as cocoa is to Ghana’s export business, the country also grows rice, cassava, peanuts, maize and bananas in significant quantities, so its agricultural assets are reasonably well diversified.”
He also commented on Ghana’s banking sector: “Of course, not all that glitters is gold, and Ghana faces its own set of challenges. In the banking sector, the rate of non-performing loans is quite high, though it is expected to decline in a more stable macroeconomic environment. It’s certainly something to keep an eye on. From what I understand, not many Ghanaians have a bank account, so I think the prospects for growth are good in the banking sector.”
Relationship with China
According to Mobius, Ghana’s strong relationship with China is particularly interesting. “The two countries have had close ties since the 1960s, when then-president Kwame Nkrumah lobbied for the People’s Republic of China’s reinstatement in the United Nations. Evidence of their ongoing relationship is abundant. In 1992, a joint venture including the Chinese government, Ghanaian government, and private Ghanaian and Hong Kong investors was reportedly established to mine for gold. Also, though Ghana’s credit in recent years has been tight, the Chinese government has continued to provide loans. In fact, China recently extended Ghana US$3 billion for infrastructure projects. All of these linkages may explain why, since 2007, that all university and college institutions in Ghana provide Chinese language courses.”
“Given growing power demands and the big payments needed to import oil, probably the most exciting news for Ghana has been the discovery of commercial quantities of offshore oil reserves … The country also has natural gas, which can be used to power turbines for electricity production that the country needs so badly,” Mobius noted.
“All in all, Ghana looks to be a country my investment team and I will continue to watch in our constant lookout for undervalued companies and bargain opportunities in frontier markets,” he said.