Nigeria, Kenya and Egypt are the African economies that have been included in the top ten core countries of the new Renaissance Asset Managers frontier markets investment fund.
Other countries included in the “Focus Ten” are Argentina, Indonesia, Pakistan, Philippines, Thailand, Ukraine and Vietnam.
Renaissance said that these countries represent “high growth markets with good consumer bases. As economies and per capita income grow, companies operating in these markets have the potential to experience accelerated growth in earnings.”
To be included in the fund, countries had to meet the following criteria:
- Population of more than 35 million
- GDP growth over the next decade expected to average over 4% per year
- GDP per capita below US$6,000
- Relatively undeveloped markets
- Substantial potential in terms of a young population, attractive resources and the ability to develop based on these criteria
“We have carefully selected the main frontier markets where we see exponential growth in all areas of economic, political and social activity, giving investors the chance to really benefit from the promise that these lands offer,” commented Sven Richter, head of frontier markets at Renaissance.
Taking Nigeria as an example, Renaissance noted that the west African country has a population in excess of 160 million, with over 50% of the people in the 15-64 years age bracket. Nigeria’s five year annual GDP growth rate is 6.6%, more than the rate of the population growth, indicating that its population is likely to become better off, leading to higher consumer spending and a more qualified workforce.
“People are making a lot of noise about frontier markets. While the developed world is struggling to grow at low single digit GDP rates, frontier markets are powering ahead at rates above 5% per annum over the next decade. From new mines to farms, these markets are helping to supply the world’s demand for goods, whilst growing their own income bases – people are getting wealthier and urbanising. The potential is huge, yet largely untapped,” Richter added.
This week, another Africa-focused investment manager, Imara, also expressed positive sentiments about Nigeria by noting that the pace of reform in the country is picking up.
Jon Chew, manager of the Imara Nigeria Fund, said the new Nigerian government and its economic advisers had been taken aback by the recent petrol price hike riots. “The [government’s] response,” he noted, “had been to speed up the pace of reform and deregulation.”