Africa a mixed bag of investment opportunities

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The continent features slow growers as well as dynamic markets that warrant exploring

It would be wrong to paint the African continent with one brush, as many countries are at varying stages of their own macro and political cycles. Understanding these cycles and developments in relation to other earlier-stage frontier and emerging markets gives context to the investment risks and opportunities that present themselves.

Nigeria has also had a stall in some key policy reforms, particularly as the government in its second term has not really committed on infrastructure, subsidy removals and growth initiatives. These have led to a more muted growth environment in the past three years. Yet despite the slow execution of the government, the economy and currency have stabilised and economic growth, while weak, is starting to show mild improvement.

Understanding how businesses have adapted to regulations has created suitable investment opportunities. Our framework has helped us identify select banks and a dominant brewer as investments in Kenya. Some of the banks have used the period of slow credit growth due to rate cap regulations to strengthen their deposit franchises and optimise their cost bases, as well as focus on alternative channels by partnering with mobile telecommunication companies to drive fee income.

SA has undergone several years of weak economic growth, rampant corruption, state-owned entity mismanagement and a policy stall. Much of this was founded and accelerated under the previous leadership, with evidence pointing to a host of middlemen and government officials who used their authority to mismanage state entities.

 

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