3 augustus 2011
Investing in Africa  

We are firmly confident in the long-term potential of the African continent. In macroeconomic terms, Africa is a very heterogeneous continent. Generally speaking, however, the continent’s demography is highly favourable. Its population currently stands at approximately one billion and Africa is expected to account for 30% to 40% of world population growth in the next 20 years. In addition, its population is very young, with two thirds of the continent’s inhabitants under the age of 25. The working population currently numbers 500 million and is set to grow to 1.1 billion between now and 2050.

Apart from this positive demographic data, African countries generally enjoy high GDP growth. This is due to a number of factors, such as improving political stability in the main markets, permanent investment in infrastructure, strong demand for commodities and raw materials in particular, and increasing regional economic integration in east, west and south Africa.  

If we compare Africa to other emerging or developed countries, a study carried out by The Economist shows that between 2000 and 2010, the ten fastest growing economies were sub-Saharan.

Nevertheless, given the disparities that exist within this continent, it is advisable to be cautious and selective when it comes to investing.

In light of its large population and abundant oil reserves, Nigeria is one of Africa’s most appealing markets. More and more companies are investing in this country. The recent elections were the most democratic in the country’s history. However, investors still need to be prudent. African stock markets are not very liquid and political problems and corruption persist, making Africa a difficult market to invest in.

Carmignac Emerging Discovery, our emerging small and mid-cap fund, currently has positions in companies such as Guinness Nigeria and Mauritius Commercial Bank. We often opt for subsidiaries of large multinationals, which enjoy better corporate governance. Our Carmignac Emergents fund focuses on consumer stocks such as Shoprite (consumer staples), a South African company, or the conglomerate CFAO (discretionary consumption), which is listed in France. In the commodity sector, we have a holding in Tullow Oil, which operates offshore oilfields in West Africa. We also recently purchased shares in Lundin Mining, which operates in the Congo.

Signed by Simon Pickard, Fund Manager- global emergent markets