AFRICANGLOBE -Africa is now the fastest growing continent in the world announced the African Development Bank last week. If There was one sentence that was designed to pop Africa over the global radar, that opening gambit by the AfDB is it. Africa’s collective gross domestic product (GDP) reached US $953 while the number of middle income countries on the continent rose to 26, out of a total of 54. Africa has grown dramatically since 2000. On current trends, it will achieve a GDP of $2.8 trillion by 2015 – twice the level of 2008. Consumer spending in Africa grew to nearly $600 billion in 2010, and by 2020, Africa’s market is expected to be worth a trillion dollars. Some 350 million Africans now earn between US$2 and US$20 a day, and the middle class is increasingly becoming an active consumer market says the AfDB. Intra- African trade worth just $108 billion in 2012. The high level macro data is painting a picture of broader based and deepening growth. I meet a lot of folks who express impatience with the quality of African growth and my point is that in fact it is a recent, last decade phenomenon and its been an accelerating trend within the decade. Africa is not homogenous in the same way China is. Africa is more of a mosaic and the high versus low differential between the fastest growing and slowest growing will always remain wide. Therefore, the experience of those who find themselves in a sweet spot versus those who might find themselves in a ‘white spot’, entirely different. And melt down risks in ‘white spots’ always exist. The geographical area of melt down risks is shrinking. For a long period, global investors entered the continent through the South African and Egypt gateways. Challenges in both gateways have been expressed in the currencies with the South African Rand at a four year lows and the Egypt pound at an all time low. You will note that both South Africa [The All Share is +5.39% in 2013] and Egypt [The EGX30 is -0.91%] have delivered negative returns when returns are booked in the dollar. What is interesting this time is that global Investors have trekked and penetrated deeper into the continent’s hinterland. This trend actually started in Q1 2012. The Ghana Composite Index is at a Record and +60.10% this year, The Nigeria All Share is +36.74% and the Nairobi All Share +27.9675%. For equity investors, Nirvana is elevated GDP growth because it is a rising tide and floats most boats. This international investor advance into the African Interior was optimally captured by the Government of Rwanda who sold their Eurobond with perfect timing. Africa exists in the frontier markets universe and continues to see a net add and I expect this net add bias to remain in play for a number of Years. For a long time, the more intrepid Investor sought frontier markets exposure for the ‘decoupled’ effect from developed markets meaning that a reduction of QE in the US should have zero correlation with the number of beers that might be drunk in Nairobi. However, during June it certainly did not feel that way. The Nigeria All Share retreated 11.099% June 11th through June 25th. The Nairobi All Share retreated 10.548% May 22nd through June 27th. Both have rebounded sharply. What is clear is that we imported some QE reduction chatter contagion. African markets ‘recoupled’ with international markets in June but are decoupling again.
Posted on: Mon, 19 Aug 2013 09:07:57 +0000
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