It is not immune from falling commodity prices. And even there the slowdown of China is being felt, which is the main trading partner of the majority of countries. In recent times, investors have been more sellers than buyers on the lists but there are those who are betting on the new era that will follow the wave of new investments underway. Railways, airports, power plants will allow the economy to diversify and grow.
HIGH CONFLICT MARKET. BUT CHINA RELAUNCHES
Contraindications are not lacking: from the conflicts that tear apart the territory to political instability and terrorism, from the lack of transparency to the shortage of liquid capital. Yet the Continent has become a hot destination for global companies and investors looking for possible high returns. According to the Corporate Council of Africa, as of July 2015 there were 180 large companies targeting Africa (from Boeing to Caterpillar, from Wal-Mart to General Electric). Meanwhile foreign direct investment (FDI) has grown six-fold, driven mainly by intra-regional trade.
Investors are attracted by an economy that has quadrupled in the last 20 years, the GDP is almost twice that of China in 2000 and according to some forecasts it will grow by another 50% in five years. The estimate for 2050 sees GDP at 3.444 billion dollars. On the other hand, the People's Republic of China itself, it emerged at the end of 2015 in the Forum for China-Africa cooperation, wants to consolidate its presence on the Continent, and has announced that it will allocate a financing plan of 60 billion dollars, mainly focused on the following sectors: industrialization, agricultural modernization, infrastructure implementation, financial services, environmental protection, trade and investment development, poverty alleviation, public health, cultural exchanges, and security cooperation. According to experts, the great structural reforms are a positive driving factor for Africa and will allow a new phase of growth on the Continent.
MULTIPLES AT A MINIMUM OF 10 YEARS. THE MIDDLE CLASS, A MIRAGE?
For those who believe in African investments, stock market multiples are attractive: African markets trade at their lowest levels for ten years now. This is because investors have exited African stock exchanges en masse in the wake of falling commodity prices, the slowdown in China and, more generally, the change in confidence in emerging markets. In 2015, the MSCI Africa index lost 19%. The most penalized were the economies linked to raw materials such as Nigeria, one of the indices that did the worst in the world in 2016.
For some, however, it is a penalty en bloc that does not take into account that Africa is a very varied area, characterized by growth rates and characteristics of national economies that are very different from each other, with opportunities in the nascent middle class and in consumption interior. In Africa today, there are 750 million consumers above the poverty line, and the number of consumers is expected to grow by 500 million over the next 15 years. "In 2050 over a third of the world's population will live in frontier markets", explain the experts of Silk Investilk Invest, an independent asset management company specializing in investment strategies aimed at frontier markets and the Black Continent with 300 million dollars of assets under management. “It is estimated – says Silk Invest – that this number will reach half of the global population in less than a century. Some examples are Nigeria, Ethiopia, Pakistan and Bangladesh, which will each host 200 million people. The main opportunities related to the growth of the middle class are found on the African continent”. For this reason, Silk Invest's strategy is to invest in companies linked exclusively to domestic consumption and in the growth of the middle class population, excluding commodities.
Also positive was Erik Renander, Manager of the HI Africa Opportunities fund of Hedge Invest Sgr, who underlined in a note some time ago: “Investors are selling and are no longer interested. Unfortunately, they will miss out on the next, amazing phase of growth. The next driver is already on the field. Africa will see the greatest growth in infrastructure in its history”. For Renander, future economists will write about how “the combined effect of new railways, airports, power plants, ports and broadband fiber has lowered the cost of doing business in Africa and allowed economies to diversify and grow. At the moment the sentiment is negative, but the new era of growth for Africa is under construction and will soon be ready.”.
In the short term, however, it cannot be ignored that in January the IMF warned about the economic prospects: in 2016 Africa will grow by around 4%, well below the trend of the last ten years and only slightly above +3,5%. of 2015.
