Market Watch: Africa “The Most Fascinating Region in the World Right Now”

In an article published yesterday on Market Watch, the opportunity for investing in Africa has again been highlighted, with the author noting that Africa may be the ‘final frontier.’  While the article notes that investors’ perceptions of Africa are still 'rooted in the past,' it also points out that many of Africa’s perceived challenges are similar to Europe during the Industrial Revolution, or even Asia in the not so distant past. 

The article justifiably points out that there are yet a number of hurdles to be overcome as Africa continues to grow.   However, while it points out that political challenges remain, and infrastructure networks are often insufficient, it also notes that a number of countries are in a 'virtuous cycle,' in which faster growth of tax revenue facilitates higher infrastructure spending, which encourages faster growth.  As many of Africa’s economies are expected to grow by 7% or more in the coming years, this cycle is expected to perpetuate itself in many of Africa’s nations.

Overall, the article points out that an emerging Africa has two significant implications for the global economy: first, it could precipitate a turnaround in the bearish sentiment around the global economy.  Many investors are presently focused on concern over the Euro, and seeking the next growth story for investment.  Perhaps, the article suggests, that Africa is it.  In addition, the article notes that Africa could be the last real emerging market story.  Globally, nowhere is as underdeveloped as Africa, and should the continent continue to grow as it has been in recent years, it is only a matter of time before it could experience ‘explosive’ growth.   We could not agree more.

For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820, or info@nilecapital.com 

We know Africa - from Cairo to Capetown.

De Beers Moves Sorting and Sales of Diamonds to Botswana

An article in the Wall Street Journal caught our eye over the weekend, as it focused on a trend we have been noticing with increasing regularity across Africa.  The article, “De Beers to Deal in Botswana” (link) highlights the recent move by diamond powerhouse De Beers to move its rough diamond sales and sorting activity from its current location in London to the capital of Botswana by the end of 2013.  This move demonstrates a trend we highlighted in an earlier article (found here) about the potential for Africa’s industries to move up the production value chain, thereby creating more and better jobs in value-add industries.   

For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820

We know Africa - from Cairo to Capetown.

Fidelity Investments Agrees: Africa Could be the Next Big Growth Story

In a recent article (found here) the Fidelity Viewpoints series provides a rationale for investors to consider Africa in their portfolio allocations. As noted in the article, there are a number of sectors in Africa that look compelling from both a growth and a diversification perspective. In addition, the article points out that the secular and economic trends in Africa should merit investors’ further consideration.

Although the opportunity for investing in Africa is becoming more widely understood, it is still relatively difficult to find a pure-play investment opportunity in the Continent. In fact, while a handful of funds many have exposure to Africa, we at Nile Capital Management believe that offering an actively managed, pan-Africa mutual fund makes us unique. As you can see in our most recent Fund Fact sheet Nile Capital is invested across Africa, and seeks opportunities throughout the Continent. This is in contrast to other funds where an allocation to African countries outside of South Africa, and at times Egypt, is still relatively rare. In reality, while Fidelity’s manager may speak favorably of the opportunities in Africa’s frontier, less than half of their fund’s exposure is in Africa, with the substantial majority of that Africa exposure allocated exclusively within South Africa.

Nile Capital is truly pan-African, investing in what we see as many of the greater opportunities in Africa’s frontier markets. We seek to invest in opportunities which capture the growth of the consumer class, the demand for infrastructure, and global interest in natural resources. We believe that Nile’s fund vehicle is well positioned to truly participate broadly in Africa's growth. Nile Capital Management’s expertise and focus on the African continent provides investors access to the Continent's potential for growth.

Nile Capital Management, the Advisor to the Nile Africa series of funds, is a New York-based asset management firm with in-depth investment expertise that covers the entire African continent, from Cairo to Cape Town. By focusing on Africa, the company seeks to identify and capitalize on the best investment opportunities in the continent and expand investors' access to emerging/frontier markets. Additional information is available at www.nilefunds.com.

Nile Capital Featured on Seeking Alpha

We at Nile wanted to briefly highlight a recent article about investing in Africa on Seeking Alpha (here), and our firm’s response (here).  Both articles were featured on the site’s front page, further confirming the growing interest for investing in Africa.

For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820

We know Africa - from Cairo to Capetown.

Opportunity in Kenya: Strong Companies, Challenging Macroeconomic Picture

The East African nation of Kenya has, for many years, been one of the Continent’s strongest economies, and a hub in its region.  The country, which has a population of approximately 40 million, and a GDP of approximately $32 billion, has been growing its economy by double-digit rates over the past six years, and is expected to continue to expand at a healthy rate over the next five.  Kenya’s economy is considered the most developed in its region, and is often chosen as a starting point for multinationals looking to expand into East Africa.  In our view, there are a number of compelling opportunities for strong investment returns in Kenya’s stock exchange, however the macroeconomic overhang remains a challenge. 

Notably, Kenya’s Stock Exchange is one of the oldest in Africa, with a current market capitalization of around $12 billion, and over fifty stocks listed to trade.   The Exchange, which is the fifth largest by market capitalization in Africa, operates over an electronic platform, and is well diversified amongst a number of sectors.  However, the exchange only trades around $100 million worth of shares per month, and liquidity remains a challenge. 

Within the companies which are listed in the Nairobi Exchange we see a number of good opportunities for strong performance.  As a whole, Kenya’s listed companies are very well managed, and in many cases have high potential for growth.  In particular, on a recent trip to Africa we were impressed with a number of companies which produce cement, a necessary ingredient for infrastructure growth, as well as companies that serve the nation’s growing consumer demand.  Over the long term we believe many of these companies are trading at compelling valuations, and could be likely to perform quite well in coming years.

However, although economic growth and business performance has been strong in the past few years, we believe that in the short term the macroeconomic overhang in Kenya makes it challenging to find compelling opportunities.  On a macroeconomic level, the biggest story for Kenya’s economy in recent years has been inflation and currency depreciation.  As a country without substantial oil reserves, Kenya is a net importer of many goods, including petroleum products, food, and industrial materials.  As a result, it must maintain adequate currency reserves in order to cover the costs of goods coming into the country.  In recent years, the price of oil has risen substantially, driving up the cost of many of the products that Kenyans import and causing inflationary pressures.  This high demand for dollars in Kenya has resulted in the depreciation of the shilling against the US dollar.  For investors who are seeking opportunities in Kenya this depreciation is a particular challenge, as a gain in the stock market has the potential to be erased by exchange rate depreciation.  In fact, as you can see over the past three years the value of the Kenyan shilling (versus the US dollar) has decreased over 25%, and shares of the largest firms listed on the Nairobi Exchange are down over 30%.  


Going forward, we believe that there will be more depreciation to come for the shilling, as real interest rates remain negative, and inflationary pressure persists.  In addition, Kenya will hold elections in August of 2012, which could mean uncertainty for investors who remember the challenges of the 2007 election cycle.  Although a drop in oil prices has the potential to ameliorate some of this pressure, we think that the government will continue to raise rates in order to combat the rise in prices.  However, we also believe that the end of this cycle is getting closer, and as current yields converge with inflation, our interest in some of Kenya’s strongest businesses will continue to grow.  When this happens, we believe it would be a good entry point for some of the opportunities we find most compelling, and we will continue to watch for the right moment to invest.     

For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820

We know Africa - from Cairo to Capetown.