Africa equities

Mergers and acquisitions activity is on the increase in Africa, with the number of deals in 2013 close to the record high reached in 2007, an encouraging sign for private equity groups looking to exit investments on the continent, according to a new report by RisCura, a Cape Town-based consultancy.

Last year, there were 991 reported M&A transactions in Africa, up 13 per cent from the previous year and close to the 1,019 deals before the global financial crisis, as illustrated in the chart below from RisCura’s 2014 Bright Africa report out on Wednesday. 

Nigeria is receiving a large influx in foreign portfolio flows in spite of investors’ unease following the terror campaign of Boko Haram, after a closely-tracked index provider increased significantly the weighing of Africa’s largest economy.

MSCI, whose indices are followed by billions of US dollars from institutional investors, has lifted the weight of Nigeria’s equity market on its popular MSCI Frontier markets to about 19 per cent, up from 12 per cent previously. 

Men point at exchange rates posted on a board at the Regional Bourse (stock exchange) for French West Africa (BVRM) where members of the West African Economic and Monetary Union (UEMOA) are represented, 2008 in Abidjan.Markets tend to rise and fall in step on big news events. Fear spreads that the US Fed will call an end to QE, and US stocks plummet. Larry Summers pulls out of the race to be Fed president, and stocks rally. If this is true of big markets in the US, Europe and Asia, is it possible to invest in something more independent?

How about Africa? How insulated from the vagaries of global market sentiment are African stocks? Pretty insulated, as it happens. 

It began 20 years ago, carting meat around Lusaka in the back of an ageing Land Rover. Since then, Zambeef has grown into one of the largest companies in Zambia’s booming economy. Now it hopes to replicate its success in west Africa.

The FTSE AIM traded company, whose primary listing is on the Lusaka Stock Exchange, is a curious entity in the modern food industry: a near fully vertically-integrated operation which produces, processes, distributes and retails, all in-house. 

By Dambisa Moyo

In my book Dead Aid I suggested that African governments could and should access the international capital markets to finance their development objectives such as infrastructure, healthcare and education. I argued that the relatively transparent global bond markets would help impose discipline on governments that were otherwise viewed by investors as reckless and, in many cases, corrupt. Critics argued that my suggestion was naive, and that African policy makers were ill-equipped to venture into the international debt markets.

Four years later, and African governments are proving the naysayers wrong. 

It is the ultimate in risk versus return. Hunters of investment exotica are heading to Africa, where some of the world’s riskiest markets are enjoying big gains.

After trailing behind more mainstream markets for the better part of a decade, so-called frontier markets as defined by index provider MSCI have climbed more than 8 per cent already this year – outpacing both emerging and developed stock markets.