The Overlooked African Asset Class

Why aren’t more local fund managers focusing on stocks else where in Africa? The continent holds much potential, but governments must get one or two things right fo r a surge in local listings.

- Jaco Visser

Africa is a continent rich in mineral resources, agricultural potential and human capital. Particularly the latter should be an enticing fact to set off an investment boom.

According to a note published last year, the World Economic Forum indicated that by 2050, it is expected that two out of every five children born worldwide, will be in Africa. The continent is noticably somewhat of a last frontier for companies, ranging from consumer staples, finance, property and agriculture to mining and clean energy, for instance. Unfortunately, the last decade has proven the opposite, since illiquidity on the continent (excluding South Africa in this article) stands in the way of luring large money managers from the US, UK, Japan and Europe to snap up stocks.

This situation is evident by only three specialist SA funds focussing on African equities outside SA. Government is also keen for more SA retirement savings finding its way into stock markets on the rest of the continent. Regulation 28 of the Pension Funds Act stipulates that 25% of funds can be invested offshore, excluding Africa, and 5% in Africa. With a retirement savings pool of about R2.99tr at the end of September 2020, according to the central bank’s Quarterly Bulletin, the potential allocation to African equities, should pension fund trustees reckon it is a good investment, would be R149.4bn.