Africa Delivers Highest Investment Returns

The current return rate on investment in Africa is more than 30%, making the continent the fastest growing region in the developing world, according to Caroli Omondi, acting Chief Executive of the Africa Trade Insurance Agency. 

Mr. Omondi, addressing the fifth gathering of the African Venture Capital Association in Mombasa, compared this with the return on investment in Europe of 10 % and 15% in the United States.

Addressing delegates on turning risks into opportunities, he pointed out that with 52% of Africa’s goods exported to the European Union, the only major risk to trade was political instability which led to a heightened perception or risk.

Source: Databank Group

2005 Mid-Year Review of Africa's Stock Markets

Stock markets prolonged their 3 year bull run in the first half of this year thanks to ongoing political and economic reforms, a favourable external environment, strong commodity prices, relatively low interest rates and strong earnings performance by many listed companies.

Africa’s GDP in 2004 is estimated to have grown by 5.1% and a similar performance is expected this year.

African stock markets are outperforming other regions, with average gains in US$ of 13.3% against a global average of 5.9%.

The top five performing markets globally all come from Africa and include Egypt, Zambia and Uganda, where strong foreign investor interest buoyed the equities market.

Courtesy of Databank Group

Tracking Market Progress – Frank Senyor Dewotor of Databank Group gives his half year review of African stock markets

The African continent continued its spectacular bullish trend in the second quarter of 2004, with African stock markets firmly perched at the upper echelons of global performance rankings at the close of the half year.

In the half-year, index returns in Africa outside Zimbabwe averaged 19.21% in US dollar terms and 19.26% in local currency terms. This compares favourably to an average index return in US dollar terms of 7.88% in Latin America, 6.41% in Europe, 5.57% in North America,-2.5% in Asia and a global average of 7.91%. Out of the top ten best performing markets in the world during the period, six (6) were from Africa, two (2) from Latin America and two (2) from Europe.

Ghana which topped the world performance rankings last year remained in the number one spot at the end of the half year driven by strong corporate results, declining inflation, falling interest rates and an overall improvement in the macroeconomic environment. Index returns reached 92% in US dollar terms in Ghana in the half year and 96% in local currency terms. The stellar performance of the market over the past 3 years has made IPO capital very cheap and this has elicited interest from companies to list on the Ghana bourse. At least five companies are slated to list on the Ghana bourse with a current market capitalization of $11bn in the second half of the year. 

The Uganda bourse which is one of the smallest markets on the continent, consolidated last year’s strong showing with index (composite) returns reaching  58% in dollar terms and 46% in local currency terms

on the wings of a strong local currency, declining interest rates and a favourable inflation outlook.

High crude oil prices, increased OPEC quota for Nigeria, higher oil output in the half-year and programmed deregulation of the oil industry have boosted Nigeria’s economic outlook, although corruption remains a  concern.  Strong corporate results for several listed companies, the naira’s stability and some degree of speculation are also contributors to the strong returns in Nigeria this year. In the half year, index returns in Nigeria reached 44% in both Naira and US dollar terms.

Broadly, the outlook for the markets in Africa for the rest of this year is highly dependent on crude oil prices, the strength of the dollar and the overall outlook for the global economy.  The strong global economic outlook could, however, ensure that the prices for several of Africa’s commodity exports (especially precious minerals) remain bullish in the short to medium term.

Databank Group (www.databankgroup.com)

Ghana Stock Exchange makes the business case for investing in the Emerging Markets

Ghana and Nigeria topped the six best performing stock markets of Africa on a global rating in 2003.

In a recent statement from the United States (U.S) Embassy, Africa provided the world's best performing stock markets in 2003. 

With other top African performers including Uganda, Kenya, Egypt and Mauritius stock markets, the returns on investment exceeded 50 % in US$ terms.

The marginalisation of African financial markets by the media in the West may be understandable, given that these markets are relatively small.  However, the fact remains that in 2002 and 2003 African stock markets have, on average, outperformed the market.

In Ghana, according to Databank Financial Services Limited, the average index return on African stock reached 41% in 2003, compared with a 30% return by the Morgan Stanley Capital International (MSCI) global index; 32% in Europe; 26%in the U.S (Standard & Poor); and 36% in Japan (Nikkei). 

Citing cheap evaluations, an improving macroeconomic environment; and S&P's upgrading of Ghana's Sovereign rating to B+, the Ghanaian Stock Exchange was reported to have recorded a U.S dollar return of 144%, putting it ahead of 61 other markets around the world.

Interest in Kenyan stocks also increased, reflecting greater investor confidence following the smooth political transition two years ago, a commitment to macroeconomic reforms and a resumption of foreign aid to boost the economy.

African markets are expected to continue to do well in 2004 and Stephen Hayes, President of the CCA (Corporate Council on Africa) described the report as "another reason why investors should seriously consider Africa's emerging markets as places ripe for investment."

Sources:  Databank Financial Services(www.databankgroup.com) Allafrica.com (www.allafrica.com)