Thursday, July 17, 2008

2008 Investment guide: Into Africa

From Forbes (business magazine):

Brutal dictators, civil wars and stolen elections tend to dominate the headlines Americans read about Africa. Less visible: cell phones, the spread of capitalism and World Bank-inspired debt forgiveness, all of which are driving down inflation and driving the boom in sub-Saharan Africa's stock markets.

So says Jonathan Auerbach, managing director of Auerbach Grayson, a cosmopolitan brokerage in New York City for institutional investors that have at least $100 million to commit. Last year it invested $850 million in Africa for these clients. His pitch: Most African countries, with the exception of Zimbabwe, have high rates of growth and millions of people aspiring to the middle class. Many who are already there are not visible in the official statistics because they are a part of the gray economy.

Outside of Johannesburg's, the stock markets are still small and illiquid but growing. Two decades ago there were 5 stock exchanges in sub-Saharan Africa. Today there are 18, with, among them, 1500 listings, according to the International Monetary Fund. North American and European funds specializing in African stocks saw net inflows last year of $663 million, up from $82 million in 2006, says EPFR Global, a research firm that tracks funds worldwide. In a small market that modest sum was enough to send prices soaring. Excluding those in South Africa, African stocks have climbed at an annualized 43% since the end of 2006, according to S&P.....

"Anybody who takes their input from the New York Times on a daily basis," Auerbach says, will think of Africa as only "corruption, aids, starvation, disease, genocide." But he believes "this just isn't the case in Africa these days."

He points to working stock exchanges, enlightened new governments and significant amounts of capital going into the continent. His yardsticks are whether a country has a stock market, an acceptable legal framework, a custodian for his clients' stock and a local analyst who can send him reliable research.


Note their comments about Zimbabwe. But in Zimbabwe, a change in government and stability would allow the diaspora to return, making it a good investment too...

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