Waka Waka, Its time for Africa

Excerpts from an article written by Larry Seruma, CIO of Nile Capital Management, LLC, titled: A Time to Invest in Africa:

For the past two decades, investors around the world have been riveted on the emerging markets of the four high growth BRICs – Brazil, Russia, India and China. However, as these opportunities fade, other high-growth emerging and frontier markets should become attractive and worthy of consideration to be added to an investor’s asset allocation strategy. Several of these markets are located in Africa, the world’s second largest continent by population and land mass, behind only Asia in both measures. With a population of more than one billion spread among 53 nations and almost 12 million square miles, Africa is becoming too big for investors to ignore. Yet, its financial markets and expanding public companies remain shrouded in mystery for most foreigners.

● A ground floor opportunity with potential for high returns - Already we have seen the first wave of strong returns from Africa. The continent’s economic growth is just forming what we believe is a powerful upward curve that will continue for decades and may produce results as rewarding as the BRICs over time.

● Political risks have been exaggerated - The stereotype of an African country ruled by one-party or military dictators is outdated and exaggerated. More than 90% of African nations now have functioning democracies.

● Strong economic and market growth - Nine of the 15 countries with the highest 5 year growth rate are in Africa and the continent is urbanizing at a faster rate than India and is already as nearly urbanized as China.

● Increased global demand for commodities - Africa holds an estimated 30% of the world’s mineral reserves. A supply that simply cannot be ignored. As BRIC countries industrialize, their demand for natural resources will keep increasing and they are turning to Africa as a source of scarce natural resources - especially energy and industrial metals. If you believe in the commodity growth story over the next five (5) years, Africa will be a prime beneficiary of that growth.

● Low correlation to domestic, international and Emerging Markets - Africa has correlations of 0.59 to S&P, 0.66 to MSCI EAFE, and 0.60 to MSCI Emerging Markets. This fact can have dramatic effects within a well positioned portfolio.

● The China Factor- China has increased its trade with Africa from $10 billion to $90 billion over the past decade. China is committed to investing its growing reserves into real assets around the globe and specifically commodities to secure its future economic growth. Africa as the mineral reserves and should benefit.

●Steadily increasing capital flows - Capital flows to Africa now exceed those of three (3) of the four (4) BRIC countries.