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Renaissance - Africa, open for business

A decade ago the thought of investing your savings in the African economy would have tested the nerve of even the most risk hungry investor. Today Africa has started to be more widely accepted as part of investment portfolios offering respite from the prolonged weakness in developed economies.

It is easy to have misconceptions about countries and, often views of Africa are influenced by the local travel agent who portray Africa as all bush and wild animals, or the NGO marketers who focus on images of starving children.


The reality is Africa offers the investor access to 55 diverse countries at an exciting stage of early development. 6 of the 10 fastest growing countries in the world, this decade, are in Sub Saharan Africa.


At 30.2 million km2 Africa is over 3 times the size of China and 10 times the size of India. It has an abundance of fuel, with 10% of world oil and 8% of world gas reserves. It is also one of the world’s leading producers of industrial and precious metals. Africa produces 68% of the world’s cocoa, 14% of the world’s tea and 6% of fresh vegetables, but its output is only a fraction of its potential as only 1% of all agricultural land is irrigated. It used to be that the world fed Africa but in the future it looks likely that Africa will feed the world.


Probably the most exciting dynamic is the growing population of over 1bn people. Africa is on the cusp of a demographic dividend as the population is young and we see improving educational levels. More than one-half of its population is under the age of 24. By 2050 the population will have grown to 2bn and will have overtaken both India and China.


This group of people is growing in importance as they join the middle classes, their tastes change and they start to buy more consumer and mobile goods and use the banking system. At the same time Africa is urbanising rapidly about 40% of the population now live in cities, and the youth are urbanising the fastest. By 2015 Africa’s youth (under 15) is expected to rise to 45% of the total.


African companies have more potential for upside than those in western countries, as the sectors are often immature and have the advantage of reduced competition. Foreign direct investment inflows into the region reached $80bn in 2011 and are estimated to reach $150bn by 2015.


Africa isn’t without challenges, but we are seeing a more business friendly climate in many countries. It holds real potential for growth and, we believe, offers long term investors real upside for many years to come.


Ron Gillies - Renaissance Asset Managers, April 2013

Important notes

Please note that these are the views of Ron Gillies, Director of UK Sales, Renaissance Asset Managers, and should not be interpreted as the views of RL360°.

Author

Ron Gillies

Director, UK Sales - Renaissance Asset Managers
April 2013

Please note that these are the views of Ron Gillies, Director of UK Sales, Renaissance Asset Managers and should not be interpreted as the views of RL360°.

360° fund links

The Renaissance Sub-Saharan fund can be accessed through our guided architecture products Oracle, Paragon and Quantum, and also through our PIMS portfolio bond.