“Africa is on the verge of an economic renaissance,” says Manraaj Singh, emerging markets specialist at Profit Hunter. Between 2001 and 2006, the continent’s growth rate reached 4.9% a year, outstripping the global average, while in 2007 the figure is set to rise to 6.2%.
The commodities boom has given Africa, home to half the world’s platinum and diamonds, along with 29% of its gold and 10% of its oil reserves, a major fillip, while debt relief and better economic management have also helped. Foreign direct investment is rocketing, reaching $30bn in 2005, 78% up from 2004. On the trade front, developing Asia has emerged as a “third pillar for African exports”, says Singh, accounting for 27% of the continent’s exports. There is ample scope for the relationship to deepen as Africa still comprises under 2% of Asia’s imports.
US trade with the continent has more than doubled over the past six years. Not only has the growth outlook vastly improved, but African markets tend to be uncorrelated with major Western markets, says John Mackie of South Africa’s Asset management group STANLIB.
The firm best-placed to play “one of the world’s most exciting growth prospects” is Aim-listed Lonrho (LONR), says Singh. The group has stakes in diamond and uranium miners and the oil and gas industry (including a port in Guinea, the “Kuwait of Africa”). It has moved into Africa’s fast-growing shipping and air-travel sectors and even has an interest in bottled water and landmine clearance. The group is still making a loss, owing to its rapid expansion, but with revenues soaring and “the building blocks for sustained growth” in place, the long-term potential is “enormous”.
Also worth a look is the Aim-listed PME African Infrastructure Opportunities Fund (PMEA), recently tipped by Justin Urquhart-Stewart of Seven Investment Management.