ViewPoint: Investing in South Africa

Global economic growth over the next decade will be led by the emerging nations of Africa, and to a lesser extent Asia. This creates exciting new investment opportunities for international investors. Africa is a continent rich in mineral resources and has 60% of the world’s uncultivated arable land. There is also a huge burgeoning middle class who are very aspirational, with a strong appetite for global consumer brands and leading technology. Multinational corporations have recognised the opportunities that exist on the African continent and are investing more and more into the region.

However, Africa is still seen as a continent fraught with corrupt governments and security concerns. These are very real problems that will likely take years to resolve, but they are being addressed as governments and their leaders see the future possibilities and opportunities that stability can bring.

South Africa has the largest economy in Africa, although it’s soon to be eclipsed by Nigeria, with a far larger population and vast oil wealth. South Africa has the biggest, and most liquid, stock exchange on the continent – the Johannesburg Stock Exchange (JSE). The JSE was founded in 1887 and is one of the most advanced exchanges in the world. Many multinational companies are listed on the exchange and these companies are moving more and more into other African markets. For vari- ous other reasons too, South Africa is viewed as the gateway into Africa – a pure democracy, excellent regulation in banking and financial services, advanced infrastructure and world class companies with an international footprint.

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The JSE All-share index has produced excellent returns in the past – averaging more than 20% per annum over the past 30 years and 24% per annum over the past 5 years. It’s always been a resource-dominant index, but becoming less so as other sectors expand rapidly. However, as the world economy continues to recover from the recent credit crisis the resource sector will inevitably benefit from this recovery.

South Africa is also blessed with world class fund management companies, such as Allan Gray and Coronation, to name just two. These companies have domestic as well as international expertise and their performance over all relevant periods speaks for itself. They have unit trust (or mutual) funds to suit every investor and offer diversity across regions and asset classes to suit every investment portfolio.

The emerging markets are more volatile in the short term than the developed markets of the world, but this brings with it good investment opportunities. An international investment portfolio should be well diversified, and an allocation to emerging markets certainly included. South Africa is a very important emerging market on the global stage, offering a solid and steadily- growing economy, with secure rewards for potential investors.

For more information contact Brent Robinson on brent@zainainvest.com