MR MONEY MAKER: How an African Adventure Can Profit for Your Portfolio
What is going on?
If we follow the headlines, the entire continent of Africa has been written off by many investors as a fruitless search for fool’s gold.
So I would ask you to leave all your prejudices behind and think about a bigger picture and a longer story about how the economies on this continent are changing.
Why is it important?
Africa is usually associated with poverty and greed, with income seemingly dependent on all types of mining.
Adventure: There are some UK-listed telephone companies that specialize in telephony and money transfer services in Africa
Yes, there are still many administrative and political questions, of course, but some of the same points can also be raised closer to home. Rather, Africa is changing and this can best be seen by the greater value of trade between the nations.
Traditionally, countries have tried to protect their economies with higher tariff walls. For anyone who has read about economics, this is rarely a path to success. Free trade zones tend to promote greater exchange of goods and services and greater prosperity.
Although it was virtually ignored by the Western media, the African Continental Free Trade Zone (AfCFTA) has been signed and ratified by 34 countries and implemented early this year. This will not mark an immediate change, but is a pointer in the right direction. However, there are some early ways to take advantage of the internal development of African economies and not just by hollowing out the minerals, but in a way we are all familiar with: cell phones.
What should I do?
I have seen from my own experience how telephony has made a great leap forward. We’ve moved on from the time I had a landline phone at my office in Kampala, Uganda, but unfortunately, since there was no system, the plastic handset on my desk was just a status symbol.
Now cell phones are used for trade in a growing number of countries – and I must say it is mostly done successfully by the women in the villages. So we could look at investments in the mast infrastructure, although that is a longer game, or in actually operating and growing telecom companies.
Putting money in Africa is for adventurous investors. In fact, there are some UK-listed telephone companies that specialize in telephony and money transfer services.
Operating in 14 countries across the continent, Airtel Africa is now the second largest mobile operator with more than 116 million mobile customers and nearly 20 million money transfer users. It is a member of the FTSE250 index so UK investors can easily buy.
For a less risky ride, try a passive fund of the continent’s 50 largest stocks, about half of which are in South Africa. The Xtrackers MSCI Africa Top 50 gives you a broader and more diversified portfolio.
Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of the regional investment platform.