We often get asked if it is appropriate to include South Africa in our Africa fund. Well… when we last checked… South Africa was, and still is, appended firmly to the bottom of the continent.
The obvious being stated, our CIO, Daniel Broby, points out that there is actually something far more compelling going on. It is the South African companies that are grasping what is going on in the continent and expanding North. Indeed, the fastest growing companies in South Africa are in fact Africa plays.
During apartheid South African businesses were not allowed to expand beyond the Limpopo river, the border with Zimbabwe. Now, Daniel points out that many are rapidly adopting strategies to capitalise on the fastest growing continent in the world. Indeed, these companies are actively assisted by the government and Africa friendly investment policies.
The financial sector leads the way in this evolving trend. Standard Bank, for example, now has operations in 18 African countries, and has just obtained a licence to operate in Angola. FirstRand also recently announced plans to focus on Africa. The insurance companies, like Old Mutual already have established presence in countries like Malawi, Kenya and Zimbabwe, and Liberty Life has just moved into Kenya and Sanlam plans to adopt a similar expansion.
Chris Muller, our Johannesburg based Portfolio Manager, observes that South African companies have in fact accelerated their expansion. SABMiller, Standard Bank, Woolworths, Shopright, Massmart, Pick and Pay and MTN have all made expansion the key element of their growth strategies. Indeed, ShopRite is planning 70 new shops in Nigeria in the next decade. Pick N Pay operates in Namibia and Botswana and says it is looking “seriously” at expanding into high-growth African markets such as Angola, Mozambique, Zambia and possibly Nigeria.
And let’s not forget that Massmart is being acquired by Walmart, a company not known for doing things in half measure.
It is difficult to talk about the African opportunity without mentioning Telecommunications. In this respect, it should not be forgotten that MTN is the continent’s biggest mobile telephone operator. It has operations in 10 African countries and commands an average 38% market share. Shoprite (pictured above),is now present in Angola, Botswana, Ghana, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Uganda, Zambia and Zimbabwe.
The beverage industry has long seen the opportunity. Indeed, SABMiller now the company derives 80% of its profits from Africa and other markets. That said, Tiger Brands has recently joined the bandwagon. Following the beer, Naspers’, the media company, has also pushed into Kenya with offerings that include the English Premier League and Channel O music.
Needless to say, we have not mentioned the mining companies where South Africa leads the pack. To us, the story is bigger than that. In conclusion, Africa funds that don’t get exposed to South Africa are in danger of missing some of the most exciting opportunities in the investment universe.
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