Tunisia has been the object of concern for many. Our perspective on the events is not as dramatic as most of the headlines would position it. We see the recent developments as a transition point for a modernizing economy.
We recently posted a comment on our blog where we point out why we believe there are similarities with what happened in Thailand last year. It took them 3 months to sort things out and now what happened seems to be forgotten. During the past 2 weeks I have heard from at least 4 people in my close circle of friends that they had just been in or were going to Thailand for a holiday!
The bottom line is that Tunisians are increasingly assertive, want change and more progress. The people took a stand and it not only prompted the president to leave the country, it also resulted in the failure of an attempt of members of the former leadership structure to return to power. In a modern state, the leaders render a service to the population, it is the essence of democracy and this is what the people of Tunisia are now forcing into place. During the last few days, things have been calming down and people seem to be getting on with their daily lives. For more perspective, you may want to have a look at last week’s posting on our investment blog: Tunesia with the “T” of Thailand
In this post, we also explain why we don’t see the risk of similar uproars in other North African countries. The market may have pushed Egypt lower, partly on the back of this concern, but for what it is worth, pricing on the Moroccan market has not been affected by these developments. Africa counts 53 countries and they are all very different from each other, even those on the Mediterranean coastline. In our team, we have 3 Moroccans and 2 Egyptians. They tell me that a real effort is required for them to clearly understand each other in their respective Arabic languages!
Nigeria – President Goodluck Jonathan beat Atiku Abubakar in the People’s Democratic Party (PDP) primaries. Abubakar was seen by many as a threat to Jonathan’s aspirations to contend for re-election. This victory has made Jonathan stronger than ever and positions the reform-minded incumbent in a great position to continue to lead Africa’s most populous nation. As we have pointed out in the past, Jonathan is a man with a plan and that is why we see this development as a positive. There is empirical evidence that one of the main factors for success of today’s darling emerging markets is that they have had the benefit of continuity when it comes to implementing policy. This is true for Brazil, Russia, India and China. The same will apply to other upcoming nations.
By the way, Goodluck Jonathan has a page on facebook, it is an interesting read for those who wish to take the time.
Nigeria will also issue its first US$ denominated Eurobond on Friday. With a maturity of 10 years, and a target size of 500mn, we are expecting it to be placed at a yield of somewhere around 6.5%. We are expecting the issue to be considerably over-subscribed.
Furthermore, South Africa’s currency, the Rand, has been under pressure. Our policy of diversification has limited the impact of this on the African Lions fund. The benefit of good diversification was also seen by the limited effect the drop of the Tunisian and the Egyptian markets had on our funds. On the positive side, our high allocation to Nigeria (around 23%) is paying off handsomely. More details on the positioning of our portfolios can be found in the attached updates.
Finally, if you haven’t received our investment outlook for 2011, it can be found on The Year of the Frontier – Silk Investment Outlook for 2011
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