Question

How might a company try to weigh fairly the opportunities and risks of investing in South Africa?

Answer 1

Kenya has been the jewel among the larger sub-Saharan African nations recording six percent annual GDP growth over the past three years, a stable currency and respectable stock market performance against the MSCI Frontier Markets index.

Some of the underpinnings of this growth are coming from a more diversified economy, better infrastructure, better literacy and greater financial inclusion. While concerns remain about rising levels of debt / GDP and a currency that looks too strong, the overall macroeconomic background remains positive

Despite the muted economic environment, Nigeria has some profitable industries, Nigeria is generally well known for having the largest population in Africa with the current IMF estimate at 200 million people. A large and young demographic population with increasing incomes typically drives a local consumption theme with a long runway for sustained economic growth. Nigeria is also underpenetrated in many industries; banking, consumer packaged food, and telecommunications are some notable ones. Businesses operating within those industries are expected to see multidecade growth.

There is still a lack of key reforms for change in South Africa and therefore few opportunities for investment remain. South Africa has suffered several years of weak economic growth, rampant corruption, mismanagement of the state-owned entity and a political stall.

Under the previous leadership, much of this was founded and accelerated with evidence pointing to a host of middlemen and government officials who used their authority to mismanage state entities