Johannesburg - Those looking for an economic recovery to boost equity prices will need to look to a recovery in America - but Africa may present some interesting opportunities.
This is the view of Jon Maguire, the chief investment officer of Cru Investment Management which recently opened a South African office.
With analysts divided, investors have been fed two options: a recovery led by the Asian economies due to their high savings levels, or a recovery out of the US.
"America is the driver and America is hurt right now," said Maguire as he dismissed the theory of an Asia-driven recovery.
Maguire said: "While the world is definitely moving east in terms of population mass, places like China don't have as much money as people think they have and their economies depend heavily on the US."
Debt merchants
A large problem facing the global economy at the moment is the process of deleveraging - the banks and traditional credit providers are not lending and this has sharply slowed down global growth and consumer spending.
Maguire said: "The world has become debt merchants and lending needs to be put back in its proper place."
A large part of the Cru portfolio is based on returns from privately-secured financing and equity deals.
Maguire believes that savings and investment patterns are already changing in the developed world. "Consumers are beginning to save, which is one of the reasons why spending is being cut."
Opportunities in Africa
Despite the economic turmoil across the globe, Cru believes it has identified some niche market investments in sub-Saharan Africa.
"People have forgotten about places like Malawi," said Maguire, who believes that sub-Saharan Africa will shortly see its population reach 850m.
He said: "In Africa there are 300 000 new mouths to feed each day."
One of the factors that Maguire believes makes Africa attractive is the very low investment base that the continent operates on. He said that the average value of a person (as calculated by dividing gross domestic product by the population) in America is about $45 000 whereas in Africa is lower than $1 000.
Maguire said: "Doubling the value of an American is difficult now and it will take a long time; doubling the value of somebody in sub-Saharan Africa is far easier and will take far less time."
Problems that face the world are rapid population growth, urbanisation and climate change.
Maguire points to sectors such as energy, water, food, irrigation and insurance as providing potential solutions for these problems. He said Cru has recently invested in food and agricultural projects in Malawi which they believe will generate superior returns over the next few years, and will be looking at investing in other agricultural-type projects in Africa.
- Fin24.com