A Fin24 reader asks:
Is a private investor likely to find good opportunities and
companies trading below fair value in Africa?
Neil Urmson of Investec Wealth & Investment responds:
We believe the answer is almost certainly yes. Africa
presents many attractive opportunities. We believe an investment strategy
should be characterised by bottom-up, in-depth analysis of investment
opportunities, allowing for some margin of safety.
It should also be characterised by greater diversity than
normal, without compromising on quality, a long investment time horizon and
fund management with specialist African expertise and a commitment to investing
in Africa for the long term and the resources and practical know-how to
execute.
Clearly, it would be foolish to assume that you can employ
one single strategy for a cluster of 53 countries. Africa does not represent
one single opportunity any more than Europe, the Brics bloc or any other
emerging market.
Therefore with 53 countries on offer, different economies, a
continent with natural resources in abundance, developing markets and clear
consumer demand, the case for labelling Africa as an emerging economy exists.
For the brave investor, a pioneering entry into Africa could provide returns
that outweigh the risks by a mile.
A private investor should understand that the decision to
invest in Africa should be no different from any other investment decision. You
can earn a return which is above inflation and which compensates for the risks
taken.
But the probability of mispricing is far higher in a market
like Africa than in developed markets.
- Fin24