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
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
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
But the probability of mispricing is far higher in a market
like Africa than in developed markets.