Nigeria and Kenya have been highlighted as Africa’s next investment destination focal points
According to the Economist Intelligence Unit (EIU) survey, Africa: Institutional Investor Intentions to 2016, global institutional investors plan to boost their asset allocation in African markets over the next five years, and are shifting to long-term investment strategies from more speculative, short-term bets. All institutional investors polled expect to have some exposure to emerging Africa by 2016, with nearly a third expecting to direct at least five per cent of their fund value there.
In terms of popularity with investors, Nigeria and Kenya head the list, followed by Zimbabwe, Egypt, Ghana and Libya. Africa’s emerging middle class has been identified by investors as the most attractive aspect of the continent, which, until now, has been viewed largely in terms of natural resources.
Africa’s frontier markets, the smallest, less developed and less liquid among emerging economies, will offer the best overall prospects for investment growth in the next decade, according to 51 per cent of the 158 investors polled by Invest AD and the EIU. Two-thirds of investors with an interest in frontier markets see Nigeria or Kenya presenting the greatest opportunities, putting the continent ahead of frontier markets in Asia and Latin America, the survey showed.
Even among frontier markets investors, most are only just starting to explore African markets, with one in five of those surveyed having zero allocations. This is closer to one in three larger investors with more than US$10bn under management, according to the survey.
“Interestingly, the Invest AD-EIU survey suggests that investors are largely drawn by the same ‘income convergence’ story that has played out in China and India — not the worn, one-dimensional motivation of mineral extraction,” Nazem Fawwaz Al Kudsi, chief executive office at Invest AD, said.
Institutional investors still have several concerns about investing in the continent, according to the report. “Africa’s biggest challenge is to overcome deeply entrenched perceptions,” the report says. “But a striking shift that can be observed among investors is a change in focus from macroeconomic and political worries towards more technical market concerns.”
