Peter Leger
Portfolio Manager
Coronation Asset Management (Pty) Ltd., South Africa
With rapidly-growing foreign investment, abundant commodity reserves, a fast-improving economic climate and fundamental infrastructural changes being made, Africa is a continent investors cannot afford to ignore. The WIOF African Performance Fund gives investors access to a wealth of investment opportunities in a leading growth region with a strong future.
IMPROVING ENVIRONMENT
Africa has in the past often been perceived as a continent plagued by poverty, famine, war, lawlessness and insurmountable infrastructure problems. But while parts of the continent do face challenges, the broader picture is increasingly positive.
Some simple basic statistics about Africa underline its enormous potential:
Africa has 13% of the world’s population
It is bigger than the USA, China, Europe, India and Argentina combined, making up 20% of the world’s land mass
It has 12% of the world’s farming land
It holds over 30% of the world’s mineral/mining resources
Alongside these encouraging fundamentals, positive demographic and macroeconomic developments, such as an improving inflation climate, are being seen in a significant number of African states. Meanwhile, government and private sector debt levels are also relatively low.
INVESTMENT DESTINATION
The positive growth outlook and continuously improving macro environment have been noticed by foreign investors and a raft of major investments have already taken place or are planned. Among the largest investments have been those from the world’s established and rising economic superpowers.
USA and Europe
For example, the US retail giant Walmart has recently had a USD2.4bn bid approved for local discount retailer Massmart, which has 288 stores in South Africa and a dozen other African countries. US and European oil companies – Chevron Corporation, Elf Oil, Texaco, ExxonMobil, Agip, Petrobras, and British Petroleum all have operations in various countries across the continent.
Asia – India and China
Companies from the two rising Asian world economic giants, India and China, are also investing. Trade volumes between South Africa and India doubled from 2007 to 2010, with India becoming South Africa’s sixth-largest destination for exports and its ninth-largest source for imports. Out of all of the Chinese companies that invested abroad in 2010, 22% invested in Africa, according to official Chinese figures. Major Chinese companies are investing, mainly in infrastructure and resources projects. Meanwhile, Chinese demand for raw materials has climbed by a reported 600% in less than a decade and the number of Chinese mining investments in Africa has risen from six in 2003 to more than 40 in 2010.
EXPECTED TO RISE
Investment is expected to continue at a healthy rate. A survey by Ernst & Young of 562 global executives released earlier this year showed that they expect new projects in Africa will enjoy strong growth from next year, with inflows of foreign direct investment forecast to reach USD150bn by 2015. The survey also showed that when it comes to investment strategies, Africa is high on the agenda of global investors, with 42% of the businesses surveyed considering investing further in the region and an additional 19% of executives confirming they will maintain their operations on the continent.
OUTLOOK
Africa’s development in recent years in terms of its economy and markets make the continent’s long-term prospects encouraging. Returns in recent years have proved to be solid and massive liquidity injections and financial support provided by western governments has stabilised the world’s financial system to an extent. However, the health of government finances in the West is beginning to appear very poor and withdrawing the stimulus provided in recent years is likely to prove a tricky affair. Global economic events and development will continue to affect the continent. But Africa’s underlying themes continue to promote confidence: there is a wealth of investment opportunities, sustainable growth, a dramatically improving investment climate, an increasing investor base and a significant upside from current valuations. In the absence of any major negative global economic events, macroeconomic developments should help to drive long-term growth potential in the region.
INVESTMENT MANAGER
The Fund’s investment manager is Coronation Asset Management (Pty) Ltd., South Africa (Coronation AM), one of the largest asset managers in South Africa and boasting a strong international presence. Founded in 1993, the company‘s headquarters are in Cape Town, South Africa while it also has offices in the United Kingdom, Botswana and Namibia.
IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.