Growth in Africa not reflected in stock values
ZURICH - The Arab Spring and global risk aversion has left shares in African companies outside South Africa hugely undervalued, representing a buying opportunity as the continent grows quickly, a fund manager at Johannesburg-based African Alliance said.
"The North Africa situation has had a negative effect ... but Africa is not just Egypt and Morocco," said Nicholas Piquito, head of Pan-African funds at African Alliance Asset Management.
"There is so much happening on the ground that is not being seen by international investors," Piquito said. "We believe the upside is very significant. The market continues to be under-appreciated globally."
Piquito said African stocks had fallen 10% since a trough in global share markets in March 2009, while global emerging markets - including South Africa - had risen about 100%.
"This is astounding, especially given that the operational efficiency of these companies have improved," he said. "Business has continued to grow, but prices have gone nowhere."
Piquito said Africa should be able to achieve annual GDP growth of 5% for the next five years, with resource-rich countries such as Nigeria, Angola and Ghana being on track to expand much faster.
"The other darlings of the emerging market universe are coming off, while we think the African continent can continue to grow quite strongly. Africa doesn't need to do anything spectacular to continue growing at 5%. It just needs to iron inefficiencies out of the system."
Piquito's Africa Pioneer Fund, with $22-million under management, is overweight on Nigeria, where its investments make up 28% of the fund.
After a crisis in 2010 and 2011, Piquito said Nigeria's banks had gone a long way to cleaning up non-performing assets. "These banks are sitting with balance sheets that are the envy of the developed world."