According to the Washington-based fund tracker, a net $660
million flowed into African regional funds over the last 12 months — not vast
sums on the global scale but far more than Africa has ever attracted in the
past.
“Through the seven months of this year, the flows into
Africa regional funds are already pretty close to four times the previous best
year, which was 2007,” EPFR global markets analyst Cameron Brandt told Reuters.
The one blip marring what would have been a clear run of 52
weeks of positive net inflows came in mid-July and only amounted to $750,000 of
withdrawals.
“The sustained levels of flows have been pretty compelling
and impressive because there have certainly been some bumps in the road this
year,” Brandt said.
EPFR includes North Africa in its definition of Africa,
despite a preference by many investors to regard the sub-Saharan region as a
whole and lump in the five Mediterranean littoral countries with the Middle
East.
Some of the Africa funds surveyed include South Africa,
Brandt said, although a cap on exposure to the continent’s biggest and most
sophisticated economy means the overall figures still give a clear picture of
interest in “frontier Africa.”
For most foreign portfolio investors, that means primarily
Nigeria and Kenya. But it has also started to include the more illiquid markets
of Uganda, Ghana, Zambia, Botswana and Zimbabwe, in all of which promising
mineral deposits look set to underpin strong economic growth.
The steady flow of foreign cash has helped many African
bourses post healthy recoveries from the lows of early 2009 when the full
effects of the global slowdown on the continent’s economy became apparent and
ended the initial burst of enthusiasm for African frontier markets.
Kenya’s main stock index is up 42 percent over the last 12
months and 37 percent year-to-date, while Nigeria’s has risen 18 percent this
year. Uganda is up 34 percent since a year ago.
However, the continent’s growing appeal has also presented
managers of the larger Africa funds with the challenge of finding a home for
new money in a relatively limited investment universe dominated by banks and
telecommunications firms in Nigeria and Kenya.
Foreign interest in the poorest continent has not stopped at
its companies.
As with many emerging markets, domestic sovereign debt in
the likes of Nigeria, Kenya, Uganda, Ghana and Zambia is enjoying unprecedented
international interest, due in large part to the hefty yields on offer compared
to developed-market bonds.
“We’ve really seen a broad re-rating of emerging markets in
a very positive way, to the point where emerging market debt has almost been a
flight to safety,” Brandt said.
