While giving a presentation last Thursday during a gala dinner, Nothando Ndebele of Investec Asset Management explained that Africa’s abundant resources have recently lured the Chinese economy. This increase in demand came as an advantage to African economies.
Ndebele observed that Chinese investors flock to African gold mines and oil wells, increasing the African geo-political economy, as Nigeria remains the greatest supplier of oil to China.
Ndebele told over 200 corporate leaders - among them the Minister of Finance and Development Planning that Nigeria supplies 25 percent of her oil to China.
“The Chinese also need food, they are no longer self-sufficient,” she said.
Sino-Africa trade grew from US$900 million (about P4 billion) in 1990 to a staggering US$18.5 billion (about P82 billion) in 2003. Booming Chinese interest in Africa is not just about oil. Africa offers investment opportunities to the world’s least known performing stock markets. Ndebele said that African countries made excellent returns on markets. “The year 2000 was a great year for African stock markets,” noted Ndebele.
She observed that African returns on investment are more lucrative compared to Europe and the United States, as they stand at 40 percent. An investor with US$1 (about P4.44) will realise US$1.40 (about 6.22) on African soil against a mere US$1.16 (about P5.16) when investing in Germany. “There are better returns when investing in Africa,” she emphasised.
Ndebele explained that “compared to the equity market, the bond market is small and dominated by South Africa”.
Ndebele also noted that since 1995, about 500 new companies were listed in African markets with less liquidity.
Africa did well in the markets last year. Sugar registered a 55 percent increase in returns. Coffee (44 percent), Platinum (19 percent) and gold 13 percent.
There are some dangers when investing in Africa though. The gloomy version involves corruption and dictatorship. Ndebele explained that risks can be mitigated if the investor has a local understanding of Africa’s geo-politics and companies. “In countries where there is a lack of transparency, you need to have an understanding of the country’s political economy”.
Risks are everywhere however. Even in Russia and Venezuela, she noted. Ndebele was optimistic that the Zimbabwean economy has embarked on fiscal discipline and reforming its democratic ideals. “Africa is moving towards democracy and privatisation,” she said.
With the understanding of the country’s stock market, Ndebele believes that any risk can be mitigated. “Know when things are about to get bad,” she warned.
