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Asset Management Viewpoints

Africa’s Emerging Bond and Real Asset Markets

by David Lashbrook and Zee de Gersigny

Getting to Grips with Africa

Africa is hugely complex for European and US investors to get to grips with. However, although the continent consists of 56 very different and poorly integrated countries, it has some obvious themes and advantages compared to developed markets.

First and foremost, Africa has one of the best demographics in terms of the ratio of young to old of any continent. More than 50% of the population is under the age of 25. Africa also has the world’s highest rate of urbanization. The youthfulness of the populations of the key listed equity countries in Africa means that these countries are well positioned to benefit from demographic “tail winds” in the form of real GDP per capita growth as these young people reach working age and contribute to the growth of their respective economies. It is not without reason that Africa is already being called the next China.

Second, there is a real focus on development in many African countries, and there is no shortage of expertise available for governments to draw on. A tremendous amount of advisory expertise is going into Africa. Moreover, a large number of Africans who were educated in countries of the developed world—many of whom have financial expertise—are returning to Africa and bringing their skills with them. Additionally, the younger generation of well-educated Africans are reaching the point where they can contribute.

Africa was the first continent on the planet to show definite signs of human habitation and is endowed with an estimated 30% of the world’s mineral reserves, including 40% of the gold and 90% of the platinum. It holds 11% of the world’s proven oil reserves, and its agricultural resources, whose development is still in its infancy, are enormous. Only some 10% of the 400 million hectares of arable land in Africa is currently utilized, and the as-yet uncultivated area comprises 60% of the world’s remaining uncultivated land. This points to a tremendous future for both individual-scale small holdings and for investors interested in large-scale agribusiness.

At the same time, what helps to make Africa such a promising investment destination is that it already contains a network of equity markets at various levels of sophistication. There are 24 operating African stock markets, of which 17 are actively traded. South Africa’s stock exchange is the giant of the group, with a market capitalization of some US$495 billion. The other 16 actively traded markets combined have a market capitalization of around US$300 billion. The largest outside of South Africa are those of Morocco, Egypt, Nigeria, and Kenya—sometimes dubbed the MENK countries.

The Africa of the 1970s, 1980s, and 1990s has been transformed, and present-day Africa is a very different proposition. Both politicians and central banks in many African countries are now practicing inflation targeting and running much tighter fiscal policies than in the past. They are sticking to their inflation targets, for the most part, and are becoming more responsible. These days it is rare to see inflation in double digits. Africa’s leaders learned from the slow-to-no-growth period of the 1990s that if they want to achieve 5% or better year-on-year growth, the first prerequisite is to have a stable economy and a stable exchange rate supported by sensible interest rates—and this is very much what we are seeing across Africa.

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Further reading


  • Acemoglu, Daron, and James A. Robinson. Why Nations Fail: The Origin of Power, Prosperity, and Poverty. New York: Crown Publishers, 2012.
  • Ayittey, George B. N. Africa Unchained: The Blueprint for Africa’s Future. New York: Palgrave Macmillan, 2006.
  • Godwin, Peter. Mukiwa: A White Boy in Africa. New York: Atlantic Monthly Press, 1996.
  • Hartley, Aidan. The Zanzibar Chest: A Memoir of Love and War. New York: Harper Perennial, 2011.
  • Hochschild, Adam. King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. New York: First Mariner Books, 1999.
  • Mahajan, Vijay. Africa Rising: How 900 Million African Consumers Offer More Than You Think. Upper Saddle River, NJ: Prentice Hall, 2011.
  • Meredith, Martin. The Fate of Africa: From the Hopes of Freedom to the Heart of Despair. New York: Public Affairs, 2005.
  • Meredith, Martin. The State of Africa: A History of the Continent Since Independence. New York: Simon & Schuster, 2011.
  • Moyo, Dambisa. Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. New York: Farrar, Straus and Giroux, 2009.
  • Okonjo-Iweala, Ngozi. Reforming the Unreformable: Lessons from Nigeria. Cambridge, MA: MIT Press, 2012.


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