Egypt Remains Top African Investment Pick for RenCap’s Robertson

CAIRO (Capital Markets in Africa) – Egypt retains its mantle as Africa’s most appealing investment destination, thanks to its expanding economy, high literacy rates, adequate electricity and ready supply of inexpensive labor, according to Charles Robertson, Renaissance Capital’s chief economist.

While Egyptian markets have boomed since the country devalued its pound in November 2016 and secured an International Monetary Fund loan, Moscow-based RenCap sees the rally as having some way to run, with a real effective exchange rate model showing it still has Africa’s cheapest currency after the Tunisian dinar. The IMF this month said it expects Egypt’s growth rate to accelerate to 5.2 percent this year, from 4.2 percent in 2017, and to 5.5 percent in 2019.

“We still have Egypt as an overweight,” Robertson said in an interview at the investment bank’s Egypt investor conference in Cape Town, South Africa. “We think growth can pick up to 5 to 6 percent with ease, and to 6 to 8 percent in the medium term.”

These are some of his other views on investment opportunities in Africa:

Nigeria

• “We think it can grow at 3 percent this year.”
• “Nigeria has recovered more slowly than some other oil exporters because they held off on exchange-rate adjustment for so long. They are now picking up. It’s a cyclically good story. To make it a structurally good story, you need to see electricity picking up, you need to see education getting better, better literacy rates, you need to see more business reforms. They have made a good start.”
• “For investors there two opportunities. One is the local market debt story, Naira bonds, which are offering double-digit yields on a currency that we think will stay stable or even slightly appreciate this year.”
• “Equity investors have to focus on the banks. They are more than half the index and again the fact that the currency is going to be stable, inflation is coming down a little bit, there is some support.”

South Africa

• “We think South Africa can grow 2 percent. I don’t think anybody has invested in this economy for three years and for good reason. Any suppressed investment has the potential to come back now.”
• New President Cyril Ramaphosa “has generally impressed people in the last two to three months. We know he can stop the deterioration in South Africa. The open question is how much reform can he push through. It’s unlikely to happen before the elections in 2019.”
• “The markets moved so fast, the currency markets in particular, that that’s already priced in a huge gain. Our fair-value estimate for the rand is around 11.7 rand per dollar.”

Kenya

• “Kenya is looking a little bit better. Growth is beginning to pick up. Growth acceleration is on the positive side. Politics seem to be improving.”
• “Bank lending has been really weak since they introduced the interest-rate cap. Everyone is assuming there is going to be a reform to that interest-rate cap story. Maybe banks will start lending again.”

Other Markets

• “Ghana is still interesting to us, cheap currency, good literacy. It’s a potential industrialization story from now.”
• “Zambia could be great, Zimbabwe could be great.”
• “Morocco is great, not from the strongest growth in the world, but it is already industrializing.”

Source: Bloomberg Business News