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Property In Africa
Africa is widely perceived as poor and corrupt – hardly a great investment opportunity. But appearances can be deceptive.
How do you make real money? Most investors answer this in much the same way Warren Buffett does. They say that if you put your money into brilliant companies, brilliant sectors and brilliant countries, then hang on, you’ll end up rich. We disagree. When something is that good, most people know about it already and your purchasing price is going to reflect that, which will limit your returns even if things go as well as the market expects.
The key to wealth is to make investments “where outcome exceeds consensus expectations”. If the consensus is that something is a basketcase and it turns out instead to be merely mildly mad, or even a recovery candidate, “it’s a sure-fire way to garner riches”. The more widespread the pessimism about an asset class, the more the odds are stacked in favour of “the early and the brave”.
This brings us neatly to Africa. In fact, if you take India and China out of the equation, sub-Saharan Africa is actually growing faster than Asia – which everyone thinks of as being packed with investible emerging markets. And as Patrick Collinson points out in The Guardian, the number of African nations seeing a decline in growth has fallen from 17 in 2003 to just six in 2006. Overall, the region is forecast to keep growing by at least 5% a year. There will be huge variations between countries, but the general direction is encouraging: much of Africa may be a shambles, but progress is being made.
The wall of money coming into Africa reflectes both genuine reforms and a global hunt for higher yields as investors weigh up the relative risk of investing in Africa or intangible, complex financial securities and derivatives. Bankers gathered in Shanghai in May 2007 for the annual meeting of the African Development Bank. Confidence was high given that the past four years of above trend economic growth has triggered a strong interest from Lodon based equity and fund managers. Convinced that the continents dominant economies are turning a corner funds listed on AIM, mutual funds, private equity and hedge funds are pouring in to Africa.
To put things into perspective, the U.K. & America are falling behind the competition when it comes to investing in the continent. China, India, Russia and much of the Islamic world are already there. In July 2006, for example, Beijing used \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\$US5 billion from its reserves to form the Africa Development Fund to develop the continent's oil and mineral resources.
Looking at the current turmoil in the markets, one wonders if China isn't on to something when it comes to weighing up the relative risk of politically unstable Africa versus intangible, complex financial securities and derivatives.
Chinese, Indian & Russian demand for natural resources has helped fuel a boom in commodities which Africa has in large supply & the promise of a massive programme of investment in infrastructure. Africa's fringe position in the global economy is contributing to it's appeal. The correlation between African equity markets & other regions is low, offering opportunities to reduce portfolio risks at a time of global volatility profits generated by commodities are causing sustainable growth in Africa.
Africa becomes the No1 investment destination for the 21st century
Private equity is attracting international investors to Africa like never before, with fund after fund being launched in London to look beyond South Africa.
"We don't have to invest in Africa, and we wouldn't have invested in certain African local-currency markets without an improvement in policies over the past few years," said William Ledward, who manages a billion emerging-market fixed-income fund for Franklin Templeton Investments.
Nkosana Moyo, who is partner for Africa at Actis, a British private equity firm that invests in emerging markets, said he plans to raise a new 0 million fund for Africa in the next year.
Moyo said Actis, as an investor with a 10-year horizon, was excited by Africa's opportunities because the continent's new generation of leaders was more at ease with open global markets; the continent, moreover, was home to 20 percent of the world's proven reserves of oil and gas.
Wall of Money Hits Africa
Arnold Ekpe, chief executive of the Ecobank Group, said that the wall of money coming into Africa reflected both genuine reforms and a global hunt for higher yields."Frankly, some of the numbers we're looking at, I haven't seen that in 30 years of banking in Africa," Ekpe said.
Alex Garrard, a UBS managing director responsible for the bank's proprietary and customer trading in exotic fixed-income securities, said he had witnessed a sea change in the last 6 to 9 months in the willingness to invest for the long term in Africa.
Stuart Culverhouse, chief economist at Exotix, said foreign direct investment accounted for virtually all the billion in private capital flows into sub-Saharan Africa, excluding South Africa, in 2005.
Investments in Africa afford low entry levels allowing average investors to take advantage of great returns in a relatively short period of time. Africa, as a whole, is the last undervalued marketplace. These markets, with the exception of South Africa, now sell at bargain basement prices.
Jet to Buy and Jet to Build Investors Are Quick To Move.
Ivor Bartell of Gambian property consultancy Gambia Property Sales, said ' The Gambia is a 6 hour flight from London and has blossomed into a world class tourist resort over the last decade with five star hotels, fine dining, fantastic beaches, water sports, sports fishing and many other quality sporting and leisure pursuits.
The Gambia is peaceful and stable. Crime rates and the cost of living are among the lowest in the world. Property ownership is part of the Gambian constitution and the conveyancing system is transparent and straightforward when done professionally and The Gambian government is totally committed to free enterprise.'
We are now getting serious enquiries from European, Middle Eastern and American property developers. Building land is readily available and prices start from less than 1.00 GBP per square metre. Construction costs are a fraction of those in Europe and opportunities exist for commercial, residential, and tourist developments'.
Attractive taxes, cheap land and low labour costs are underpining the viability of such projects. Farid Bensouda, international hotelier and Managing Director of Coconut Residence, one of the two 5-star hotels, analyses The Gambia’s competitiveness. "Taxes are reasonable, very fair, the land is cheap and the labour is cheap. Colleagues in the Caribbean pay 10 times more than I do, or 10 to 20 times more in the south of Spain."
- Knight Frank has just launched its East Africa property fund having recently reported an increase in real estate value and growth in the region.
- In August a £650 Million Pan African fund was launched by Pamodzi Investment Holdings
- Since January 2007 there has been more than £1 Billion raised in London by private equity funds for Africa
- Since June 2007 3 African funds have raised £200 Million & listed on boyh AIM & LSE
- Two years ago there was just 2 African funds on the London markets, today there are more than a dozen
- 7 out the the worlds 20 fastest growing world economies are in Africa
- 6 out of the top 10 performing economies in Africa are in West Africa
- Africa's overall GDP growth has exceeded global growth
- Top Six Fasting Growing Economies in West Africa
- Libera 13.3%
- Equatorial Guinea 7.1%
- Gambia 7.0%
- Burkino Faso 6.5%
- Serria Leone 6.5%
- Cape Verde 6.5%
* Sourse IMF
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