News and observations from Brand SA's US office

New York gains Momentum

By on August 6, 2013 in Business, Economy, Investment with 0 Comments

Momentum logoSouth African financial services giant, Momentum, has opened an investment management office in New York and plans to launch a new Africa investment fund next month.

The Momentum Africa Fixed Income Fund will be unveiled and introduced to American institutional investors like big pension funds, endowment funds and foundations on September 1.

Zee de Gersigny, the managing director of Momemtum Africa Investments, Momentum’s registered name in the US, said Africa is a big investment opportunity and, while a lot of investment information is readily available about South Africa, most international investors do not really know that much about the rest of Africa as an investment destination.

“We’re seeing these amazing GDP (Gross Domestic Product) numbers and favourable demographics, as well as an emerging middle class. As a global investor you want to be exposed to this wonderful new investment opportunity, Africa. The biggest poverty reducer in the last 20 years has been exceptionally high and consistent economic growth which has been above average in emerging markets. These economies are growing in the region of six to eight percent on a consistent basis. As you have that continuous growth you will have a trickle-down effect to the population and growing the actual wealth of the average person in those countries.

“On top of that you have these favourable demographics within Africa, where you have a population that’s set to double from one billion to two in the next 20 years and we’ve got the youngest population in the world as a continent. That will be the working class in the future, the economically productive part of the population. That creates the emerging middle class, the consumer that drives the economic growth. Central banks in Africa are now bringing sound economic policy that’s bringing down inflation to single digits, which makes it a stable environment for investors to plough their money in. Most of Africa is informal, but we’re now seeing a growth in the formalisation of markets.” she said.

The Africa Fixed Interest Fund will be the first of its kind, focusing on African fixed interest markets and the local currency markets. Momentum is creating a fund that will give investors sustainable Zee de Gersigny 1high yield and also give them capital growth which is coming from healthy balance sheets of African governments with a low debt to GDP ratio. The company harvests these yields by having diversification across geography, using local fund managers to gain on the ground access to the markets. It has a team in East Africa for investments in Kenya, Uganda, Tanzania, Rwanda, Zambia and Mauritius; the West-Africa manager harvests Ghana; South African based managers and a team of Pan Africa managers based in London with investment portfolios in Ghana, Nigeria, Egypt, Uganda and Zambia.

“We are really giving investors exposure to the whole of Africa from a different perspective, using local knowledge as well as international experience,” said De Gersigny.

She said another positive trend all over Africa was that central banks have introduced sound economic policy to manage inflation in a more controlled more prudent way. In the 1990s you would have peaks of inflation of up to 30 percent across Africa, but you don’t see that anymore. Inflation on the continent is still heavily affected by drought, but the inflation targeting that most central banks use helps control it to single digits.

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