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Angola, Ghana and Nigeria - The Darlings of Africa

28 Aug 2012

With international investor attention increasingly focused on sub-Saharan Africa, Nigeria, Ghana and Angola are emerging as favoured destinations.

Pieter de Wet, Head of Research at Novare Equity Partners, said that given international concerns regarding energy supply, this was partly because of their oil production capabilities.

Of the three, Nigeria has the biggest economy. It also has the largest population with some 170 million people compared to Ghana’s 24 million and Angola with just more than 19 million people. Based on GDP per capita, at the end of 2011 the International Monetary Fund (IMF) ranked Angola first with US$5 894, Ghana second with US$3 083 and Nigeria third with US$2 578.

The IMF forecast real GDP growth for Angola of 10.5% for 2012, and 7.3% for Ghana following last year’s growth surge of 13.7% as oil production came on line. Nigeria’s real GDP growth is forecast at just below 7% for 2012.

Said de Wet: “All three countries have experienced strong growth rates over recent years and the trend is expected to continue. But there have also been significant political advances. Angola is probably the most politically controversial of the three countries in terms of openness, with MPLA expected to win the upcoming elections. Indications of judicial independence in Angola following a Supreme Court ruling against the government with regard to the Angolan National Electoral Commission are positive.”

He added that another measure of political stability was in a country’s political risk insurance. Coface assigned a C rating to Angola and Ghana, while giving Nigeria a D. By comparison, South Africa obtained an A3 rating. Ghana ranks best in terms of measures relating to the risk of war and of expropriation and government action, followed by Angola and Nigeria.

“Abundant resources, specifically oil, have helped focus international attention on these countries, but the real draw card is proving to be their fast-growing consumer markets.

“While developed economies contend with aging populations, sub-Saharan Africa has one of the youngest populations in the world. Youthful, less economically encumbered populations, coupled with superior economic growth rates and stabilising political landscapes, make for a rosy outlook,” said de Wet.

However, investing in these countries’ growth stories is not always easy.

Nigeria has a stock exchange that is bigger and more liquid than Ghana’s, while Angola has not made a final announcement on the opening of its long awaited stock exchange.

Both Nigeria and Ghana have some of the deeper debt markets on the continent, as well as Eurobond offerings, which initially attracted significant attention from international investors. At present investing directly in these countries through vehicles like private equity funds appears to be the best option, said de Wet.

He added: “Investing in longer term and more illiquid markets in sub-Saharan Africa requires an experienced team in order to avoid the costly pitfalls many investors have encountered.”