In a recent interview with The Wall Street Transcript, fund manager Larry Seruma, founder of New York City-based Nile Capital Management, LLC, extolled four reasons for investing in Africa:
“First, let’s talk about an objective that motivates almost all investors – potential returns. Over the last five years, African markets as a whole have returned about 12% annualized. This is comparable to the return of the broader index of emerging markets (MSCI Emerging Markets), which has been about 13% annualized over the same period. So Africa has performed about as well as emerging markets on the whole. But when you compare that performance with developed markets, it looks even more attractive.
Most major developed market indices have produced flat to negative total returns over the last five years. Over a 10-year horizon, the performance gap between Africa and developed markets is even greater. Second, African markets have produced low correlation with other emerging markets as well as developed markets. This means that adding Africa to a core portfolio has the potential to increase portfolio diversification. The third reason is Africa’s growth story. Increasingly, global GDP growth is being driven by emerging and frontier markets, and Africa’s GDP is projected to grow by 6% annually over the next few years. This matches the average annual increase in Africa’s GDP over the last decade. The fourth reason is a surge in money flows to emerging investment markets.”