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(NEWZIMBABWE) Zim deal trigers investor focus on Africa

Zim deal trigers investor focus on Africa
by Investment Week
06/08/2010 00:00:00

INVESTOR spotlight was unexpectedly thrust upon Africa this week after it emerged renowned Invesco Perpetual manager Neil Woodford was taking a stake in a Zimbabwe-focused fund.

Woodford, the head of investments at the group, has reportedly committed $25 million for a 29.5 percent stake in Masawara, an $80 million fund set to begin trading on the AIM market this month.

The Jersey-incorporated Masawara says following the recent stabilistation of the Zimbabwean economy - it is looking to obtain long-term capital growth through the acquisition of interests in agriculture, mining, telecommunications and real estate companies.

Zimbabwe's once prosperous agricultural economy was run into ruin over the last decade with critics blaming President Robert Mugabe’s policies for the collapse.

[Actually, there was an attempt to destroy it in retaliation for successful land redistribution, through economic sanctions, such as those included in the Zimbabwe Democracy and Economic Recovery Act of 2001. Individuals like Neil Woodford have no business being anywhere near Africa until they admit that. - MrK]

Hyper-inflation was a rampant feature of recent years, with the country forced to issue a Z$100 billion note early last year.

However, the country’s move to abandon its own currency in the following months helped to bring back an element of stability to its economy. Inflation has been cut to just 5.3%, while Zimbabwean GDP grew in the region of 5 percent in 2009.

Woodford's involvement in Masawara will undoubtedly boost the profile of investing in Zimbabwe and the entire African continent.

Awareness

But retail investors will be fully aware of the potential pitfalls of investing in Africa, as shown by the dealing suspension enforced upon the New Star Heart of Africa fund in December 2008. The fund was liquidated the following April.

Heart of Africa manager Jamie Allsopp was faced with severe illiquidity in many of the fund's holdings during the height of the credit and financial crisis.

But the manager, now at frontier markets specialist Insparo Asset Management, says investors should not be discouraged from investing in Africa.

"Liquidity, as always, is the issue in Africa, but you do have a number of options," he says.

"My old New Star Heart of Africa fund was long-only equity and daily dealing. What we run here at Insparo is a multi strategy hedge fund.

"The use of sovereign credit and corporate credit allows you to have a much larger pool of assets to diversify across. We can find the capital structure that offers the best value and creates a larger pool of liquidity in which to invest."

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Equity and credit

Allsopp says the Insparo fund invests in both the equity and credit of Africa and the Middle East, which includes positions in Zimbabwe.

"In Zimbabwe we like a number of companies; we think that the brewery and telecommunication stocks are at attractive levels," he says.

"Zimbabwe became dollarised and wrote off its debts, this has led to a significant pick up in the economy. Inflation has come down significantly and many companies in the country are turning a profit.

"However, there remain some key concerns for the country with respect to foreign investment; an example of this is the forever changing laws surrounding indigenisation."

Allsopp is also confident on the opportunities available elsewhere on the African continent.

"The outlook for Africa is very positive, growth is regularly revised upwards and inflation is coming down," he adds.

"Look at Ghana for example; growth is forecast to be over 20% next year andinflation has come down for 10 consecutive months, now in single digits.

"There is a wind of change blowing through Africa; it is a bright spot in what is an otherwise gloomy world."

Investec Africa & Middle East fund manager Roelof Horne says the recent FIFA World Cup should have a positive, transformative and lasting impact on the value of ‘Brand Africa' and go a long way to changing the popular perception of the continent from "hopeless to hopeful".

However, while Horne accepts liquidity on the African continent has improved, he says it remains at less than 40 percent of previous highs.

"Despite reports of significant portfolio flows into African markets, we believe it will take time for global capital allocations to fully recognise the extent of the investment opportunity in Africa," he says. - Investment Week

Labels: MASARAWA, NEIL WOODFORD, NEOCOLONIALISM

posted by MrK @ 5:00 PM