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Consultant touts investments in Africa
Investment consultant RogersCasey says investments in Africa are consistent with the principles of social responsibility, and therefore the continent is emerging as a land of investment opportunities. Writing for MarketWatch, Thomas Kostigen says that investors may have to change the way they think about Africa, which has a bounty of opportunities in terms of tangible assets. Check out the following ETF [PGJ]. It's investment focus are small and midcap companies in the Middle east and Africa.
Into Africa: New socially-responsible investment opportunities are emerging in Africa
Africa is emerging as the land of new investment opportunity, according to investment consultant RogersCasey. Investments throughout the continent are consistent with the fundamental principles of social responsibility and attractive risk-adjusted returns, the firm says.
What? What? Africa as a place for investment opportunity rather than a place for charity? That is the new way of thinking by many of the world's largest investors - outside the United States.
The U.S. has largely shunned African investments because of instability, hunger, and widespread diseases that have "undoubtedly deterred foreign investors from the region," RogersCasey notes.
Finding strength in tangible assets
But new opportunities abound in Africa in terms of tangible assets and it's something for U.S. investors to consider beyond the world of philanthropy.
Indeed, investing in Africa is something U.S. investors should consider in order to compete with the rest of the world. Muslim investors particularly are attracted to the region because they can buy hard assets rather than securities, which often conflict with their religious law, sharia law, because of the ban on the taking of interest, among other prohibitions. And with what Al Jazeera estimates is about $1 trillion in new Islamic wealth, there is an investment force to be reckoned with.
"What is clear, however, is that these monies will not necessarily come back into the Western financial system in the ways they did 20 years ago. At the heart of the sharia'a compliant monetary system is the concept that tangible assets are preferred," the RogersCasey report says.
"Africa with its rock-bottom real asset values may be trying to teach the world how China, India, Russia, and the Islamic world actually prefer to hold assets -- in real form rather than derivatives or financial securities. When the yen carry trade ends, the world could look very different from a financial perspective and the current 'crisis' on subprime mortgages in the U.S. may look like the proverbial gnat against the 900 pound gorilla," the report says.
"Fifty or one hundred years ago due to our political clout and financial systems, we didn't have to care or listen (and we didn't). Now, we should be taking lessons or, at the least, observing the action," the report says.
That is a very astute point. The U.S. and the West are betting on leverage and exotic financial instruments when much of the East is reluctant to do that. China, for example, announced that $200 billion of its reserves will go into real assets. RogersCasey says in private talks, central banks are actively seeking diversification and advice from sophisticated investors and consultants.
"The point is simple: we cannot assume all these reserves will be held in financial asset form. Perhaps, the resource rationalizers are already showing us their asset allocation preferences in how they are perceiving and investing in Africa," RogersCasey says.
Investment gains: So what is to be gained by investing in Africa?
"It can be argued that Africa, as a whole, is the last undervalued marketplace. With its obvious wealth in natural resources and farmlands, an Africa without bloodshed and disease could be a superior source of commodities for the foreseeable future. These markets, with the exception of South Africa, now sell at bargain basement prices with little interference by good governance or environmental controls," RogersCasey reports.
However, it takes a dramatic change in perception to view Africa as an emerging market. The continent's strife across virtually all areas beckons charity, not the chance for investment return.
Still, with China stepping up its investments in the region through such operators as PetroChina, and with foreign investment banks now starting to play more in the region -- global investment banks are spending 30% to 40% of their time in places like Nigeria and Angola, where two years ago they spent no time at all, RogersCasey says -- it may be time to take another look at Africa from an investing standpoint, if not a strategic standpoint.
Moreover investing in a land of opportunity that will empower or at least provide hope for sustainability amongst its inhabitants is a return on investment that almost no one can argue isn't worthwhile.
The RogersCasey report reminds that a noted economist once said the only thing worse than being exploited by capitalists is not being exploited by capitalists.
The U.S. and the West don't have to take it to the point of exploitation, but Africa should certainly be considered for something that it has always been: A place to be explored.
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posted by Victor Lloyd Smith @ 6:23 PM
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