Manager Talk: African Fund Manager Sees Opportunity In Oil, Consumer Stocks By Reshma Kapadia
Larry Seruma, who grew up in Uganda, now runs the Nile Pan Africa fund (NAFAX). Today’s Africa looks a lot different than the one Seruma grew up in.
The changes Seruma sees on trips back to Africa are getting increasing notice, with talk of an “African renaissance.” More companies are trying to gain a foothold in Africa to tap into rising incomes in places like Nigeria and China has been there for a long time, investing in the country to help secure the resources the continent offers and that China so badly needs.Trade between the two has grown from $5 billion in 2000 to $170 billion, Seruma says.
Investors are waking up to Africa, with the MSCI Emerging Africa, excluding South Africa, is up 29% this year. But Seruma says there is still opportunity, noting that while Africa may be getting more attention, inflows are still relatively small. The three themes his fund is trying to play: The rising middle class and increased consumerism, the need and investment in infrastructure and the increased investment from oil and gas companies in under-explored parts of East Africa that should offer a growth engine for places like Kenya, Ethiopia and Uganda.
To be sure, China’s slowdown will be felt. (S&P raised concerns about its impact on African economies recently) But Seruma says Africa is not all the same. South African firms may feel the Chinese slowdown in its platinum, iron ore and gold miners. But Seruma says much of sub-Saharan Africa will not feel the hit as much as some fear. For starters, China is still consuming a large amount of natural resources and it will likely continue to reap the rewards of its multi-year investments in Africa.
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