Loyiso Sibali
2 July 2008
Johannesburg — ZAMBIA has become Africa's favoured investment hot spot, having experienced a large appreciation of the kwacha against the dollar as well as a boom in copper production, says Razia Khan, head of Africa research at Standard Chartered.
The Zambian kwacha has appreciated 20,9% in the year to date against the dollar.
In a report on the Zambian market written in May this year, Khan said the kwacha could be expected to appreciate further, prompted by the revenue Zambia would receive from a windfall tax on copper earnings.
Khan said this week she believed the currency could appreciate to 2975 kwacha to the dollar in the near future. The kwacha is trading at 3196 to the dollar now.
Michael Power, head of structured risk at Investec Asset Management, agrees that Zambia is a great investment because it has untapped agricultural resources and successful copper mining.
Between 2005 and 2006, the value of Zambia's copper exports more than doubled, reaching $2,7bn.
Exports have risen further since then, Khan says.
Power says the countries in Africa showing the best returns are those rich in resources, Zambia being one of them.
The Zambian stock market has returned 36,44% in the year to date.
Power says banks, breweries and cement sectors are a good way to play the African markets.
The mobile telecommunications sector has also been receiving attention and is a growing sector in Africa, Khan says.
Zambia's stock exchange has just listed Celtel Zambia. According to the exchange's website, the initial public offering of 1,040-million ordinary shares raised about 665-million kwacha ($208000). The offer generated a demand of 2,040-billion kwacha, of which 1,7-billion kwacha was from international investors.
Investors interested in Africa should consider looking at funds that invest in sub- Saharan Africa, says Christie Viljoen, Cape-based economist at NKC Independent Economists.
He says this route is easier because the brokers can penetrate those markets through their agents on the ground. The resources sector is the biggest benefactor of foreign investments, Khan says.
Africa's largest economies benefited from the most foreign direct investment, with SA ($77,5bn), Egypt ($38bn), Nigeria ($32bn) and Angola ($18bn due to investment in oil production) pulling in the most during 2006-07, Viljoen says.
"Whether investments were made directly (foreign direct investment) or indirectly (portfolio investments), resources are Africa's key heading towards this millennium's second decade," Viljoen says.
Democracy is becoming more entrenched in African countries and, overall, politics has improved on the continent, Khan says.
Mauritius, Cape Verde, Nigeria, Tanzania, Tunisia, Morocco and Egypt have good political rankings, Power says.
Political co-operation among African nations within the next decade - which will in part be driven by what the Africa Union envisages for the continent - will be important for significant economic development by 2030.
But, political turmoil this year so far - in Kenya, Zimbabwe and Sudan - has polarised African leaders, with periodic local in-fighting likely to hurt Africa's prospects, Viljoen says.
Another country favoured as an investment hot spot is Nigeria.
Power says the country will bounce back following the end of the bad news about attacks on oil companies which has marred its reputation over the past couple of weeks.
Tunisia is another good country to invest in, he says.
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