INVESTMENT FOCUS-Africa investors see through the headlines

Fri Nov 7, 2014 10:09am EST
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By Karin Strohecker

LONDON Nov 7 (Reuters) - Ebola, terrorism and political upheaval - headlines from Africa over the past year seem a far cry from the inspiring 'Africa Rising' story. But many newly found investors are sticking with the plot.

Even against the additional headwinds of falling commodity prices and the prospect of higher U.S. interest rates, funds active in sub-Saharan Africa insist they still see a compelling growth story, driven by an uptick in regional trade, growing investment and a bulging middle class - the basis of the 'Africa Rising' thesis.

"The most consistent growth that we see across the globe seems to be coming from Africa," said Boston-based Asha Mehta, who manages Acadian Asset Management's $380 million global equity frontier fund. "And it's likely to play out over the next five to 10 years."

Emerging markets at large have had a torrid couple of years, fearful of a cresting of China's economic boom and higher U.S. interest rates. The more esoteric frontier markets typically weathered this storm, however, as they drew in a different sort of investor - one more atuned to diversification, tolerant of higher risk and locked into long-term themes.

But even for Africa optimists, the news has been trying.

Security threats posed by the Boko Haram and al Shabaab militant groups, political upheaval in Burkina Faso or the devastating Ebola outbreak that has killed thousands in West Africa, reminded investors of the risks that have led many to steer clear of the continent for decades.

China's slowdown also jars African economies, whose fortunes have been tied heavily to minerals and oil exploration and which have soaked up swathes of direct Chinese investment.

But investors like Jonathan Stichbury, CEO of PineBridge East Africa which has $2.2 billion under management in the region, excluding South Africa, say growth in sub-Saharan Africa is much less reliant on commodity prices and much more driven by developments on the ground.   Continued...