I’m a strong advocate for investing directly in African stock markets. It’s the purest way to hitch your portfolio to Africa’s economic growth.
But, with some 20 stock markets spread across the continent, there’s no denying that opening and managing a brokerage account in each one of them is an incredible hassle.
So, how can investor who wants exposure to the full breadth of the continent’s growth put money to work there most efficiently? One way would be to invest in the growing number of Africa-focused unit trusts and mutual funds. If you like to take a bit more control of your investment decisions, however, you may want to consider investing in South African stocks that have large, growing pan-African operations.
Such stocks can be a pretty good proxy for investing in Africa as a whole with the added benefit of the Johannesburg Stock Exchange’s advanced trading platforms, governance, and accessibility.
Check out AFKI Market Journals’s eight stocks with pan-African operations that derive more than 20 percent of their revenue from Africa north of the Limpopo River.
(Revenue from rest of Africa: 21.6%)
South Africa’s leading mobile operator also boasts extensive wireless networks further afield. During its 2013 fiscal year, it doubled its data customers in Mozambique and reported “runaway success” from its mobile money transfer service, M-Pesa, in Tanzania. Lesotho also makes a significant sales contribution, and the company believes to Congolese business has enormous potential.
(Revenue from rest of Africa: 23.6%)
With Africa’s huge infrastructure and housing deficit, cement looks like it will be in demand for a very long time. One of the easiest ways to invest in this trend is through Pretoria Portland Cement. The company’s main business is in the Rainbow Nation, but it also operates in six other fast-growing African countries, including Botswana, the DRC, Ethiopia, Mozambique, Rwanda, and Zimbabwe.
(Revenue from rest of Africa: 24.0%)
South Africa’s largest foods manufacturer and distributor, Tiger Brands is also in business in Nigeria, Kenya, Cameroon, Ethiopia, and Zimbabwe. And it exports to 17 more African countries. In late 2012, the company purchased a controlling stake in Nigeria’s largest miller, Dangote Flour Mills. The results have been disappointing to date, but management describes its potential as “huge.”
(Revenue from rest of Africa: 27.0%)
A holding company focused on civil engineering projects, power transmission, and renewable energy, CIG is making a concerted effort to become a pan-African company. It already owns an Angolan environmental services firm and has recently worked on electricity infrastructure projects in Kenya, Zambia and Ghana.
(Revenue from rest of Africa: 29.3%)
Omnia provides chemicals to the agriculture (think fertilizer) and mining (think explosives) industries. Southern Africa’s leading fertilizer manufacturer, it distributes its products from offices in Angola, Zambia, Zimbabwe, and Mozambique. Its mining products have an even larger geographic footprint and are used heavily in Burkina Faso, Mauritania, Sierra Leone, Mali, and Senegal.
(Revenue from rest of Africa: 39.5%)
Tongaat Hulett is in the sugar cane business. In addition to its South African operations, it owns sugar cane plantations in Swaziland, Mozambique, Zimbabwe and packaging plants in Botswana and Namibia. The non-South African operations have really sweetened the company’s results of late. In 2013, operating profit from its “Rest of Africa” segment more than offset an operating loss from its South African business.
(Revenue from rest of Africa: 52.8%)
This mobile giant may be headquartered in South Africa, but its home base has become progressively less important to its bottom line. It now operates in 21 countries, including Nigeria where it serves 55.2 million subscribers and generates more revenue than anywhere else. Other key markets include Sudan, where it grew sales by more than 42% in the first half of 2013.
(Revenue from rest of Africa: 62.0%)
With farms and refineries in six African countries, Illovo is Africa’s largest sugar producer. The company’s South African assets accounted for just 10% of total operating profit in the first half of the 2014 fiscal year, dwarfed by the operations in Malawi (33%), Zambia (30%), and Swaziland (17%). And there’s even more sugar for socially responsible investors, the company is one of only six to meet the JSE’s best performer threshold for environmental impact.
Do you know of other South African stocks that derive a significant portion of their sales from the rest of the continent? Tell us about them in the comments.
Disclosure: Ryan has a beneficial interest in shares of Vodacom, Consolidated Infrastructure Group, and Illovo Sugar through his work with Africa Capital Group.