As a frontier market, the countries of Africa represent both tremendous opportunities and tremendous risks. On the risk side of the ledger are all the usual complications of international trade and investment compounded by the problems inherent in a developing, emergent continental market consisting of 54 countries and 1.1 billion people – it’s a lot to keep track of.
Luckily, the ups and downs of the African currency markets aren’t one of them if you know where to look. To help with that, AFKInsider has compiled all the news you need to know now in order to slim down your currency risk .
2015 was a tough year for many sub-Saharan Africa currencies mainly due to a falling commodity prices on the international market that left many countries struggling with rising inflation and depreciating local units.
Some experts have even said that Africa’s booming years that was driven by rising prices of its export products such as oil, coffee, cocoa and metals over the last decade or so, have come to an end and last year’s currency rout in the region was only but a symptom of this phenomena.
African currency woes were further compounded by speculations over a possible interest rate hike by the US Fed in over nine years that made the dollar strengthen globally.
The US Fed finally increased rates in December, strengthening the dollar even further.
A stronger dollar has not helped the African Investment case, but some US fund managers and investors are waking up to a “tremendous opportunity” for inexpensive investments on the continent.
“Africa is on the cheap. For an American investor coming in now, if you look at the assets you are getting in these companies and what you are paying for them in dollars, you are buying Africa on the cheap in many investments you make in Africa,” American investor and fund manager, Robert Scharar, told HowWeMadeItInAfrica.
John Vitalo, Atlas Mara’s chief executive, told This Is Africa in an interview on the sideline of an International Monetary Fund and World Bank meeting in Lima, Peru in October, that the fall in commodity prices that has seen most African currencies fall against the dollar presented an investment opportunity for his group.
“This environment is actually good for us because we are looking for acquisitions to establish Atlas Mara footprints in Africa. In this environment there are few other people looking to do that and with dollars acquisition currency [we] go further,” Vitalo said.
Atlas Mara, a rapidly growing sub-Saharan Africa financial service group, formed by former Barclays Chief Executive Robert Diamond and Dubai-based billionaire businessman Ashish Thakkar, has been on an aggressive investment plan in banks across sub-Saharan Africa as it seeks to become a leading banking group in the region.
Scharar argued American investors to look at buying “relatively inexpensive” assets in African companies now, with a long term investment outlook.
“I think in the next year or so is a pretty opportune time for investors to consider it. They just have to put [their investment] on the shelf… and not be hyper over the day-to-day volatility they are going to have,” he said.
