Portfolio Manager, Peter Brooke, shares his latest weekly perspectives, this week he explores Africa’s investment potential and demographic trends that position the continent for growth.
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Peter Brooke 00:00
Good day, I'm Peter Brooke, a Portfolio Manager at the Old Mutual Investment Group. This is Macro Perspective 21 of 2022, and I want to talk about the opportunity in Africa.
Last month I went to the Victoria Falls for Easter, and it was fascinating to notice a huge change. When I was young and I went to the falls, all the guides were white, and all the tourists were white. The next time I went, all the guides were black, and all the tourists were white. This time, all the guides were black, and the majority of the tourists were black. For instance, on a dinner cruise on the upper Zambezi, out of the 40 tourists, only six were white.
Now, some of this was due to low international tourist numbers due to the slow reopening after Covid. But it also represents a big growth in regional tourism, I'm talking about doctors from Rustenburg and accountants from Joburg. I spoke to a black lodge manager, whose clientele had been 100% white from Europe and the US. And in Covid, he had no business. So, he had to drive to Harare, and with a little bit of marketing, he had some really good groups of local businesspeople. I saw a very similar phenomenon in Namibia.
Now, it's always tricky to talk about race in southern Africa. But the relevance of this story is that profound change has happened over 30 years. It is also important that it highlights that unless you change your perspective, you can miss the opportunity on your own doorstep. Good clients are a short drive away, instead of an intercontinental flight away, if you bother to look.
Our work in global macro equity spends time looking at long-term demographics to search out where the opportunities lie. And the reality is that the rich world demographics are deteriorating dramatically, with old age dependency ratios rising sharply. Countries that look attractive to us are India, Mexico, and the Philippines, where their growing working age populations can benefit from business process outsourcing and from nearshoring - or as they now call it, "friend-shoring" - as the world diversifies supply chains.
But a lot of African countries also look interesting through the same lens, including South Africa. The rise in work from home also means work from anywhere, which creates big opportunities for Africa's labour to access work in the rest of the world. Now, this is not necessarily easy to access, in terms of investments due to a liquid market. And you have to have good demographic meeting good politics and economic policy, else there is no guarantee of growth. That is why we leave it to our Africa team of Cavan, Randolph, and Sanaa to pick where to invest on a bottom up basis. But this trip left me convinced that there are opportunities if you bother to change your perspective and go and have a look.
Until next week.