Monthly Highlights: December 2021

•  West African equity markets were positive amid broad based gains across the region led by Ghana and the Francophone region
•  East African equities were mixed as positive performance in Mauritius, Uganda and Kenya were dragged lower by Rwanda
•  North Africa equities closed higher with the exception of Tunisia
•  Southern African equities also were mixed as strong performance in Zimbabwe, Zambia, Malawi and Namibia were offset by weaker returns in Botswana

The Africa Opportunities Fund posted a return of +4.04% in December and closed the year +16.17% higher, in comparison, the MSCI EFM Africa ex‐South Africa and S&P Africa ex-South Africa Indices returned +10.85% and +15.31% respectively in FY21. We were pleased with our performance last year – outperforming the index by 5.32%.

The performance across Africa’s financial markets over the year has been broadly positive with thirteen markets posting positive performance and only three in the negative in US dollar terms as we witnessed continued recovery from the lows of 2020 that were driven by the outbreak of the COVID-19 pandemic. The last two months of 2021 were impacted by the emergence of the omicron variant of the coronavirus, in southern Africa, which appears to be more infectious but less dangerous than previous variants. This however, didn’t deter market performance in our universe significantly, as December witness strong gains across most markets. Looking back at 2021,the gainers were led by Zimbabwe (+279.7%), Zambia (+96.6%), Ghana (+36.7%) and Malawi (+32.6%), whilst the worst performing countries in our geographies were Botswana (-6.2%), Rwanda (-5.3%) and Tunisia (-4.1%).

West African equity markets were positive amid broad based gains across the region led by Ghana and the Francophone region

West African equity markets were positive amid broad based gains across the region led by Ghana and the Francophone region. In Ghana, the strong performance was driven by Benso Oil and Fan Milk which gained by +253.4% and 243.5% y/y respectively in 2021. The performance of palm oil producer, Benso, is attributed to the soaring global palm oil prices, which have translated into a 69% y/y increase in its top line in 1H21 and the company is on course to meet its guidance of about 100% top line growth in FY21. In Nigeria, the market was relatively flat, gaining only 0.1% in USD following the 6.79% devaluation of the naira, currency shortages and as a result lower foreign inflows (-19% y/y) for the first six months of 2021.

East African equities were mixed as positive performance in Mauritius, Uganda and Kenya were dragged lower by Rwanda

East African equities were mixed as positive performance in Mauritius, Uganda and Kenya were dragged lower by Rwanda. Mauritius led the gainers with return of +15.5% following the removal of the country from the EU’s grey list of high-risk countries that have strategic deficiencies in their anti-money laundering and counter terrorist financing frameworks after completing the action plan and a successful onsite visit by FATF team. The performance was a welcome respite following two years of negative performance of -30.5% and -7.7% recorded in 2020 and 2019 respectively. In Kenya, the market closed marginally higher (+1.8%) with performance impacted negatively by heavyweight, Safaricom. The sell-off of -11.97% in the 4Q21, was due to the escalating armed conflict and civil unrest in Ethiopia, which has put the company’s USD850m investment at risk, with the telco operator, evacuating some of its employees from the country.

North Africa equities closed higher with the exception of Tunisia

North Africa equities closed higher with the exception of Tunisia. Morocco was the best performing market with the Madex gaining 13.6% in USD as the country emerged as the leader in terms of vaccinations against the COVID-19 virus in Africa, after implementing a fast and effective rollout with about 23m of the 36m population fully vaccinated and just over 3m have received the third dose. Egypt performance was also positive as the country’s 1Q 21/22 GDP grew by 9.8%, which is the highest quarterly growth rate over the past two decades demonstrating an improvement in the country’s economy and a trend towards recovery from the pandemic. We are expecting this trend to continue into 2Q21/22 and are looking for 6%-7% GDP growth, for this quarter.

Southern African equities also were mixed as strong performance in Zimbabwe, Zambia, Malawi and Namibia were offset by weaker returns in Botswana

Southern African equities also were mixed as strong performance in Zimbabwe, Zambia, Malawi and Namibia were offset by weaker returns in Botswana. In Zimbabwe, the market return was +279.7% using the official exchange rate. However, using the unofficial rate of ZWL 250 to the USD the return will be +64.3%, as inflation adjusted real returns are hard to determine and hard currency investors cannot repatriate capital or returns. In Zambia, the Lusaka Stock Exchange closed +96.6% higher in US dollar terms in 2021, following successful democratic elections in which opposition leader Hakainde Hichilema of the United Party for National Development was elected President. On the back of this victory, the currency gained +21.2% against the USD with investors confident that the new government will secure a bailout deal with the IMF and also negotiate a debt restructuring. Botswana was the only market in the negative territory, as inflation reached 8.6% in November, higher than the Bank of Botswana’s target rate of 3-6%.