Coronavirus Is Helping African Economies Compete
(Bloomberg Opinion) - Ultimately, African economies are likely to outperform the rest of the world during the coronavirus pandemic. The 54 countries in Africa now include seven of the top ten fastest growing economies in the world, partly because the deadly virus may have improved its competitive advantage as they accelerated their decades-long transformation from exporters of natural resources to hubs for long-distance wireless.
The transition to a 21st century technology-driven business in a region where people are younger than elsewhere is reflected in the changing landscape of the 1,300 publicly traded companies that make up the African company. Communications companies have grown into a robust presence, accounting for 29% of the continent's total market cap in 2020, compared to 13% a decade earlier, according to data compiled by Bloomberg. Material and energy, which have been the region's benchmarks since colonial times, fell from 34% to 23% over the same period.
Africa fended off the Covid-19 attack better than many developing regions. The coronavirus had fallen to its lowest level since April or May in some of the continent's largest countries - South Africa, Nigeria and Ethiopia - according to the Johns Hopkins Bloomberg School of Public Health. In contrast, earlier this month Mexico became the fourth country to record more than 100,000 confirmed Covid-19 deaths, behind the US (257,929), Brazil (169,485) and India (134,218). South Africa, Africa's sixth most populous country, suffered 20,968 deaths out of its 767,759 Covid-19 cases.
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The economies of Ethiopia, Uganda, Ivory Coast, Egypt, Ghana, Rwanda and Kenya have weathered the economic impact of the pandemic so successfully that they were among the top ten fastest growing in the world by 2020. At least five of them are expected to stay with the Elite Growth Club through 2022, according to projections by economists Bloomberg has compiled over the past three months. Two years ago Africa had only three of the best artists and in 2015 four.
Shares of the 200 largest publicly traded companies south of the Sahara have risen 13% this year as the comparable emerging markets index rose 12% and the riskier frontier market benchmark lost 3%, according to Bloomberg. Corporate Africa is up 78% over the past two years, while emerging markets are up 33% and frontier markets are up 12%. The same 200 African companies rose 324% in five years, as the emerging market rose 67% and the frontier market rose 27%.
Africa's commodity-related companies led all industries with a two-year total return (income plus appreciation) of 188% that dwarfed 37% of global competitors, and the emerging tech sector returned 123%, compared to the comparable global benchmark around 92 % rose.
Technology stars include Cartrack Holdings Limited, the Johannesburg-based software maker that collects vehicle data transmitted while driving and provides users with safety and performance information. The share price rose 76% in 2020. CBZ Holdings Limited, the Harare, Zimbabwe-based bank with a burgeoning digital business, was 11 times more valuable this year than last year. MTN Nigeria Communications PLC, the Lagos, Nigeria-based telecommunications service that has benefited in particular from the Covid-19 lockdowns, grew 58% in 2020. The rest of global telecommunications fell 1%.
Nigeria had the best performing stocks in the world this year. Among the 93 major stock markets in the world, the Nigerian Stock Exchange's All Stock Index of 153 companies was number 1, according to Bloomberg, with a total return of 27%. Communications, which made up 28% of the index this year, up from less than 1% in 2015, rose 68%, beating # 2 in healthcare.
This is a taste of the best that investors can expect in African companies. Global X MSCI Nigeria, the largest exchange traded fund for assets invested in the country, has the largest discount of 32%. This is a record since the fund was launched in 2013. Translation: More than 20 Nigerian companies in this ETF grew much faster than their global counterparts, to the point where they are severely undervalued.
Just as investors picked up on US companies that allow people to work and play remotely, a similar trend is emerging across the Atlantic. The global pandemic is everyone's problem. It is proving to be a profit opportunity in Africa.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Matthew A. Winkler is Bloomberg News Co-Founder (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founded Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, overseas awards from the Press Club and Society of Professional Journalists and Editors (Sabew).
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