According to Ayo Salami, Africa’s number one problem is misperception. Africa, a continent of 54 countries and a billion people who speak over 2,000 languages, is viewed by much of the rest of the world as “one country”. People do not take the time to disaggregate the continent, in order to understand it better.
Some of the insightful quotes Mr. Salami made are included below. The quotes have been paraphrased for readability.
“Based on the standard parameters used for sovereign credit rating; such as debt-to-GBP ratios, tax revenues, fiscal deficits, current account deficits; there is no way one can justify France having a AAA rating and Botswana having a BB- rating … Why does Botswana look risky? It’s not because they know anything about Botswana but they know something about Somalia, Sudan, the DRC. The problem is that most people’s information about Africa comes from low-cost information sources.”
“Although a lot of these low cost information sources tell the truth, they lie by omission. Low cost information sources are based on sensational news.”
“Change in Africa has been evolutionary not revolutionary. Consequently, a lot of investors have not yet woken up to the opportunities in Africa.”
“There is a strong valuation case for investment in African capital markets.”
“Africa has unbelievably attractive demographics. Over 70 percent of the people on the continent are under 35 years old.”
“The African continent is three times larger than the United States. Most people fail to appreciate how large the African continent is because most maps are drawn with a North-South orientation, at the expense of the East-West orientation. Consequently, Africa’s height is often understated. Africa is the second-largest continent in the world.”
“From 2000-2013, African markets have delivered annualized returns of around nine percent. Compare this to the G7 markets that have delivered annualized returns of just one percent. If you had invested in African markets in 2000, you would have made 256 percent return, relative to only 13 percent return in the G7 markets.”
“In spite of Africa’s excellent long-term performance, African markets still have significant ‘room to boom.’ The opportunities are still there.”
“The so-called ‘Africa Risk’ is not supported by the data at all. Using standard deviation-based volatility of annual returns from 2000-2013 as a measure of market risk, Africa is lower risk than Latin America, Eastern Europe, Emerging Markets (as a whole), and Asia. Volatility of investment returns in Africa are normal and are not ‘outsized volatilities’ at all.”
“Even after excluding Africa’s largest capital market, the Johannesburg Stock Exchange, you still have over $500B of an investable universe in 22 stock exchanges.”
“Measuring degree of political risk by the number of insurance payouts made by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) since 1945, Africa has lower political risk than Asia and Latin America. MIGA has never paid out on expropriation of assets in Africa. There has never been a situation where the World Bank has had to compensate anyone for loss of assets in Africa.”
Dr. Ayo Salami is the Chief Investment Officer of Duet’s African Funds, including the Duet Africa Index and the Duet Africa Opportunities Fund.
Dr. Salami was named CIO of the Year at the Investment Excellence Awards in 2014 and has been with the Duet Group since 2007.
Ayo initiated Nomura’s coverage of the African region, and has built one of the largest proprietary databases of African Equities.
Ayo worked as a Chartered Accountant in the City of London, and obtained his PhD in Finance from Cass Business School, where he was a lecturer covering accounting and finance within both undergraduate and postgraduate degree programs.
Ayo is a graduate of both the London School of Economics and Leeds University.