Is It Wise To Go Hunting For Value In South Africa?

Is It Wise To Go Hunting For Value In South Africa?

In the past decade, the world has changed dramatically for value investors. The rise of the online discount broker and availability of information online has revolutionized the investment landscape for every type of investor. It’s now just as easy to put money to work in Australia as it is in the United States.

So, in this series I’m looking at several different developed, emerging and frontier markets, highlighting their potential risks and rewards for value investors. You can find part one of the series, Is It Wise To Go Hunting For Value In Brazil? Here.

Value investing in South Africa

Africa is often touted as the world’s next high-growth region, following in the footsteps of Asia and South America. And there’s no denying that the region has potential. The continent is home to a third of the planet’s mineral reserves, a tenth of the oil, and it produces two-thirds of the diamonds.

While the continent has been held back by corruption and protectionist economic policies, over the past decade Africa has clocked up an average annual economic growth rate of 5%. Government policies to reform markets and overseas investment have been key growth drivers, but many of the region’s markets remain inaccessible to international investors.

For example, there are 29 stock exchanges in Africa, representing 38 nations. Of these, only 24 exchanges are represented by The African Securities Exchanges Association and only 16 of these exchanges have more than ten securities listed. The region’s three biggest markets are South Africa, Nigeria, and Egypt. Of these three, South Africa is the only market which offers exposure to the whole of Africa, while offering the kind of top ranked audit and accounting standards, a sound banking system, and well-regulated stock exchange that developed market investors have come to expect.

Read the rest of the article here…

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