Norway bets big on growth in Africa

19 April 2015 - 02:00 By Bloomberg

Norway's sovereign wealth fund is pouring a bigger share of its cash into Africa in a bid to capture some of the fastest growth in the global economy. The $890-billion (R10.7-trillion) fund, which is already in South Africa, was spreading its investments to the north and west of the continent in search of opportunities, Yngve Slyngstad, CEO of Norges Bank Investment Management, which manages the fund, said in an interview this week."What's new is that we have crept north - Kenya and Nigeria. We're looking at quite a few West African countries," he said. "In North Africa, for quite some time, we've been invested in Morocco and Egypt; there are also some investments coming in Tunisia."Africa has emerged as one of the fastest-growing regions globally. And although the slump in oil has hurt Nigeria and Angola, the IMF still sees growth rates for sub-Saharan Africa that are twice those for developed nations.The number of middle-class households in the region has tripled since 2010, according to Standard Bank Group.The wealth fund is expanding into emerging and frontier markets as returns in the developed world are eroded by monetary easing programmes."It's fair to say that monetary policy does affect pricing in today's market to such an extent that monetary policy itself has been a risk you have to watch," Slyngstad said.He may also get the go-ahead next year to invest in infrastructure projects and to add more real estate to the fund's swelling portfolio. As the fund expands its geographical reach, it relies on local investment advisers to guide its decisions."All of these investments are done by external managers, generally by managers in the same country. It means our external managers team has been flying around a lot in the last year. They've had a lot of flights to Africa," said Slyngstad.At the end of last year, the fund held $1.8-billion in bonds in Africa through holdings in Egypt, South Africa and Tunisia. It also had $3.8-billion invested in African stocks, in countries ranging from Egypt to Zambia. The wealth fund returned 7.6% in 2014, its smallest gain since it posted a loss in 2011. It raised its holdings in emerging markets to 10.6%, adding countries such as Ghana and Mauritius, and invested in Nigeria's currency for the first time.Its investments in Europe fell to 39.3% from 45.2% a year earlier. The fund's holdings in North America rose to 38.9% of the total from 32.8%, and investments in Asia and Oceania climbed to 17.5%.The investor receives its guidelines from the government."Frontier markets for us aren't an exception. It's a rule that we will be invested if there is a possibility," Slyngstad said. "We will invest in a market if it's a well-functioning market. As soon as a market satisfies our minimum requirements, we will be investing there."..

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