Tags: Seruma | africa | investing | nile

Nile Capital's Larry Seruma: Flourishing Africa Shielded From Global Woes

Friday, 16 Nov 2012 11:00 AM

By Forrest Jones and Kathleen Walter

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Investors seeking growth opportunities should look to Africa, Nigeria especially, where natural resources, infrastructure and consumer products hold a slew of good prospects, said Larry Seruma, chief investment officer and principal of Nile Capital Management, which invests in the continent.

Africa is home to more stable democracies these days, while the banking systems aren't too exposed to the debt-ridden industrialized world, which cushions Sub-Saharan Africa somewhat from global financial uncertainties.

"Markets in Africa have done very well this year. Markets in Egypt, markets in Nigeria and Kenya, they are up in double digits," Seruma told Newsmax TV in an exclusive interview.

Watch our exclusive video. Story continues below.

"Africa is destined to grow about 5.7 percent and in some other countries, they are growing much faster than that. One of the largest economies in Africa, Nigeria, is growing at about 6.7 percent. So growth varies by country, but overall, Sub-Saharan Africa is growing faster than any other region."

Investors can play big companies present across the region such as Nestle.

However, to really tap the continent's potential, investors need to think locally, especially in the consumer-products, natural-resources and infrastructure sectors.

"There are quite a few multinationals that are doing business in Africa, for example, GE and Wal-Mart. Our view is that if you want to capture the Africa growth story, you are better off investing in the African company," said Seruma.

"For example, for multinationals that have subsidiaries doing business in Africa, you want to own the subsidiary. I think that is where you participate in the actual Africa growth story."

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

Look for both subsidiaries of multinationals operating across the continent and home-grown companies as well.

"From a natural-resources standpoint, the best sector to play right now is the oil-and-gas exploration company. The best region for that is East Africa and one of our favorite picks for that region is Africa Oil," said Seruma.

"On the infrastructure side, infrastructure is a very big story in Africa. It runs from cement companies, for example, Dangote Cement in Nigeria, to utility stocks. They are much more spread out across the continent."

Nigeria is home to the best opportunities.

"On a country basis, our favorite country to invest right now is Nigeria. It have a very broad offering in terms of what Africa presents," Seruma said.

Nile Capital Management looks to invest in businesses that are trading below fundamental value and own those businesses over a long time, in some cases, up to five years or more.

Fortunately for the growing emerging market, Africa's financial institutions aren't as exposed to shaky financial systems in Europe and elsewhere, meaning if a country like Greece defaults and rattles European, U.S. and even Asian financial institutions, Africa will enjoy some cushion.

"Africa is connected to the world and the main transmission mechanism is through trade, but it also has its own independent dynamics. For example the African banking system is not that connected to the financial world," Seruma said.

"The banks are regulated much more, and they are really driven by domestic factors. So to some extent, Africa dynamics in terms of growth are much more domestic and they are pretty much decoupled from some of the main events you see in the global markets."

The region carries less political risk than in the past as well, the product mainly due to the dismantling of Apartheid in South Africa.

Take Nigeria as an example.

"Nigeria, 30 years ago, used to be mired in coups. So change in government was through coups," Seruma said.

"Now you've had almost six transitions in power that have been through democracy. That is really the change. Political stability in Africa is far much more improved than it was many years ago."

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

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