The pandemic created an unusual year for the business community. Job losses, pay cuts, and a near halt in investment. These are just some of the shocks to businesses. George Asante, Managing Director at Absa Group joins us from Johannesburg, South Africa. Our Ignatius Annor spoke to him in the following interview brought to you in partnership with AME Trade, an event management company based in London, United Kingdom.
George, thank you for speaking with us.
Ignatius Annor: So first, investments are key to rebound of economies. What trend do you think will drive investment returns post-pandemic?
George Asante: ‘’I think the key thing across the continent is really going to be a relative value play. Investors are really going to look at what do I get if I invest in the developed market, other emerging market versus Africa. And the main thing that is going to drive returns, in my view, is going to be what is going to happen on the developed market front. What is going to happen to US interest rate? Are they going to go up? If it goes up Africa needs to compensate by actually rewarding investors for making it worthwhile coming into Africa. It’s going to be how governments and policymakers actually deal with the issue of debt sustainability. Countries that are going to do very well in terms of returns to investors are going to be countries that went into the crisis strong. And those that are able to access the capital market and those that are able to access the local market. So for me, I think it's really a relative value play, rewarding investors appropriately for the risk they take on the continent.''
Ignatius Annor: So where can investors spot opportunities?
George Asante: ''I would I wish to tell you that they should go to this country or that corporate or that corporate, but that is not possible. I think it's really going to be picky. You have to pick where you think you get the best of value. So let's say you take government bonds. For countries that actually went into the crisis much stronger and who have been able to navigate the whole debt renegotiation discussion very well and who still have access to global markets and local market, deep liquidity are going to do well. So I would choose those countries over other countries that are obviously struggling. So you talk about countries like Kenya, Ghana, etc. who went into the crisis having restructured and reformed their own financial sector, I think they're going to do well. Other countries that are already defaulting are just going to be a struggle. Then you think about the other opportunities that are emerging. I believe that the private sector or the private market is also going to offer a lot of good opportunities, particularly markets that have an overlay of social good. So let's say infrastructure development opportunities that are going to emerge with an angle of social good are actually going to offer fantastic opportunities for investors who want to really look at the continent’’.
Ignatius Annor: Are investors looking for portfolio diversification now and if so, why?
George Asante: ‘’The global investor still has a stash of liquidity that they want to diversify away from developed markets. There is about 1.4 trillion of investments in the U.S (United States) alone that goes into sub-investment grades kind of instruments. And they are looking for other new markets and Africa, I believe, offer that market and markets that are open to such investments will be there. Then when you look at the local terrain as well, investors like pension funds, asset managers are beginning to be aware of, what other alternatives are there aside continuously investing in government instrument. And mind you, government instruments are not going to reward investors that much into the future because the government will like to keep interest rates lower. So investors are beginning to look at what alternatives are there. Can I invest in ETFs (Exchange traded fund)? Can I invest in commodity linked structures? Can I invest in credit paper? I think these are the new emerging diversification strategies that our investors on the continent really will be looking to explore.''
Ignatius Annor: And you are a sponsor of the Pension Funds and Alternative Investment Africa 2021 conference. What's the key message from you for this virtual event?
George Asante: ''I think for me, the key message is that there is a lot of opportunity for investors and pension funds and asset managers to actually diversify and achieve ''Alpha'' through new products, ETFs, (Exchange traded fund). There is a talk of crypto investment. There is the talk of private market investment. There is a talk of emerging mid-cap investment across the continent, Infrastructure investment overlaid with social good. These are all emerging trends and I believe that investors should begin applying themselves and exploring some of these opportunities anchored on strong research.''