A case for Africans investing in Africa, despite global uncertainty
By Mpho Mtsi, Client Director at Old Mutual Investment Group
Amid destabilising uncertainty following the whirlwind first 100 days of Donald Trump’s second presidency, Africa has been caught in the crossfire of shifting alliances, market turbulence and a global tariff tit-for-tat.
Yet, despite all these headwinds, the case for investing in the continent remains strong.
In the year to date, we have witnessed significant challenges to the established world order, shifting of long-held views on investing and perceptions of risk, as well as new avenues and markets for reward muscling into contention.
This has been driven by groundbreaking decisions by the second Trump administration, but also by longer-standing global vulnerability.
A significant driver of investor demand for diversification is the overexposure of global equity markets, in particular, to US-focused tech stocks like the ‘magnificent seven’ – Alphabet (Google), Amazon, Apple, Microsoft, Meta, Nvidia and Tesla.
The collapse of these dominant stocks (or even the disruption experienced from the end of 2024 from the likes of Deepseek) has a significant impact on portfolios.
As a result, investors may rethink markets previously deemed ‘too risky’ or ‘too much trouble’.
Africa falls squarely into this category.
The latest Standard Bank/The Value Exchange ‘World to Africa’ report, released in April 2025 and looking back at 2024, shows a substantial shift towards African market exposure by international investors and, notably, large institutional investors such as retirement funds, investment companies and collective investment schemes.
The report shows that over the past two years, 50% of institutional investors ramped up their allocations to Africa.
Standard Bank and the Value Exchange anticipate international investment inflows of around US$3.7 billion into African markets in the short term.
This shift is being driven by the availability of Africa’s growing range of investment options, from stocks and index funds to sovereign debt, private markets and bonds.
The Africa of 2025 has something for every global investor, despite global market turbulence and uncertainty, including diversification and attractive returns as well as unique consumer and infrastructure exposure across 54 diverse countries.
Over more than two decades of experience leading African strategies for our clients, a flexible portfolio with exposure to African debt and debt-related securities is emerging as an attractive option for gun-shy investors who might not want to increase their equity allocations but still seek to explore opportunities on the continent. Among these ‘safer’ entry points are US dollar-denominated instruments (which reduce currency risk) as well as high-yield bonds.
The rise of Eurobonds in particular has, since 2001, provided more than 20 African governments an alternative avenue for accessing investment finance that does not hinge on the International Monetary Fund or other rapidly dwindling sources of foreign aid.
It has also made it easier for American, European, British and other investors to gain exposure to the African market.
Over the past 15 years, African debt markets – especially sovereign debt – have outpaced equity markets, with countries like Egypt, Benin, Senegal and Tunisia, all issuing Eurobonds.
African Eurobonds have historically produced equity-like returns for investors while significantly reducing portfolio exposure to currency, liquidity and other related risks.
This is reflected in the graphical comparison below of the long-term USD returns after investing $100 in 2008 in African (excluding South African) sovereign bonds or the MSCI All-Country World Equity Index.
African Flexible Income offers a welcome dose of resilience, standing firm even in the face of tariff standoffs and flip-flops.
Let’s talk African equities
Over the past few decades, there have been moments when the lustre of African equities, and investment into the continent, really began to shine. We believe this is just such a moment.
The two ingredients that drive African equity performance in investor portfolios are currency and company valuations.
If we look at historical trends, managed currencies experience periods of stability following sharp devaluations.
We believe one of these periods is setting in right now, with leading African currencies like the Nigerian Naira and the Egyptian Pound levelling off.
This gives a boost to the African equities story.
Similarly, valuations are very appealing at the moment.
If you consider the valuations of African equities compared to global equities, it’s clear that global equities are heavily overpriced.
Amid bubbling concerns about a worldwide slowdown, and with African equity prices still on the cheap side, this makes for an attractive picture.
Getting African Investments Right
With correlation to global equity markets being negative, the case for diversification by African investments is clear.
Furthermore, we are seeing an Africa that is growing in both confidence and GDP.
Six of the 10 fastest-growing economies are here, attractive local businesses are emerging and governance and the principles of ESG management are finding traction.
You need only observe the current challenges in developed economies such as Japan to understand the value of the young and growing African population, further supported by improvements in governance and stability, anticipated infrastructure development and abundance of natural resources.
Reflecting once more on a flexible income approach, even after allowing for the average 1% knock in the long term due to defaults, there is still a 4% to 5% uplift from US treasury.
Diversifying and increasing expected portfolio returns through allocation to Africa is an obvious value-add.
While some investors may lament past losses or troubles repatriating assets on the continent, this only highlights the importance of on-the-ground activity and relationships, not only to understand the nuances of the various regions, but also to identify the building blocks required to construct a diversified African portfolio.
This is the recipe for achieving the kind of positive returns we have mined for our clients.
Our first-hand discussions with government ministers, corporate leaders and economists from across our continent provide us a front-row seat to the potential unfolding across Africa and the unique interconnectedness of many of our sectors and economic drivers.
Our conviction in African flexible income and equities remains strong despite global uncertainty.
Surely, if the rest of the world is looking to African opportunities, shouldn’t you?
Click here to learn more about Old Mutual African Frontiers Strategies
- Mtsi is Client Director at Old Mutual Investment Group
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