The positivity around the Covid-19 vaccine especially towards the East African economic rebound is a breath of fresh air. The Kenyan government reopened schools in January 2021 whereas the Ugandan government has proposed different dates for opening school to different classes. This will increase consumption along the value chain, because the education sector has many supporting sectors such as transport, retail trade and financial services.
We have seen the Bank of Uganda extending treasury bonds worth $131.72 million that were due to mature on January 6th 2021 and will now mature at various dates between 2023 and 2040. Debt service is putting tremendous pressure on East African governments because of limited foreign exchange earnings; therefore the Covid-19 vaccination program for East Africa will give investors confidence in most sectors especially agriculture and tourism which are major foreign exchange earners for the region. The foreign exchange gains will lead to a positive trickle-down effect to the different businesses and general population.
We expect to see most businesses recruiting more workers this year compared with 2020, because of strong business prospects following easing of Covid-19 containment measures, improved market optimism, expected increase in government spending on development infrastructure and expected increase in economic activities.
The truth is that Covid-19 will likely be around for many more years; therefore many travelers around the world will be required to carry Covid-19 vaccination certificates just like the famous yellowfever certificates. This means that East African governments have to continue managing the virus for many more years through different educative programs under government.
So what does Covid-19 vaccine mean to investors? Well, if history is to be considered, then regardless of the market cycles, when economies go through a slump, businesses with strong fundamentals will be the ones that will survive. Hence, investors must consider investing in such businesses.
While stock prices might seem lucrative right now, investors must be careful before they go bottom-fishing. They must research the security carefully before investing. For example, have you read about cannabis investments? The Rwandan government will issue licenses for growing cannabis for medical use. Just to give you a little more insight, according to MarketsandMarkets, the cannabis market was estimated to be valued at US$20.5 billion in 2020 and is projected to reach US$90.4 billion by 2026. Also, the growth of this market can as well be attributed to the increasing awareness among consumers regarding health benefits of cannabis and its growing medical application. Do you want to tap into this market?
Another interesting market to think about is robotics. Did you know that the robotics market was valued at US$23.67 billion in 2020 and is expected to reach US$74 billion by 2026 and grow at a compound annual growth rate (CAGR) of 20.4% over the forecast period (2021-2026)? In 2020, the United Nations Development Programme donated robots to the Rwandan government which were installed in some hospitals in an effort to minimize the risk of medical staff catching the coronavirus. The robots carry out simple tasks, like checking temperatures and monitoring patients, thus reducing human exposure to the disease. Factors like the aging population and shortages of healthcare workers are driving the demand for assistive technology robots. The robotic industry is experiencing a significant transformation, with robots growing beyond the workhorses of industrial shop floors and beginning to adopt the roles of personal assistants, surgical assistants, delivery vehicles, autonomous vehicles, exoskeletons, and crewless aerial vehicles, among many other uses. In the past decade, industrial robots used to be high priced, due to which, the return–on-investment is expected to be achieved after a decade. However, presently, smaller collaborative robots are priced for companies to receive return-on-investment in months instead of decades, often costing around US$20,000. Declining sensor prices and increasing adoption have further aided lower costs. How many East Africans have tapped into this market?
Thinking out of the box or thinking beyond the box is necessary for investors in 2021.
Nelson Mandela is Lead Investment Partner – Investment Owl
He can be reached at [email protected]