- Africa is host to some world class companies that investors should consider adding to their portfolio in 2023. However, the investment climate has been choppy at best and investors need to be shrewd when it comes to their portfolio investment decisions especially in 2023.
- The investment climate was at the beginning of the year quite optimistic with the world finally putting COVID and its pandemic behind it. Investing in African companies would have been in a no-brainer given the circumstances around the world at this time.
- Things started to go side ways when Russia invaded the Ukraine and set in motion a chain of events which have profoundly altered the global investment climate and flow if investment capital which would otherwise be directed to the top African companies.
- The United States dollar was resurgent in 2022 nearing parity with the Euro and the Pound Sterling as the cost of living crisis from the war in Ukraine began to bite in Europe and Britain. This development saw investment flows move away from emerging markets to the United States dollar which regained its safe haven status. This means that fewer funds will be available in 2023 for investment in top African companies.
- The top companies in Africa that are available for investment include Dangote Group, MTN, Anglo American, Anglo Platinum, Glencore, among others.
- The top African companies to watch in 2023 will be African financial services which made a very strong come back post COVID. Other African companies to watch will be those involved in mining generally but specifically those companies involved in the mining of the so called critical minerals that are useful in the production of minerals that will aid the world in reaching its net-zero targets.
- Investors will be well advised in addition to the top companies to avoid namely in the tech space which are currently experiencing a correction post COVID
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The year 2022 began on a promising note however, economic headwinds began to emerge that redefined the global investment climate the world over.
- The war in Ukraine, coupled with the US treasury’s fight against via the rise in US interests rates to curb the cheap dollars it floated in 2020 and 2021, introduced significant volatility to the global economy.
- Investors in 2023 need to keep in mind themes that began in 2022 are set to continue in 2023.
- Those such as the prospect of a recession, a slowing global economy, a resurgent US dollar, and continued rising interest rates will remain.
The previous year got off to a promising start but went awry when in February the Russia’s invasion of Ukraine set in motion a chain of events, permeating a volatility of sorts into the global economy last witnessed in 2008 and during the Great Recession of the United States. 2022’s geopolitical conflict triggered energy prices to spiral upwards and caused a cost-of-living crisis in most if not all countries worldwide. The reintroduction of stagflation an economic phenomenon was last seen in the 1970s when it was triggered by similar factors to the current bout of stagflation.
Central banks world over took a hawkish stance against inflation by raising interest rates to counter the effect of rising general prices. Ordinarily, this would work in an economy that is overheating however, with already anaemic economic growth rising interest rates become a delicate thing to balance. Central bankers walked the tightrope of managing inflation in a way that does not make the prospect of a recession likely.
The war in Europe increased the cost of production inputs and added inflationary pressure to economies that had only just begun to recover from the pandemic-induced recession. Supply chains disrupted by the pandemic had no sooner recovered when prices of basic raw materials, energy, and fertilizers began to rise, reducing productivity in the process.
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Some of the largest economies of the world began to slow down such as China, the United States, the United Kingdom, and many in Europe. China the most notable of these economies is the most poignant because for the last 2 decades, the Asian giant has been the economic forerunner of the world. As the is the second largest economy in the world, China was expected to eclipse the United States before 2030. This does not seem likely, given the country’s economic performance in 2022.
The US Greenback made a very strong comeback against America’s major trading partners, momentarily reaching parity against the Euro and the Pound. The Greenback in 2022 toppled all emerging market currencies as the currency of choice for investors looking for safety and steady returns. Part of the reason for the resurgence of the US dollar is the sovereign debt distress currently being experienced by emerging market economies. Some of the debt-distressed economies are in Africa and their currencies registered steady declines in 2022 against the greenback. So severe is the debt distress situation in Africa that certain countries are on the brink of default. Ghana, Kenya, Ethiopia, and Zambia made headlines when they nearly fell off the cliff. Zambia is actually in default and has been negotiating to cancel its debts.
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