News & Publications

Africa Market and Lombard Fund News

January 2018

07 Feb 2018

Dear Investors

As January arrived, so did some level of rationality return to investors. Volatility fell as investors digested Decembers aggressive movements. African markets showed mixed performances.


In South Africa it is the end of an era, As South Africa said bye to rogue president Zuma. As the new leader of the ruling party is South Africa begins to shift policy towards good governance and fiscal discipline, the relative underweight of South Africa in global investment portfolios has been given attention in the media. While the immediate reaction of investors has more than discounted in short term optimism, sustained sell offs may offer an opportunity to expand positions. However, the current rally in the ZAR has held us back from any additional investments and maintained our positions in the USD earners, with the expectation that the ZAR will weaken back towards the R13/$ mark.


  1. fund support of Egypt is paying off well. The IMF announced that GDP growth rate expectations for this fiscal year reached 4.8% from 4.2% last year. This is because of the macroeconomic stabilisation policies the country put in place last year among which the exchange rate liberalisation. In December, inflation decreased to 21% from 33% in July 2017 and expectations for this year are for inflation to further come down and reach the low teens. The decelerating inflation should enable the central bank to cut rates very soon and boost growth. The current account deficit has lowered, reaching its smallest shortfall in the 3rd quarter of 2017. Fundamentals look on track for a sustainable recovery. We are very excited about our investments in Egypt for 2018. y did well for us last year and we expect can even better performance this year.


We have been saying for many months that the Zimbabwe stock exchange is overvalued. Finally, investors are starting to agree. The valuations driven by hyperinflation have started to come down, leaving this market as the worst performing in Africa. For now, we do not see any immediate benefit to introducing money to this country but as always, we will keep our eyes open for opportunities.


In Nigeria the substantial recovery in oil prices supported strong gains for our position in oil and petroleum developments company Seplat. Stronger oil and commodity prices, coupled with stability in the political arena, indicate that this region’s risk asset valuations are due an uplift. We are actively seeking additional investments into Nigeria but will remain vigilant of potential political instability.


Kenya’s central bank Governor reiterated this week his view that the cap on interest rates is weighing on the economy. While growth certainly came lower than expectations last year, the jury is still out on whether this was due to political tension and drought only or whether deceleration was reinforced by interest rate caps. As a reminder, since September 2016 the government has capped interest rates to 4% above the central bank’s benchmark rate. We will meet with management of the Kenyan banks middle of February to discuss the potential for a revision of these caps by the central bank


Looking forward to our next communication and an even better 2018.


Constant Capital

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