News & Publications

Africa Market and Lombard Fund News


06 Apr 2018

Dear Investors

The year is progressing well as we reach the end of the first quarter. It has been a positive one and we look forward to more of the same for the next quarter.


South Africa

As corruption charges are brought against ex-president Zuma, South African government debt is upgraded by Moody’s to stable. The agency recognising the early stage steps by the new president to reduce spending, tackle corruption and stabilise the fiscus. We agree with Moody’s actions and have increased our positions in the general industrial South African counters and initiated investments into Banks.

A core holding in our fund is Naspers. The company sold a 2% stake in Tencent for $9.8bn in order to strengthen its finances and invest over time in its classifieds, online food delivery and fintech businesses globally. Naspers has indicated that it had no plans to reduce its holding further. We view this as a very positive development for the group. It is the first-time management has openly looked for ways to reduce the 40% discount to its underlying Tencent investment. We believe that this is the first step in a number of events that will see Naspers finding ways of reducing the discount and unlocking value to shareholders.


Morocco’s central bank kept benchmark interest rate 2.25%. Bank al-Maghrib said inflation was expected to reach 1.8% on average in 2018 and to fall to 1.5% in 2019. GDP growth is expected to reach 3.3% this year and 3.5% in 2019. The new more flexible exchange rate system introduced in January has been well-received and is improving economy and moderating inflation which is supported by the bank’s decision. As current developments are in-line with our expectations and forecasts, we are maintaining our investments in the region.


Inflation continues to slow in Nigeria with latest data published by the Statistics office showing annual inflation reaching 14.3% in February. Food price inflation has persisted in the high double digits over the last year. Nigeria is in the crop season and output is growing which is supporting lower food prices. The slowing inflation is paving the way for easier policy following over a year of maintaining interest rates at 14%. Risks and rewards appear evenly balanced for now and we are maintaining our investments in the region.


  1. positive indicators for banking stocks and general economic improvement is that inflation has continues to moderate in Kenya and across the region, interest rates have been reduced and the IMF is giving Kenya additional time to finish mandatory reviews and has approved Kenya’s request to extend by six months a stand-by loan that was due to expire at the end of March. Why does this matter…. Well, an amendment of the bill currently capping commercial interest rates could happen soon since it was one of the condition IMF needed to approve the extension.


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


Constant Capital

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