Tuesday, October 16, 2007

Growing Africa gets share index

The index will help investors assess potential profits, says its creator

A financial index has been launched for sub-Saharan Africa, allowing investors to track the fortunes of the top companies in the region.

The index is the creation of investment bank Renaissance Capital.

The world's major economies all have financial indices - such as the UK's FTSE, the US Dow Jones and Hong Kong's Hang Seng.

Correspondents say it is a sign that Africa is beginning to provide more attractive investment opportunities.

The Renaissance Capital Index will highlight the financial ups and downs of the top 50 companies in 21 countries across the continent, from Senegal to Mozambique.

It will not include South Africa, which already has its own index.

What we have isa huge, untapped, but not very well understood, investment opportunity 

John Bates
Renaissance Capital

FTSE index data on a screen

Despite headlines which often focus on the continent's problems, Africa's economies are growing, thanks to investment from China and the expansion of sectors such as tourism and telecommunications.

The index will provide potential investors with corporate growth benchmarks, allowing them to assess potential profits, explained John Bates from Renaissance Capital.

"Sub-Saharan Africa is a particularly strong growth market," he told the BBC.

"You're talking about a region that has 15% of the world's population, 20% of the world's land mass, but only produces 2% of global output at this stage. Against that backdrop sub-Saharan Africa is actually increasing its exports to China, whereas the rest of the world is doing quite the opposite.

"So what we have is a huge, untapped, but not very well understood, investment opportunity in all shapes and sizes," he said.

Unlike several other parts of the world, sub-Saharan Africa is showing high growth rates - with the banking sector, for example, growing by 90% over the past few years.

Analysts say, however, that the risks of investing in Africa are still high, because of factors like poor infrastructure and corruption - but they say that also means the rewards are potentially much higher.

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