Interview with Bloomberg’s Editor in Chief, Emeritus Matthew Winkler on Africa’s Economic Outlook

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Africa’s economic outlook has remained positive since 2016 after the commodity price plunge the previous year, which slowed down the continent’s growth. The recovery of commodity prices and the acceleration of cross-border cooperation have since played a part in the recovery of the region’s economy. As Bloomberg Editor-in-Chief Emeritus Matthew Winkler says, Africa’s economic growth is currently driven by large infrastructure developments happening in multiple countries. Winkler was speaking during the 2018 Africa Business Media Innovators Forum in Livingstone, Zambia.


What is the state of Africa’s economy?

Matthew Winkler: We’re at an inflection point. There are 36 economists whom we talk to at Bloomberg and their estimate is that Africa’s economy will grow at 3.1% in 2018, which is still behind the world average of 3.8%. It is afterwards, though, when the growth will take off exponentially. Looking ahead to 2020, the size of the African economy will expand significantly growing at 3.8%, beating the estimated world growth of 3.2%. This will be the first time Africa has outperformed the world in growth since 2014.


What is driving this growth?

Matthew Winkler: Ethiopia is the largest contributor to this growth, with 10.9% GDP growth for 2017 beating every member of the emerging markets – and will exceed that over the next three years. Ethiopia’s growth is being driven by the large volume of Chinese investment coming into the country.  Last year alone, Ethiopia absorbed almost half of the US$7billion in foreign investment for East Africa. Its role in the region is becoming very similar to the one Japan played in the 1960s in Asia. This is proof that business-friendly policies can trigger progress. Ethiopia’s total trade with China was more than $5-billion in 2017 – a 74% increase from five years ago. While its trade with Saudi Arabia, its second-biggest trading partner, was $2.1billion – a 14% increase from half a decade ago.


What about the bond market?

Matthew Winkler: Globally, the bond market has been very treacherous of late, losing 1.7%. The benchmark US Treasury market lost 2.9% against growth in the EMEA bonds of 2.7%.

Mozambican government bonds gained 28%, second behind Iraq in total

returns, while Angola (third) grew 28% as well. Ghana generated 23% returns, Ethiopia 19% and the Democratic Republic of Congo 17%. The positive returns are due to extraordinarily high growth in the emerging and frontier markets, as countries in the developed world drop interest rates in the aftermath of the global financial crisis. Now global investors are chasing for yield and the winners are these countries because that is where the returns are.


How does Africa rank in terms of return on investment and what are the continent’s most rewarding sectors?

Matthew Winkler:  In 2017, the 600 major companies domiciled in Africa produced 170% total return in their stocks. The emerging market gained 16%; the frontier market which is a bit riskier than the emerging market gained 7%; while world equities, the combination of everything, grew 19%.

The three best-performing industries were communications services (821% total returns), industrial (327%) and financial (230%).

Zimbabwe’s Econet Wireless is one of the leaders, producing total returns of 649% to shareholders over the last two years against the group average of 8%. Its revenue increased by 34%. Its growth is 17 times its global peers and it is currently the second fastest growing telco in the world. While Kenya’s Safaricom was the second-best African performer with a 29% gain. Its growth is five times that of its peers. Safaricom’s recently released half-year earnings reported a 70% spike in revenue and a profit increase of 148%.


The telecommunications industry appears to dominate the rest, why is this so?

Matthew Winkler: There’s a story here – analysts say Econet’s sales will increase 24% in the coming year, eight times their world competitors. Safaricom will grow 9% or the three times their world competitors.

All these companies are linking what people do in their homes and in their businesses with what they do on their mobile platforms and that’s why the telecommunications industry remains attractive.


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