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OPINION: Africa’s friends reviewed – A case study of sovereign wealth funds

PUBLISHED: Wed, 24 Aug 2016 16:37:28 GMT

Over the years, Africa has had many friends or those who claim to be friends, but who among these is betting her funds on the continent? It’s one thing to hand out grants and another to bet citizens’ funds in a cause or economy you believe in. Going by sovereign wealth funds, Norway is betting a lot on the African continent.

So, what is a sovereign wealth fund? In layman’s terms, a sovereign wealth fund is an investment pool of foreign reserves owned and managed directly or indirectly by a government. A novice understanding would be that if you really do believe in the notion of “Africa Rising” and now is the time to enter Africa, then put your money where your mouth is and invest your foreign reserves on the continent which has achieved average real annual GDP growth of 5.4% between 2000 and 2010, adding $78 billion annually to GDP (in 2015 prices).

With a dreary global outlook of about 2.4%, sovereign wealth funds increased assets under management by $200 billion from a year ago to $6.5 trillion in March 2016 according to information provider Preqin, and this shows us the kind colossal funds we’re talking about here. But where are all these funds being invested? Your resident Armchair Critic was on hand to quench your curiosity.

Government Pension Fund of Norway

The Norway Government Pension Fund stands at over $870 billion in assets representing approximately $121,707 per Norwegian. Norway has the world’s largest sovereign wealth fund but is their portfolio reaching the African continent?

Norges Bank, which is the central bank of Norway, also manages the Government Pension Fund of Norway which is worth over 7.345 billion Norwegian Krone at market value. Their investment strategy is 60% equities, 35% fixed income, 5% real estate.

Here comes the pain:

So has the pension fund invested in Africa? YES…

Across Africa, Norway’s Sovereign Wealth Fund through Norges Bank has invested over USD $4.66 billion (equities and fixed income assets only) spanning 185 investments. More than their investment in the Middle East.

So how have the Norwegians invested on the continent?

Botswana

Norges Bank has invested USD 16.7 million in two investments in Botswana: Choppies Enterprises Ltd with a USD 12.1 million investment earning it a 2.27% ownership, and Sechaba Breweries Ltd with an investment of USD 4.64 million with 1.33% ownership.

Egypt

Norges Bank has invested a Total of USD 384.7 million and this has been spread through 40 investments in the country. Surprisingly, Norway didn’t wither even during Egypt’s choppy stint in 2011.

Ghana

Ghana’s crude production in 2010 turned the country’s fortunes around but Norway’s portfolio is away from commodities.  Norges Bank’s investment in Ghana stands at a Total of USD 8.5 million in 2 investments: Enterprise Group Ltd, where USD 1.87 million has been invested, earning the fund a 2.25% ownership, and FAN Milk Ltd where USD 6.72 million has been injected, guaranteeing an ownership of 3%.

Kenya

Norges Bank has been pumped USD 133.67Million in the East African powerhouse channeled through 12 investments.

Notable investments include:

  • CFC Stanbic Holdings Ltd. Total invested-USD 5,172,661.Ownership 1.62%
  • Kenya: East African Breweries Ltd. Total invested USD 31,350,850. Ownership1.49%
  • Equity Group Holdings Ltd. Total invested-USD 24,764,418. Ownership 1.68%
  • Kenya Commercial Bank Ltd. Total invested- USD 20,049,307. Ownership 1.55%

Morocco

The kingdom has attracted a Total of USD 51.4 million propelled through 9 investments.

Nigeria

In the 17 investments in Nigeria, a total of USD 139.73 has been invested from the Norwegian fund through Norges Bank into 17 investments.

South Africa

Finally, our equities journey ends at RSA which has received the bulk of the investment totaling USD 2.63 billion channeled through 97 investments.

Fixed income assets

The fund has also moved in for fixed income assets on the continent totaling USD 1.27 billion but these have been restricted to Tunisia and South Africa.

Norway has done what many “Friends” of Africa have failed on over the decades – INVEST. I say invest because when you invest, you expect returns so your efforts to realise the returns are unweathering.  Africa needs more of these investments where defaulting on returns isn’t an option. If you believe in grants to Africa, many countries beat Norway but if you look closely, Norway has committed (some of) her petrol dollars to African investment vehicles well knowing her oil will be depleted in 60 years (ceteris paribus). What does that say about our other friends?


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