U.S. investors have failed to recognize the potential for business opportunities in Africa and the way the U.S. media cover news in Africa could be a contributing factor, according to Robert Scharar, an investment advisor and fund manager of the Africa Fund.
Scharar is tinvestment firm. He has been investing in Africa for 20 years.
In an article in How We Made It In Africa, Scharar said African markets in many cases offer great value with dividend yields higher than U.S. markets’. Africa’s business environment is not so different from the U.S.’s, he said. It’s easy to conduct business there, and the perceived risks of doing business on the continent are actually much larger than the actual risks, he said.
Failure to recognize the business potential in Africa “could be deemed to be a major problem for the United States,” Scharar said in How We Made It In Africa. “I think the U.S. has had many opportunities to play a greater role as an investor in Africa and it has largely been omitted from most people’s plans.”
The way U.S. news media cover the news could be part of the reason why U.S. investors have shied away.
Africa’s economic growth has often been downplayed by negative news about continent, and has therefore not received enough media attention, Scharar said in the article.
“Africa may not get the publicity and understanding that it should,” he said. “What happens is that our news is filled with the tragedies and the heartbreaks, which certainly exist, but it’s not necessarily filled with the successes. Most Americans really have the wrong perception.”
The Africa Fund invests in publicly traded companies across Africa and is one of a few funds of its kind with management based in the U.S., Scharar said. It is one of five mutual funds of the Commonwealth International Series Trust and was launched in 2011.
Some of the perceived risks in doing business in Africa are justifiable, Scharar said.
“There have been some experiences with governance issues; that certainly is a problem in some parts of Africa… I have been travelling in Africa for almost 20 years and my experience has been that by and large those issues are not that much of an issue. You can do business there pretty transparently and without the corruption that one might contribute to some of the government activities. I think the business community is much cleaner than that.”
What U.S. investors aren’t seeing, he added in the article, is a rapidly growing educated class of people who want what everybody else wants in the world, “You know, a better lifestyle for their families, security, all the things that everybody else is looking for – and that is just taking rapid effect.”
Generally, Scharar said, dividend yields in Africa are higher than the U.S. markets’. “When you look at fundamental valuations of companies, the types of things we look at is what is the price to the book value of a company, what is the price to the earnings, what is the dividend yield, what are their growth rates – those statistical bases often are very, very attractive in African public companies.”
Timing wise, if you are patient, there could be rewards, Scharar said in the article. “The timing may not be tomorrow morning, but it’s certainly in my lifetime and it’s not necessarily decades away at all. This can happen fairly quickly.”
Scharar encourages American and global investors to visit Africa to better understand the diversity of it markets.
With a large part of Africa being English speaking, “Africa is much more in line with the U.S. than people appreciate,” he said. “It is easy to conduct business. Many countries in Africa function under laws that are similar to what we have in the U.S. and their corporate structures,” Scharar told How We Made It In Africa. “We are just missing this opportunity to do business with a continent, much of which wants to do business with us.”
