After a decade of fluctuating sentiment and volatile currencies, Africa’s equity and debt markets are quietly mounting a comeback – in some cases, thrashing the returns made from some less obviously risky jurisdictions.
From an unassuming office in Cape Town, Randolph Oosthuizen and his co-manager Cavan Osborne have been managing the Old Mutual African Frontiers Fund (equity) since 2012, and more recently, a flexible fixed income fund focused on African sovereign debt. With about $300m under management in equities, and growing traction in debt instruments, their experience across the continent now spans the euphoric optimism of the early 2010s to the post-Covid realism of 2024.
“Funnily enough, we think it’s actually a good time to be investing in African stocks,” Oosthuizen says.
A decade ago, African currencies were something of an afterthought for equity managers. But years of crises – from Nigeria’s liquidity crunches to Egypt’s forex controls – forced a fundamental rethink. Today, Oosthuizen’s team applies a top-down macro framework to assess currency risks before they ever pick a stock.
Their equity holdings span Egypt, Morocco, Nigeria, Kenya and smaller plays like Ghana and Mauritius. But what’s striking now is the valuation gap. The fund’s trailing price-to-earnings (p:e) ratio sits at 6.9 times, and its forward p:e is 5.4 times – rock-bottom levels that are almost unheard of in global markets today. “In some markets, banks are trading at 2 times p:e,” Oosthuizen says. “And yet their fundamentals remain intact.”
With currency depreciation largely behind them – thanks in part to policy reforms and stabilising reserves in countries like Nigeria, Egypt and Ghana – African equities are enjoying a rare window of macro calm. Morocco’s stocks are still expensive (as expected in a low-inflation, euro-linked environment), but elsewhere Oosthuizen sees value nearly everywhere.
While African equities remain a liquidity challenge – “building a $3m position can take weeks” – the team’s newer fixed income fund trades effortlessly in $1m-$5m clips. But liquidity isn’t the only reason the team’s been drawn to debt.
Launched three years ago, the Old Mutual African Frontiers Flexible Income Fund has returned a robust 11.3% annually in dollar terms – well above its 8.9% benchmark. In contrast, investment-grade sovereign debt has returned just 1.5% annually over the past three years, while high-yield (or what Oosthuizen wryly calls “not junk, just misunderstood”) debt has averaged 10%.
“People underestimate how dangerous interest rate risk can be,” he says. “With investment-grade debt, low coupons and long duration mean that even small yield changes cause big capital losses. But high-yield African debt comes with high coupons and shorter durations – it’s simply less sensitive.”
Indeed, during the past four years, despite high-profile defaults in Zambia and Ghana, African high-yield debt outperformed most global fixed-income benchmarks. The resilience has surprised even seasoned investors. “Even through Covid and Russia’s invasion of Ukraine, the asset class held up,” Oosthuizen says. “That’s a powerful proof point.”
The key risk in Africa, he argues, isn’t so much creditworthiness – it’s convertibility. “It’s not just about depreciation. It’s about being able to get your money out.” That’s why the fixed income fund skews towards dollar-denominated sovereign bonds, giving exposure to African growth without the friction of blocked currencies or shadow FX markets.
Still, the team stays nimble. With currency risk currently benign and local yields elevated, they’re seeing fresh opportunities in local currency debt, even in places previously considered no-go zones.
Both funds are registered as European UCITS (the collective investment in transferable securities regulatory framework in the EU that sets common rules for investment funds that are marketed to retail investors). The equity fund is an Article 8 fund — meaning it explicitly incorporates environmental, social and governance (ESG) factors. That’s not window dressing. “Corporate governance matters a lot more in low-transparency markets,” Oosthuizen says. “We’ve learned to be sceptical, to ask difficult questions, and to walk away.”
Renewed optimism
Despite years of outflows and sentiment swings, African investing is not dead. Far from it. Old Mutual’s clients include its life company parent, South African and Sub-Saharan African pension funds, and several European institutions — all of which see value in specialist managers who know when to steer clear and when to double down.
“There’s a renewed, cautious optimism,” Oosthuizen says. “We’ve seen new mandates and some large allocations recently. It’s not the giddy optimism of 2011, but it’s better grounded.”
While Africa is often treated as a single narrative, Oosthuizen stresses that its markets are anything but homogeneous. Currency pegs in West Africa contrast with floating rates in East Africa. Morocco is a magnet for risk-averse capital, while Nigeria offers frontier volatility with frontier returns. “It’s not just about Africa,” he says. “It’s about knowing Africa.”
That means boots on the ground – trips to regulators, meetings with central banks, visits to companies and, yes, long days in traffic-choked Kampala or Lagos. Uganda, he says, remains a favourite: “Beautiful, friendly, stable, and with lots of infrastructure investment.”
The post-Covid world has left no asset class untouched, but in Africa, some of the volatility has sharpened the investment case. Currency headwinds are subsiding. Valuations are cheap. Debt markets have matured. And investors are beginning to return – slowly, but deliberately.
Still, Oosthuizen offers a final caveat. “No asset class performs all the time. You need people who know what to do, when. We’ve spent a decade building that expertise. We don’t think Africa is one big opportunity – we think it’s many specific ones, if you know where to look.”
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