South Africa is more susceptible to global risks, and has seen a slowdown in domestic growth momentum. Recent market volatility has limited countercyclical policy options. We lower our 2013 South Africa GDP forecast to 2.2% (2.7% previously). Elsewhere in Africa, demand is more resilient. Angola, Cote d?Ivoire, Ghana, Zambia, and a swathe of new resource economies in East Africa should all see medium-term trend growth of c.7%.
Fears that Africa will be hit hard by a moderation in China?s growth trend are misplaced. While much of Africa?s growth impetus remains domestic, trade with China continues to increase.
The impact of QE tapering on Africa will not be uniform. More liquid markets that have seen a higher level of foreign investor participation are more vulnerable. Nonetheless, with a tapering of QE now largely discounted, we expect domestic fundamentals to reassert themselves.
We maintain an Overweight duration and FX weighting on Nigeria, we are Overweight duration on Ghana, but Neutral on the Ghana cedi. We maintain a Neutral duration stance on South Africa, and Underweight FX weighting on the rand. We are Neutral duration in Kenya and Uganda, given a less favourable demand/supply outlook. We remain Neutral duration on Zambia given expectations of tighter liquidity.
Eoin Treacy's view Sub Saharan Africa is interesting from a number of perspectives, not least because of the improving standards of economic and fiscal governance evident in a number of countries. Additionally, as one of the world's major population growth centres, the region has the capacity to post outsized economic growth, provided governance remains on an improving trajectory. The discovery of significant new energy resources in East Africa should also act to improve the fiscal position of respective governments over future decades.
The Nigerian Index found support three weeks ago, at the upper side of the underlying trading range; having unwound the majority of its overbought condition relative to the 200-day MA. A sustained move below 34,500 would be required to question medium-term recovery potential.
Botswana has paused in the region of the 2008 peak in what has so far been a relatively gradual process of mean reversion. Ghana has a relatively similar pattern. Kenya found support last week in the region of the 200-day MA. Namibia hit a medium-term peak in January and has since experienced its deepest pullback in at least two years. The Index rallied impressively last week but a sustained move back above 950 will be required to confirm a return to demand dominance beyond the short term.
This additional report from IJG Securities focusing on Namibia, kindly forwarded by a subscriber, may also be of interest to subscribers.