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29 March 2024

World Cup could draw investments

Published

I'm sure a number of you have been keenly following the World Cup matches as they play out across South Africa. For me, even though I was sitting far away, the opening match in the awe-inspiring Johannesburg venue felt especially close to home, since we have an office in this city originally called the Place of Gold.

We have been coming to South Africa for several years, and we have a number of South African companies in our portfolios, so we rejoice along with the South Africans that they are hosts of the Fifa World Cup 2010. The country has many world-class companies that present good investing opportunities. These companies have capable management teams and many are expanding their international market share. Higher global demand for commodities, a recovery in domestic demand and the hosting of the World Cup should further support South Africa's economic resurgence.

A number of sectors could benefit from the World Cup, most notably those related to infrastructure, tourism, retailing, media and telecommunications. This is the first time the World Cup has ever been held on the African continent. The World Cup could enhance the South Africa's image and improve the world's perception of the country, as well as potentially attract more tourists and investors to the region.

While South Africa is by far the largest and most liquid of the markets in sub-Saharan Africa, we are now looking at lesser-known markets in the African continent, including Nigeria, Egypt, Kenya, Botswana, Ghana, Morocco, and Tunisia. Liquidity is the key concern for most investors, so markets that are the most liquid could attract greater investment flows. While some African markets are developing rapidly, we think they have a long way to go before their potential is fully realised. In the meantime, private equity investments present an alternative channel for direct foreign investment, which is needed as a starter.

We have also observed the growth of new markets in the region. For example, Libya already has a stock market and is encouraging the privatisation of state-owned enterprises—a development some other African countries are repeating. Nigeria, a large country with substantial natural resources, is quickly emerging as an interesting investment destination. It has the second-largest proven oil reserves in Africa, and in late 2009, surpassed Saudi Arabia as the third-largest supplier of crude oil to the US.

The author is Executive Chairman, Templeton Asset Management. The views expressed are his own