African governance

The Mo Ibrahim Foundation is offering a prize of almost €4 million in recognition of contributions to good governance in sub-Saharan Africa. The Mo Ibrahim Prize for Achievement in African Leadership to former African executive Heads of State or Government who have demonstrated exemplary leadership, including delivering security, health,education and economic development to their constituents, and democratically transfer power to their successor. The prize will consist of €3.8 million over 10 years and a further €150,000 a year thereafter, making it
the largest prize in the world.

Sub-Saharan africa to grow 5.5% in 2011

The International Monetary Fund cut its 2011 growth forecast for Sub-Saharan Africa to 5.5 percent, but the number is still impressive. The IMF had previously estimated growth of 5.9 percent for 2011.Africa’s growth rate is forecast to almost double this year as demand from China and India drive up prices of commodities such as copper and platinum, and exports rebound from last year’s global recession.

Laos opens stock exchange

Laos, the smallest economy in Southeast Asia, is starting its first stock exchange in early 2011. Landlocked Laos is seeking global investors to help pay for infrastructure projects and create jobs for its 7 million citizens, nearly half of whom are younger than 16. Rio Tinto Group and Electricite de France SA are among companies that have boosted investments in mines and power plants to tap into the nation’s rivers and other natural resources.

Laos’ economy may expand 7.5 percent in 2011 from an estimated 7.4 percent this year and a 5.5 percent pace in 2009, boosted by electricity sales to Thailand and higher prices of copper, gold and silver, the Asian Development Bank said in a report on its website.

2nd Annual Investing in Frontier Markets

Assessing favorable regions and products in a diverse market

16th & 17th September 2010, London, UK

An expert speaker panel which includes:

Daniel Broby, CIO, Silk Invest
Peter Westin, Chief Equity Strategist/Economist, Aton Capital
Raphael Kassin, Head of Emerging Market Debt, Reyl Asset Management
Douglas Bennett, Director, Frontier Market Fund Managers
Clemente Cappello, CIO and Portfolio Manager, Sturgeon Capital
Javier Garcia, Fund Manager, Julius Baer Black Sea Fund, Swiss & Global Asset Management
Ayo Salami, Chief Investment Officer, Duet Asset Management
Frank Senyo Dewotor, Portfolio Manager (Africa), Fulcrum Asset Management
Mohammed Hanif, Chief Investment Officer/CEO, Insparo AM
Slim Feriani, CEO, Advance Emerging Capital
Khaled Abdel Majeed, Managing Partner, MENA Capital
Douglas Clayton, CEO, Leopard Capital
Keith Gubbin, CEO, Africa Asset Management
Chris Derksen, Head of Frontier Markets, Investec Asset Management
Kenneth Spurling, Managing Director / CEO, FDSH Asset Management Limited
Alisher Ali, Managing Partner, Eurasia Capital Management

Frontier market EM yields

The announcement of a CFA 5 billion Cote d'Ivoire bonds 2009-2014 6,95% listed on the BRVM selling at only a 3% discount makes one wonder if yields can get much lower in frontier markets (Cote d'Ivoire defaulted in the not to distant past).

Some think that it is completely mad to think that frontier market yields cannot go to lower levels, even with them having the inverse government debt picture of developed markets. We disagree. Consider that in the past, at the peak of the developed markets bull period in bonds (the ultimate lows in yields), the curve gots so flat that the average spread between the long bond and Fed funds rate was only 100bps. It would seem that just as the BB frontier bond universe was over-looked and hence had the greatest return potential, the pick up in the frontier yeilds, and in particular the local and corproate yields, are still attractive. With the structural case, thhe long end of the frontier universe now also carries with it a compelling total return opportunity (inflation expectations are still far too high).

All change at the NSE

The Nigerian Securities and Exchange Commission ordered the Director-General of the NSE to leave her post. Local media reported that the former CEO, Mrs Okereke-Onyuke was accused of mismanaging the accounts of the NSE, which she has led for 10 and served for 27 years after coming from the New York Stock Exchange.

Local press reported drama at the Lagos trading floor as officials of SEC and the Economic and Financial Crimes Commission, accompanied by armed police and plain-clothes security officer came to enforce the dismissal.

The cleaning up of insitutions like the NSE is a pre-requisite for Nigeria's economic future.

Bloomberg Africa Equity Focus Day

In the World Cup month of June, Bloomberg is turning the spotlight on Africa.
It is holding its Africa Equity Focus Day at 16th June 10:30 - 13:00 with 4 experts on the Continent:

Daniel Broby - CIO Silk Invest
Plamen Monosvki - CIO of Renaissance Investment Management (Renaissance Capital)
Farooq Oreagba - Head of Strategy & Business Development Directorate, Nigerian Stock Exchange
Michael Fidance - Head of Emerging Market Cash Trading, HSBC

They will present their views and perspectives about investing in Africa. The seminar will be followed by a Lunch. Bloomberg users can sign up under BU or reply to my message.

Venue Bloomberg
Citygate House
39-45 Finsbury Square, London

Essential Africa: Capital Markets Conference

Rainbow Consulting is hosting a half day investment conference:
London, Friday 11 June 2010, 8.45 am to 2.00 pm

Registration link

http://www.africanrainbow.org/index.php?option=com_docman&task=doc_download&gid=77.

Time

Topic Speaker(s)
9.00 am
Welcome
Katharine Pulvermacher
Founder & Chief Executive
African Rainbow Consulting

9.15 am
Key Economic and Political Indicators
An institutional investor’s perspective on Africa, covering the many changes that are transforming the landscape

Ritesh Anand
Founder & Chief Executive
Invictus Capital

9.45 am
Trading African Securities
Investors, be aware: liquidity, transparency, regulation and transaction costs in emerging markets may surprise you.

Daniel Broby
Chief Investment Officer
Silk Invest

Coffee & Refreshments
10.30 am
Development Finance Institutions:
International donors are major investors in Africa. Do they crowd out private investment or act as a catalyst?

Mavis Owusu-Gyamfi
Deputy Director, Private Sector Development
UK Department for International Development (DFID)


11.15 am
Private Equity and Venture Capital
What hurdles confront PE and VC funds trying to access the international marketplace
Guy Fraser-Sampson
CASS Business School

11.45 am
Investment in SMEs and Microfinance
The “missing middle” and the base of the pyramid offer a tantalising win-win for investors and investees alike.


Peter Hinton
CEO, Summit Development Group
Howard Finkelstein
Director, Microfinance Club of New York

12.30 pm
Closing Remarks
Mrs. Ruth Barry
Commercial Director
African Rainbow Consulting

Lunch


Speakers
Ritesh Anand
Ritesh Anand is founder and CEO of Invictus Investment Management, a pan-African focussed listed equity fund. Ritesh spent over seven years in various roles at the Wellcome Trust, most recently as Investment Manager for Africa and the Middle East.

Prior to moving to the UK, Ritesh worked as a fund manager for First Mutual Asset Management in Zimbabwe, where he was responsible for four unit trust funds and managed segregated pension funds. Ritesh received his BSc (Honours) in Economics from the University of Warwick, MSc in Strategic Management from the University of Derby and completed the Executive Finance Program at London Business School.

Ruth Barry
Ruth Barry is Commercial Director of African Rainbow Consulting Limited. She holds a Business Diploma from Kings College London and an MSc in Residential and Commercial Property from City University. Ruth is a qualified mediator (Regents College) and also studied Pharmacy and Medicine as an undergraduate at Chelsea College. She has extensive experience in negotiating and managing financial transactions in the property sector, having worked for more than a decade in local and international real estate investment, including developing residential and commercial blocks in city centres and country areas. In her earlier career, Ruth organised fortnightly sales events for commercial and residential property in Europe and East Africa, where she was born and raised.

Daniel Broby
Daniel Broby is Chief Investment Officer of Silk Invest. Silk Invest is a specialist in frontier market investments. He runs a team based in London, Egypt, South Africa and Morocco. He joined Silk Invest having sold the hedge fund he founded (Danfonds Frontier Markets SPC) to the company. Prior to that he worked for Renaissance Investment Management (UK) Limited, where he was Chief Executive Officer. He held various roles and responsibilities throughout the RIM group, principally those of Chief Investment Officer, Head of Asset Management and Director of the Renaissance Africa Fund. His roles involved extensive travel to and from offices in Moscow, Kiev, Nairobi, Geneva and London. In addition to the day to day management of the group's various investment teams, he also oversaw the successful launch of the Renaissance Africa Fund, the Global Macro Fund for RIM (UK) and the successful launch of the offshore Renaissance Russia Infrastructure Fund for RIM.

Daniel has an MPhil in economics and an MSc in investment analysis. He was a board member of CFA (UK) for over 10 years. He was the CFA Institute's President Council Representative for Europe, Middle East and Africa for four years and was presented with the Institute's Society Leader Award in 2006. He now serves as a member of the Capital Markets Policy Council. He was elected an individual member of the London Stock Exchange in 1990 and is a Fellow of the Securities Institute, a Fellow of CFA UK and a Visiting Fellow at Durham University.

Howard J. Finkelstein
Howard J. Finkelstein has been practicing law for nearly 30 years, more than 25 for large law firms. On January 1, 2009, Howard resigned his partnership at Akerman Senterfitt to open up his own law practice, focusing on structuring capital market instruments to bring Western capital to microfinance institutions (MFIs) worldwide. He is a piomeer in the securitization of microfinance-related obligations. His work has helped to bring nearly $1 billion to MFIs worldwide.

Mr. Finkelstein sits on the Board of Directors of the Microfinance Club of New York, Secretary of Microlumbia, Inc., and on the Advisory Boards of Green Microfinance, Lend for Peace, Frogtek LLC and African Rainbow Consulting.

Guy Fraser-Sampson
Guy Fraser-Sampson has held many investment posts over the years, including Investment Controller with the Abu Dhabi Investment Authority. He is also well known for having set up and run for several years the international operations of a leading fund of funds manager.

He currently teaches various investment modules at Cass Business School in the City of London, and performs consultancy assignments around the world for investors, investment managers and government bodies. He is the author of two investment books: Multi Asset Class Investment Strategy and Private Equity as an asset class (currently in its second edition).

Peter Hinton
Peter Hinton has 25 years of commercial experience including 15 years of banking, SMEs and private equity in Africa. He is currently CEO of Summit Development Group, an investment fund that SDG invests in financial institutions across Sub-Saharan Africa in order to transform them into leading banks that provide financial services to SMEs and the financially excluded. Prior to that he was with Enterprise Banking Group , African Banking Corporation, CDC Capital Partners, Africa Trading and BHS. Peter is a Chartered Accountant with a degree in Economics & Accountancy and a master’s degree in Development Economics.

Mavis Owusu-Gyamfi
Mavis Owusu-Gyamfi is currently responsible for setting DFID ’s policy direction on private sector development (PSD) and managing a team of technical specialists that provide advice to key partners in developing countries, the international community and the UK government. Prior to this she led the team responsible for managing the Department’s portfolio to support economic growth in Nigeria. She has extensive experience in private sector led growth and has provided technical advice to governments in East, West and Southern Africa as well as the Eastern Caribbean. This included facilitating the first PSD Strategies in Ghana and Tanzania and successfully managing economic development portfolios exceeding $400m in a number of countries.

She is a political economist by training and an MPhil graduate of the Institute of Development Studies at the University of Sussex. Her publications include Binding Constraints to Growth in Nigeria (Palgrave Macmillan, 2008) and Growth and Competitiveness (World Bank, 2007).

Katharine Pulvermacher
Katharine Pulvermacher is the Founder and Chief Executive of African Rainbow Consulting Limited. She obtained her MSc in Economics with reference to Africa with Distinction from the School of Oriental and African Studies in London, where she also completed the first stage of her PhD focusing on poverty alleviation. Katharine ran a highly successful investment research and marketing programme targeting institutional investors in the main capital markets for eight years. Her published research spans asset allocation, commodities and most recently, public private partnerships in Africa.

As an undergraduate at the University of Cape Town, she studied Social Work, Psychology and Sociology, and ran adult literacy classes in her spare time. She is an experienced trainer and group facilitator, has taught at university level in South Africa and the United Kingdom, and ran social reinsertion programmes for the long-term unemployed in the French department of Aude. In addition to her “new-born” - African Rainbow - Katharine is a mother of two sons, whose travels in Africa are almost as extensive as her own.

Mauritius, Tourist Haven, Banks on Image Makeover

Daniel Broby of Silk Invest speaks to Reuters on Mauritius. http://frontiermarkets.thomsonreuters.com/Pages/MauritiusBanksonImageMakeover.aspx

Low Global Interest Rates, Rising Commodity Prices Seen Helping Frontier Markets Outperform

North Korea - the forgotten frontier market

North Korea and South Korea have been in a suspended state of war for some time. Tensions with North Korea escalated in response to tension over the sinking a South Korean warship in March. North Korea, led by Kim Jong-il, is the last Stalinist dictatorship. It set off a nuclear device in 2006 and has since test-fired a ballistic missile. It now looks like the war could flare up again. President Lee said if his country's waters, airspace or territory were violated he would immediately exercise his right of self-defence. Barack Obama has ordered that the 28,000 U.S. troops in South Korea be put on alert.

Dead Aid

Mauritius

THE EUROMONEY MAURITIUS CONFERENCE 2010

ACCESSING GROWTH MARKETS- THE ROLE OF GLOBAL BUSINESS CENTRES

30th March 2010

The Waldorf Hilton Hotel, London

Panel 1: The Global Growth Environment
This session was chaired by Christopher Garnett, Director, Euromoney Conferences and focused on the global growth environment. Speakers included Daniel Broby, Chief Investment Officer, Silk Invest; Richard Fairgrieve, Director, Global Emerging Markets, Blackfriars Asset Management; Slim Feriani, Chief Executive Officer, Advance Emerging Capital and Liam Halligan, Chief Economist, Prosperity Capital Management

Panel I proved to be an excellent platform to set the scene for the rest of the day. Panelists analysed the main risks that the global economy is currently going through and expressed their invaluable views on where they believed the global downturn currently stands.

According to Richard Fairgrieve, the world has not come out of the economic crisis yet. As investors, it is very important to see the world from its various horizons. It is important to split emerging markets from the rest of the world. Since emerging markets have the reserves, they will continue to grow at a faster pace. In previous years, emerging markets have grown by 4-5% while those of the West grew by only 2%.

According to Slim Feriani, major risks are still present in the developed and Western world. We live in a global village and there is currently lots of talk about decoupling. The reality is that if Western countries do not grow then the export engine of the emerging economies is going to be hit. The economic crisis has in some ways played a positive role for emerging markets as it has forced them to look inward and concentrate on their domestic and regional markets.

For Daniel Broby, the end of the game is what matters. During the crisis, the Mauritian tourism sector was hit by 10%. However, there had been a very pragmatic approach by the Government to tackle this crisis. For instance, hotels and services were upgraded to make the country more attractive. Slim Feriani pointed out that places like Istanbul and Turkey have had tangible progress as compared to what they were 10 years ago. Confidence and stability has helped the economies to grow.

The shift in the flow of capital and investment from the West to the East, the growing importance of emerging markets like India and China as well as the way major capital markets around the world are re-inventing themselves to take advantage of the new economic landscape were examined. Slim Feriani reiterated that as investment managers, they are cautious and conservative in their approach to invest. They have structures in Nigeria as well as in Mauritius. Mauritius is a stable country but not necessarily the most cost effective platform. There has been a major transformation in Africa. It is predicted that in 10 years from now, Nigeria will boom as long as politics and stability improves. However, the fact remains that while some African countries are progressing; some have gone backward, for example Zimbabwe.

For Daniel Broby, African economies such as Botswana and Mauritius have been successful as there has been a high correlation between democracy and success. It was further highlighted that for Global Business Centres to remain and enhance their competitiveness, factors like transparency, regulatory framework, consistency and extensive networks of bilateral agreements should be taken into consideration.

Reuters codes: Silk Invest

Silk - African Lions Fund A0RAC3X.DX LU0389403337.LUF
Silk - African Lions Fund A0RAC4X.DX LU0389403410.LUF
Silk - Arab Falcons Fund A0RAC6X.DX LU0389403683.LUF
Silk - Arab Falcons Fund A0RAC5X.DX LU0389403501.LUF
Silk - Arab Falcons Fund A0YETMX.DX LU0485224678.LUF
Silk - Arab Falcons Fund A0YETYX.DX LU0485223860.LUF
Silk - Road Income Fund A0X918X.DX LU0445778870.LUF

COMESA Investment Forum

The 3rd COMESA Investment Forum –at Sharm El Sheikh, Egypt, just closed on a positive note. There were over 800 delegates from 65 countries.

Earlier during the Forum, the former president of Botswana, one of the most successful African countries, said that Africa was bursting with business and investment opportunities and offered the best return on investment in the world.

Nassif Sawiris, Chairman and CEO of Orascom Development, called for a clearer legal environment if Africa is to attract more investment. He added that more transparency in contract enforcement was needed to reassure investors of the security of their ventures.

Video: The investment case for Africa

Daniel Broby, Silk Invest, "The Case for Investment in New Emerging Markets—Africa and the Middle East" from CFA Ireland on Vimeo.

Silk Arab Falcons fund one year performance +22.01%

Silk African lions fund one year performance +34.19%

Kenya cuts interest rate

Kenya's central bank unexpectedly cut its key interest rate by 25 basis points to 6.75 percent on Tuesday, saying downside risks to the economic recovery called for measures to support growth.

The direction and magnitude of movements of the CBR will send the appropriate signal that inflation is not the significant threat it once was.

African mining Indaba attracts 4,000 delegates

Clearly, Africa is the new investment destination. The African Mining Indaba started with optimism and around 4,000 delegates versus 3,800 last year. This is the first big mining conference to be held since the end of the global financial crisis,

Formal talks on day one all involved commodity forecasting, and delivered a steady stream of observations about rare metals, uranium, iron ore, gold and copper. Somewhat predictably most forecasts were optimistic about the outlook, though a clear message was that 2010 will be a year when supply issues dominate demand.

Silk Road Income Fund awarded ‘Golden Bull’

Silk Invest’s Luxembourg SICAV, the Silk Road Income Fund, has been awarded the ‘Golden Bull’ prize for innovation at the ‘Finanzen Nacht’ ceremony in Munich. Hailed by the German press as the “Oscar of the financial world”, the award is sponsored by Euro, Germany’s leading finance publication. The gala evening was attended by over 500 delegates.

The Silk Road Income Fund was launched in October 2009. It gives investors exposure to a range of frontier fixed income markets, previously inaccessible to mainstream European investors in the shape of a UCITS compliant fund.

The award winning hedge fund was launched to compliment Silk Invest’s equity offerings, namely the African Lions and Arab Falcons funds. As its name implies, the geographic remit of the fund is Africa, the Middle East and the Central Asia, leveraging of Silk Invest’s position as a market leader in these geographies

The Silk Road Income Fund aims to manage 60-80 holdings across 25 countries. The target portfolio is to achieve annual returns of 16.5% with a duration of 3.4 years and an average rating of “BB+”.

African Development Bank USD benchmark bond

The African Development Bank plans to sell three-year bonds denominated in U.S. dollars. The Tunisia-based lender has hired Daiwa Capital Markets, Deutsche Bank AG, Goldman Sachs and UBS AG to manage the sale. The sale is expected to be be benchmark in size, which typically means at least $500 million.

Zimbabwe forgets to withdraw Capital Gains Witholding Tax

When the revised Zimbabwe Stock Exchange transaction charges were announced in the 2010 national budget proposals, there was a general inference that the Capital Gains Withholding Tax would be withdrawn. This was previously 1% of sale proceeds in the case of marketable securities. For some unexplained reason the legislation covering the applicability of Capital Gains Withholding Tax on marketable securities has in fact not been changed and accordingly, the tax must continue to be levied. It therefore costs 1.73% to enter the market and 2.48% to exit. That's a total cost in and out of 4.21%. Not exactly a level that will encourage a flood of money into the country.

The new frontier of Investing

Click here for - Link to great article on frontier markets.

Frontier market settlement periods

Bahrain T+2 49% Foreign Investment Ceiling in general, 10% for a single entity

Bulgaria T+2 Foreign Investment Ceiling100% in general

Colombia T+3 to T+6 Foreign Investment Ceiling100% in general

Croatia T+3 Foreign Investment Ceiling 100% in general

Jordan T+2 Foreign Investment Ceiling 100% in general, with restrictions of 50% or 49% on certain sectors.

Oman T+3 Foreign Investment Ceiling Up to 70% with some further restrictions at
company level

Pakistan T+2 Foreign Investment Ceiling 100% in general

Romania T+3 Foreign Investment Ceiling 100% in general

Sri Lanka Sales T+4 Purchases T+3 Foreign Investment Ceiling 100% in general, with restrictions of 40% on certain sectors .

United Arab Emirates T+2 Foreign Investment Ceiling 49% in general, some individual companies may have different restrictions

Vietnam T+3 Foreign Investment Ceiling 49% in general, 30% for banks

The re-establishment of Morocco’s historic trading routes

All tariff barriers between Morocco and the EU will come down in 2012. The opportunity that this represents is immense; akin to a rebuilding of the silk routes of the past. Co-incidence with this, the kingdom has undertaken a number of strategic liberalizations and a revision of its legal framework that investors should now take notice of. This, combined with the modernization of its infrastructure and a new focus on upgrading the educational system, will result in medium term GDP growth of at least 5.5% annually. That is pretty impressive for a country that, only ten years ago, was considered as an undeveloped nation. Zin Bekkali, the Moroccan CEO of London based Silk Invest, believes that this can be translated into investment performance going forward. Indeed, that is why Silk Invest has placed its Maghreb hub office in Casablanca.

Bekkali points out that the Moroccan investment theme is one of convergence. The open sky agreement with the EU is the most talked about convergence between the EU and Morocco. This is because it represents cross border transportation and that brings the geographies closer together. Domestically, however, even equally important improvements have been made in infrastructure. These improvements have been made both in the road and the rail system. In the 1990’s 40km of train track were laid per year. This year that figure will be 160km. By 2011 the distance covered by new track will be 320km.

Hesham Saad, the lead manager of the Silk Falcons fund, points out that although Morocco has a diversified economy it is a net importer of oil. As a result, it has to focus on its biggest asset, its geographic positioning. This is historically where the country has been most successful. The country now appreciates this and the new vision is to become a strategic hub for the region, particularly in services. This is why the ports, railways and roads are the focus of so much attention. USD 16bn a year is now being spent on infrastructure. The port of Tangiers is the largest such project. After only three years in operation, Morocco’s position as a shipping destination has improved from 76th to 30th place.
In addition to the convergence programs with the EU, Morocco has numerous free trade agreements with amongst others the US. Equally interesting is its commercial and cultural links with many of the Arab countries. At the corporate level, Moroccan companies are expanding into Sub Saharan Africa, leveraging the country’s status as a hub. Maroc Telecom and Attijariwafa bank are clear leaders in this trend. The telecom operator is expanding through Africa buying majority stakes in telecom companies in Mauritania, Burkina Faso, Gabon and Mali and prospecting in other African countries. While Attijariwafa bank, Morocco largest private bank, and the seventh largest bank in Africa in terms of total assets, has been very active in Africa acquiring majority stakes in major banks in Tunisia, Senegal, Gabon, Cameroun, Ivory Coast, Mali and Congo. This should enable Attijariwafa Bank to become a leading regional bank in both North Africa and Africa as a whole and contribute to local economic development.

Daniel Broby, Chief Investment Officer at Silk Invest notes that in the past, Morocco has been accused of a lack of transparency and a less than level playing field. He claims this is now changing. He points, for example, to the fact that the English language is now being jointly used with French for public tenders. Broby also says IFRS is now mandatory for listed companies (in a country where 30% of companies used to fail to produce international annual reports).

Corruption is being addressed by a powerful government commission. Taib Fassi-Fihri, the Minister for Foreign affairs and Co-operation, points out that the country is benchmarking its ‘openness’ policy on EU regulations and norms. Still, all is not perfect. More has to be done to improve justice, upgrade corporate to best practice and to simplify procedures at the government level. The point, however, is that the political will exists to do this within the country’s democratic framework.

Wages are 8 – 10 times less the European levels and the labour force is very young. As a result, the country is particularly suited to added value industries. Tourism is obvious but agriculture and outsourced manufacturing are clearly areas which will grow strongly going forward.

According to Silk Invest, revenue per capita has doubled over the last ten years. As a result, increasingly, growth is also being driven by internal demand. The country has low and stable inflation around 1.2%, a balanced budget and has reduced government debt substantially. Foreign exchange reserves now represent 7.4 months of imports.

The financial sector was one of the first to be modernised. Following the centrally co—ordinated reforms, it is now both dynamic and robust. Ismail Douiri, Vice President of the Moroccan Banking Association, said that Moroccan banks had “resilience due to the careful regulation in which we operate, thereby avoiding the first phase of contagion.“ The minimum solvency ratio was increased from 8% to 10% one year before the credit crisis began. Banking loans have increased fourfold in ten years. The capital backing this was largely raised in the local institutional market.

Abdeltif Stitou, Silk Invest’s Chief Operating Officer and also a Moroccan, point out that the capital markets are developing at a rapid rate. There has been a historically strong link between the state and the private sector. Thanks to new tax breaks the number of listed companies will likely double by 2015. Karim Hajji, Managing director of the Casablanca Stock Exchange, points out that the capital markets in Morocco are the oldest in Africa. The current stock exchange goes back 80 years and now has a market capitalization of $85bn.

Valuations in the Moroccan market reflect a fair amount of the growth ahead. The market has been a laggard in 2009, actually falling by 3% (as at 9th November) against a world where most markets have risen. That said, Zin Bekkali notes that over the last ten years returns have averaged 15% per annum. His company’s Silk Arab Falcons fund allocates 8.5% to Morocco and the Silk African Lions fund allocates 9.3%.

Youssef Lahlou, a portfolio manager at Silk Invest based in Casablanca, points out that “the Moroccan Stock Exchange should benefit from a return of international investors looking to diversify their holdings in the MENA region”. He invests in companies relatively sheltered from the impact of the financial crisis. In Lahlou’s opinion the real estate sector is one of the most interesting in Morocco. With a shortage of 1.5 million housing units especially in the low-income and the mid-range segments, companies operating in this sector (especially Addoha and Alliance) are set to reap the fruits of the accelerating demand. This should also benefit companies in the cement and Iron and Steel sectors.

The Silk Invest funds are also positioned to benefit from the financial sector. Moroccan Banks such as Attijariwafa bank and BCP will continue to growth rapidly, with more than 100 branches opening yearly. They will continue to develop their activity in sub-Saharan Africa. The region has helped Morocco promote growth and reach economic stability, allowing it to average over the past five years a growth rate in excess of 6%.

According to Youseff Lahou another success story out of Morocco is Maroc Telecom (the country’s largest Market Capitalization stock). The group, present in several Sub-Saharan countries, has been able to sustain strong annual earnings growth, over the last few years, thanks to an improvement in the Group’s operating performance, solid sales growth, primarily due to an increase in subscriber numbers which reached 14.5 million in 2008 against 8.2 million in 2005 (i.e. an increase of 77%) and a much tighter control over operating costs.

In conclusion, Morocco looks set to be one of the winners in the post credit crisis world. The next ten years will see a rapid convergence with Southern Europe. The Silk route is being re-invented and companies close to the capital markets, those in the emergent sectors, look set to enjoy above average growth.