Investments in Africa are often associated with political and corporate risk, which discourages people from taking advantage of compelling opportunities, according to Charlemagne Capital's Sharat Dua.
Speaking to Citywire Selector, Dua, who runs the Charlemagne Magna Africa fund, believes Tanzania could present something of a surprise antidote to these fears.
‘Tanzania is a good news story, the frustration I have is that Africa gets a bad press, but there are lots of positive stories investors don’t know about.'
Dua currently has 1% of the portfolio positioned in Tanzania and says President John Magufuli’s strong leadership has addressed many of the concerns potential investors may face when deciding whether or not to invest in the country.
‘His austerity-driven approach has set out to clean up the country. He cancelled the inauguration day celebrations and instead told citizens to get involved in cleaning up the community.
‘Also, he has clamped down on foreign travel for bureaucrats. Now, only the vice president, the prime minister, the finance minister and the president himself can travel without approval.’
The next success story
Dua says his contrarian bet on Tanzania has the potential to become as successful as Kenya, where he has 12% of his portfolio. Within Tanzania, Dua favours AB InBev, a brewer behind global brands such as Budweiser, Stella Artois, and Becks.
‘It’s a well-run business and very cheap for a brewery. In its current financial year, it’s trading at around 13x earnings, and often trades at more than 20x earnings.’
Dua says Tanzania could see a lot of IPOs over the next year, which could help the market become more liquid.
‘The government has decided that foreign-owned telecoms and mining companies should be required to list on the stock market. Leadership from the government is something we really look for in a frontier market – a strong leader who wants businesses to do better.
‘Magufuli wants to clean up bureaucracy, but also give local people a stake in businesses. If the market in Tanzania opens more widely, it will be a win-win situation for everybody,’ Dua says.
This article originally appeared in the July/August edition of the Citywire Selector magazine. At the time of writing, Dua held a Citywire-AA rating, which has since been altered due to a change in track record.