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Don’t ignore South Africa, says AA-rated Dua

Don’t ignore South Africa, says AA-rated Dua

Charlemagne Capital’s Sharat Dua is backing South Africa to turn around despite its muddled political picture and concerns over its economic outlook.

'South Africa has a lot of unreported economic activity, there’s a lot more going on than meets the eye.

'It’s an entrepreneurial country and there are emerging consumers in the young generation. When the right leadership is in place, the country will have a good story to tell', he told Citywire Selector.

AA-rated Dua currently has 56% of the Charlemagne Magna Africa fund allocated to South Africa.

‘South African companies are some of the best run in emerging markets, as you have western levels of education and better corporate governance than in other emerging markets. The country's dialogue and attitude to board responsibilities is positive’, Dua said.

With six of the top ten holdings of the fund allocated to South African companies, Dua said sentiment towards shareholder returns, dividends, share buy-backs and capital investments are superior to that of other economies.

‘Companies and stocks are often the best ways to invest in Africa. One of our larger positions in the fund is Shoprite. It has been investing significantly in Nigeria and Angola, the company is in a phase at the moment where it is really the only game in town.’

Best operations

Dua puts the success of companies like Shoprite down to the way senior management handles the operations side of the business.

'It is by far the leader in the food retail market in South Africa, it accounts for around a third of the market. The company took the decision several years ago to invest in sub-Saharan Africa and it is now in a position where roughly 20% of sales and profits come from Angola.

'At this time other retailers were not able to stock their stores and had empty shelves. Shoprite had products on the shelves the whole time and gained a huge number of customers in that period.’

Dua said margins have gone up mainly as a result of the number of customers they are managing to get through the door. He added that the company maintains the concept it will not be beaten on price.

Over the three years to the end of May 2017, the Charlemagne Magna Africa fund lost 16.23% in US dollar terms. This compares with a fall of 4.12% by its Citywire-assigned benchmark, the MSCI EFM Africa TR USD over the same time period.

 

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