Africa Fund – Fund Manager Update

In April, markets came under further pressure due to the sharp rise in US Treasury yields and on-going fallout from the war in Ukraine. South Africa was also impacted by severe floods and renewed power cuts, which drove the TOP 40 index down by 11.3% in USD terms over the month. Meanwhile, the Egyptian benchmark declined by 0.7% in USD terms.

The power issues and impact from the flooding will add to pressures on the South African economy going forward, which is already seeing a slowdown in activity. However, CPI inflation rose to 5.9% y/y last month, close to the top of the 3-6% target range, keeping pressure on the SARB to continue with its gradual tightening cycle. We remain underweight to South Africa.

In Egypt, CPI inflation also rose further last month, reaching 10.5% y/y, which may prompt further monetary tightening from the central bank near-term. Following significant financial support from various Gulf countries in March, the government remains in discussion with the IMF over a possible new support programme.

We added Kumba to the portfolio, an iron ore producer (A rated for ESG), following a significant share price pullback.