African stock markets entered 2025 with strong momentum after a positive 2024 for several frontier markets. The discussion focuses on sub-Saharan African equities outside North Africa and South Africa, with particular attention to Tanzania, Kenya, Nigeria, Rwanda, Senegal, Ghana, Zambia, Uganda, Mauritius, and the West African regional exchange.
The fund discussed in the transcript returned an estimated 26% to 27% in U.S. dollar terms in 2024. The largest country exposures going into 2025 were Tanzania at about 35% of the fund and Kenya at about 30%, followed by Nigeria at just over 7%, Rwanda at around 6.5%, and Senegal at around 6%.
Tanzania outlook
Tanzania remains the largest allocation, though by a smaller margin than in previous years. The country enters 2025 with a presidential election. President Samia Suluhu Hassan is running after taking over from John Magufuli in 2021.
The investment case for Tanzania is based on a more foreign-investor-friendly policy style, stronger capital inflows, and a local economy supported by three main export engines:
- tourism,
- agriculture,
- minerals.
All three are described as performing well. Cashew nuts had a strong season, coffee prices are at record levels, gold prices are also at record levels, and tourism remains busy despite high safari prices.
Low oil prices are another positive factor because Tanzania relies fully on imported fuel. Lower fuel costs leave consumers with more money to spend.
The portfolio is mainly exposed to the domestic economy rather than direct exporters. Examples include Tanzania Breweries, which is described as having about 75% beer market share, and Tanzania Cigarette, which is highlighted because blocks of shares are available at low multiples through off-market cross trades.
Tanzania Cigarette is described as trading at around three times EBITDA or about five to six times earnings, depending on estimates, with an expected dividend yield above 15% on the entry price.
The main uncertainty for Tanzania is the election, but the overall outlook is described as bullish for economic growth in 2025.
Kenya outlook
Kenya is now the second-largest allocation, close to Tanzania. The Kenyan market had been deeply negative in 2023, with pressure from political turmoil, protests, falling currency, and fears around Eurobond repayment or rollover.
The Kenyan shilling fell from about 105 per U.S. dollar in 2020 to around 170 before strengthening sharply after the Eurobond rollover. It later moved below 130, creating foreign-exchange gains for investors who bought Kenyan assets cheaply.
The Kenyan market benefited from both rising share prices in local currency and a roughly 30% appreciation of the Kenyan shilling against the U.S. dollar during the year.
The economic setup is described as improving from “bad to less bad,” which can be profitable in emerging and frontier markets. Inflation has fallen to just over 3%, government bond yields are below 10% on recent auctions, interest rates are falling, and food and oil prices are under control.
Kenya Power and Light Company is used as an example of how negative sentiment had become. The stock reportedly fell as low as 1.50 Kenyan shillings, then quadrupled or quintupled after strong earnings and a 7-shilling dividend announcement.
Kenya’s risks remain significant. Around 32% of government revenue is spent on interest payments. The country needs more foreign exchange to repay or reduce reliance on Eurobond rollovers. Kenya is also not food self-sufficient and imports food from countries such as Tanzania and Uganda. Its mining industry has been held back by government mismanagement, though there may be renewed interest in minerals projects.
Positive factors include:
- falling interest rates,
- lower inflation,
- diaspora remittances,
- a strong software and call-center talent base,
- construction activity in Nairobi,
- infrastructure development,
- a more active stock market.
The Kenyan shilling is described as relatively strong around 129 and may depreciate again over a five-year view, though not necessarily back to 170.
Nigeria outlook
Nigeria became the third-largest exposure at just over 7% of the fund. It had previously been avoided because foreign investors could not reliably get money out due to foreign-exchange restrictions and a distorted official exchange-rate system.
The new president, Bola Tinubu, changed the system by devaluing the exchange rate, replacing the central bank governor, and allowing the naira to find a more realistic level. The exchange rate moved from an artificially low official level around 450 per U.S. dollar to 1,200, later as weak as 1,600, and then settled around 1,500 to 1,550.
The main improvement is that investors can now repatriate money, though the exchange rate fluctuates significantly and investors must watch conversion pricing carefully.
The fund bought about $1 million of shares in one Nigerian company at around 15 to 16 naira per share, and the stock doubled. Nigeria’s stock market performed very strongly in local currency terms, but dollar returns were hit by the naira’s devaluation.
Nigeria remains highly risky. Inflation is running in the low 30% range. Food security is a problem because of import dependence and insecurity in rural areas, where bandits and terrorists can interfere with farming. The government also faces pressure to raise tax revenue because tax collection as a percentage of GDP is very low and oil revenue is not enough.
The oil industry still faces problems with low production, theft, weak foreign investment conditions, and reliance on oil taxation for the budget.
One positive development is that the government allowed the two large mobile operators to raise tariffs after more than 10 years without increases. This may help telecom companies whose dollar-linked expenses were badly affected by currency devaluation.
The investment approach in Nigeria is highly selective. The country is not presented as broadly attractive, but as a market where valuations became so depressed that careful stock selection could produce gains.
Rwanda exposure
Rwanda exposure is concentrated in one company: the Heineken subsidiary, in which Heineken owns 80% and 20% is free float.
The company dominates Rwanda’s beer market and also holds the Coca-Cola bottling license, giving it a strong position in soft drinks. Rwanda is described as a small country with a young population, many of whom are becoming drinking-age consumers.
The shares rose from around 120 to 260 in local currency terms during the holding period. The Rwandan franc has weakened, unlike the Tanzanian, Kenyan, and Ugandan shillings, but the company has paid large dividends. The current dividend yield is described as around 10%.
The company may also have export potential into neighboring markets such as Burundi or eastern Democratic Republic of Congo, though this is unclear from official statistics. Burundi is described as very poor and sometimes short of foreign currency, which limits demand.
Senegal exposure
Senegal exposure is mainly through Sonatel, the largest mobile phone company in Senegal and several other West African countries, including Mali, Guinea, Guinea-Bissau, and Sierra Leone.
The stock was bought after being heavily oversold after COVID, partly because a large investor was exiting. The initial purchase level was around 11,000 to 12,000 per share, and the stock has since doubled to around 24,000. The position is still being added to because earnings have also grown.
Senegal’s oil industry has started producing, but the fund has not invested in foreign-listed oil companies operating there.
The political situation is viewed as more mature than in many African countries. President Bassirou Diomaye Faye consolidated power after a second parliamentary election. The main concern is anti-France and anti-West rhetoric, including discussion of renegotiating oil deals. That could be negative for long-term investment stability, especially if existing contracts are changed.
However, the transcript suggests some of the rhetoric may be populist and that what politicians say may differ from what they actually do.
African telecoms and mobile money
A major theme is that African telecom companies are not just voice and data businesses. They are also fintech and payments platforms.
Safaricom in Kenya is described as the model, with mobile money now generating nearly 50% of revenue. Sonatel’s mobile-money revenue is still below 30%, leaving room for growth.
Mobile money allows users to:
- store cash in phone wallets,
- send money to other users,
- cash out through agents,
- pay businesses directly,
- avoid more expensive bank transfers or Western Union-type services.
Agents effectively act as distributed bank tellers across the country. West Africa is described as behind East Africa in mobile money adoption, which creates possible upside for companies such as Sonatel.
West African regional exchange
The West African regional exchange, based in Abidjan, is being monitored but currently has no allocation in the portfolio.
Several companies were reviewed at a regional investor conference. Orange Côte d’Ivoire listed recently, but the valuation was considered expensive and the shares have risen since. Local pension fund demand can push up prices.
One company of interest imports heavy crude from Colombia and Venezuela and refines it into bitumen for road construction across Africa. This could benefit from long-term infrastructure demand, including possible highway development between Abidjan and Lagos.
Ghana exposure
The Ghana exposure is through MTN Ghana, the dominant mobile phone company. The attraction is again mobile money and data growth.
Ghanaian consumers are described as using more data than most other African markets. Whenever MTN upgrades or optimizes network capacity, demand absorbs the additional data quickly.
Mobile money is a major driver for MTN Ghana, similar to other leading African telecom companies.
Uganda, Zambia, Mauritius, and smaller markets
Uganda exposure was previously held through MTN Uganda, a sister company of MTN Ghana. The position reportedly rose from around 140 to 240, and profits were taken.
Zambia exposure remains through Zambia Breweries, part of the AB InBev group and a sister company of Tanzania Breweries. It has not performed well because Zambia faced several macro problems:
- drought,
- weak hydroelectric power generation,
- pressure on harvests,
- food imports from Tanzania,
- weak copper momentum,
- unresolved debt restructuring.
The company itself is still viewed as well-managed, and a turnaround may create gains if Zambia’s industry and macro environment improve.
Mauritius currently has no exposure. The market is described as having been hit by scandals, though falling prices may create future opportunities.
Overall African equity outlook for 2025
The transcript presents East Africa as the strongest regional theme. Tanzania and Kenya are the two main exposures and are described as benefiting from growth, improving macro conditions, domestic consumption, tourism, agriculture, exports, and capital inflows.
Nigeria is more speculative but has become investable again because money can now be repatriated and valuations were extremely depressed. Rwanda and Senegal offer more focused company-specific opportunities, especially in breweries, soft drinks, telecoms, and mobile money.
The main risks across African frontier markets are:
- currency depreciation,
- inflation,
- political instability,
- government debt burdens,
- capital controls,
- weak liquidity,
- tax pressure,
- food insecurity,
- energy shortages,
- contract renegotiation,
- foreign-exchange access,
- country-specific governance problems.
The main opportunities are:
- strong GDP growth,
- young populations,
- underpenetrated consumer markets,
- mobile money expansion,
- data consumption growth,
- rising tourism,
- commodity exports,
- undervalued equities,
- improving local macro conditions,
- diaspora remittances,
- infrastructure development.
The practical investment approach described is selective rather than broad. The best opportunities are in companies with dominant local positions, strong dividends, low valuations, improving earnings, and exposure to domestic growth.
