How do global regions compare?
Source: BMI Research, IMF World Economic Outlook, RisCura analysis
In the previous section, we have segmented Africa into its meaningful markets. This is done to reflect that investors consider regional opportunities rather than the small and fragmented national markets within Africa.
The next step was to identify how the segmented African regions compare to other global markets. To do this comparison, we identified other markets that have similar investment characteristics to the meaningful African markets that we analysed.
We have analysed both the FTSE and MSCI market indexes to understand which markets compare to the different meaningful African markets identified. These indices broadly classify markets as developed, emerging, and frontier markets. The distinction between each classification is determined by the sustainability of economic development; size and liquidity requirements, and market accessibility.
All the African markets are either classified as emerging or frontier markets. The distinction between emerging markets and frontier markets is nuanced; however, it comes down to the invest-ability of capital markets. Emerging markets are less developed than developed markets, but have relatively stable and liquid capital markets.
Frontier markets represent the riskiest markets to invest in regarding depth, access and efficiency of capital markets.
The map above shows the latest market classification by MSCI and FTSE. Of the markets that we analyse in this publication, only Egypt and South Africa are classified as emerging markets and from an investor’s perspective, should be compared to Brazil, Mexico, Poland and China.
Botswana, Cote D’Ivoire, Ghana, Kenya, Mauritius, Morocco, Nigeria, Tunisia, Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo are classified as frontier markets and from an investor’s perspective, should be compared to Croatia, Serbia, Jordan and Bangladesh.