Renaissance Capital's investment in Africa report

Renaissance Capital recently released their investment in Africa report series, highlighting their top picks for investment in the continent, which are Cote d'Ivoire and Rwanda. The firm's assessment is centered around the undervalued currencies of these countries, which provide a cost-effective way to tap into their rapidly expanding economies. Yvonne Mhango, Sub-Saharan Africa Economist at Renaissance Capital, discussed the key findings of the report in an interview with CNBC Africa. The central themes of the report revolve around the fiscal positions and currencies of various African nations. Mhango pointed out that fiscal discipline is crucial in light of recent challenges faced by several African countries, such as Mozambique, Ghana, and Zambia, which have sought assistance from the IMF for fiscal consolidation. She emphasized the importance of maintaining strong fiscal positions to ensure economic stability. Additionally, Mhango highlighted the currency dynamics in Africa, noting that while some commodity-exporting countries like Nigeria and Angola have experienced significant currency depreciation, others still have undervalued currencies. These undervalued currencies present attractive opportunities for investors looking to benefit from robust economic growth. The correlation between GDP growth and public investment was another significant aspect discussed in the report. Mhango explained that countries investing at least 8% of their GDP in public infrastructure projects tend to see GDP growth exceeding 5%. Countries like Rwanda and Ethiopia were cited as examples of nations that have benefited from high levels of public investment. Rwanda, in particular, has strategically invested in key sectors like tourism and transportation to drive economic growth. While discussing Kenya, Mhango raised concerns about the country's overvalued currency, which could pose risks amid dwindling foreign exchange reserves. She contrasted this with Rwanda, where despite facing liquidity challenges in 2016, the relatively cheaper currency and ambitious development plans make it an attractive investment destination. The report also touched upon the impact of oil prices on African economies, with Kenya being vulnerable to fluctuations in oil prices due to its heavy dependence on oil imports. Despite potential risks, Mhango reassured that stable oil price projections for the year should limit adverse effects on the country's current account. Overall, the report underscores the investment potential in African economies with undervalued currencies, strong public investment initiatives, and strategic development plans driving growth prospects.