The report was presented by Mr. Shritesh Nanji – Chief Investment Officer – Investments, Mr. Dan Gathogo – Deputy Chief Investment Officer and Ms. Faith Omoongeh – Portfolio Manager at the Radisson Blu Hotel, Upper Hill, Nairobi.SIEAL expects the global economy to slow down in 2023 and there remains a risk that some of the world’s major economies could enter a recession later in the year.
Mr. Shritesh Nanji noted that ‘The slowdown has been caused mainly by spillovers effects from the Covid-19 Pandemic such as the Zero-Covid policy adopted until recently by China which reduced economic activity in the world’s second largest economy and also from higher food and other commodity prices as a result of the Russia – Ukraine war. This in turn has driven global inflation higher and caused major central banks to hike interest rates sharply during 2022. Previously, low interest rates in advanced economies had been positive for developing economies and capital markets. However, the recent rapid rise in global interest rates has led to US Dollar strength and ultimately resulted in capital outflows from emerging and frontier markets back into hard currency assets. This has limited the capacity of developing countries to access international debt markets causing significant challenges and vulnerabilities.’
Speaking at the launch, Mr. Dan Gathogo noted that ‘SIEAL expects interest rates in Kenya to remain elevated in 2023 given the funding requirements of the government and the requirement for the Central Bank of Kenya to manage inflation. There is also the possibility of continued pressure on the Kenya shilling owing to Eurobond debt repayment obligations due in June 2024, which could further maintain pressure on interest rates.’ SIEAL also commented on the outlook for the Kenyan stock market with Mr. Dan Gathogo stating that ‘after a 23.4% market decline in 2022, stock market valuations are now cheaper and could represent an attractive entry point for long term investors. However, US Dollar strength and elevated yields in local government bonds could still dampen investors (both foreign and local) participation at the securities exchange.’
On Private Equity (PE) and Real Estate (RE), Ms. Faith Omoongeh commented that ‘the current volatile investment environment favours consideration of diversification into quality alternative assets. The PE asset class offers East African investment opportunities which are often embedded with currency risk diversification, whilst lower company valuations may offer attractive entry points for PE funds. However, there remains the risk that the current high local interest rate environment could impact fundraising activities. Within RE, SIEAL expects emerging alternative opportunities to offer greater value compared to more traditional property investments. Emerging opportunities include data centres, healthcare, student housing, cold storage, affordable housing, and infrastructure that could offer higher returns to investors than more traditional office, retail and residential real estate investments.’
About Sanlam Investments East Africa
Sanlam Investments East African Limited (SIEAL) is a leading fund manager in the region and has a strong record of accomplishment in service delivery and investment performance. SIEAL is part of the Sanlam Group, through its subsidiary Sanlam emerging markets. The Sanlam group is a leading financial services group with operations in more than 30 African countries and a primary listing on the Johannesburg stock exchange.
SIEAL has been fully operational in Kenya since 1998 and in Uganda since 2004. The firm is licensed by the Capital Markets Authority in Kenya and Uganda and duly registered with the Retirement Benefits Authority in Kenya to provide investment advisory and management services. The firm is also licensed by the Uganda Retirement Benefits Regulatory Authority.