According to Malek Bou-Diab, who manages the £63m fund, a lot is going on in the background of these two markets. The governments are addressing problems within the economy and divesting from stakes in companies.
“If you ask what the top priority is for these countries, the answer is the economy. Current governments are making progress on the political front,” Bou-Diab said.
In Morocco, the change is visible in companies that are becoming much more innovative in the domestic market.
Lesieur, an oil and soap company, used to manufacture only bars of soap until two years ago when the government brought in a strategic investor. Now they offer a multi-functional liquid soap that can be used in three different ways.
“The company used to be boring. Now they are much more dynamic geographically and are supplying other West African companies,” Bou-Diab said.
The example of Lesieur serves as a model for other companies active in frontier markets. Local Moroccan real estate companies are collaborating with the government and are another example of a company model that is tapping into the general need for housing in Africa.
“These changes we are seeing aren’t priced into the market yet. We’re selectively positioning ourselves in this space,” Bou-Diab said.
He points out that now similar real estate companies are emerging in Senegal and the Ivory Coast.
Tunisia
Meanwhile Tunisia is profiting from its geographical situation between Algeria and Libya.
“There are problems but that does not mean there is no demand. With investors pulling out of Algeria and Libya, these two economies are becoming importers to fullfill domestic demand. Tunisia is shipping to its neighbours, which is its growth channel,” according to Bou-Diab.
The market does not really apply much attention to these shifts until they become more prominent, he added.
The BB African Opportunities Fund invests primarily in listed companies operating out of the emerging markets of Africa. Its largest share of assets, 35.40%, are in Egyptian equity. The fund has seen a cumulative performance of 16.21% in the past year, compared with a 10.77% performance of the IMA’s equity emerging market index, according to FE Analytics.
