Prediction Not checkable as stated
Smith: Deglobalization will make African markets even less correlated with the US
“The world is not necessarily integrating any further at the moment. If anything, people are taking a bit of a step back, and we think that's going to make places like Africa even less correlated with the U.S. Markets”
Disclosure
Smith: All Africa Partners avoids Zimbabwe over currency repatriation and liquidity risks
“In terms of picking countries, I mentioned we didn't invest in Zimbabwe at the moment, and that's really on the basis of liquidity. Because we're investing in listed markets, and we promise to give money back to our investors if they ask for it back, we need t…”
Assertion Contradicted
Smith: Kenya's Equity Group compounded dollar EPS at 20% annually for 20 years
“It started as a listed entity around 20 years ago, and since then it has grown its dollar EPS by over 20% per annum.”
Assertion Supported
Smith: Africa consistently accounts for half of the world's fastest-growing economies
“If you look at the top 10 or top 20 fastest growing economies in the world, Africa always makes up
Half of those, and has done for many years, and is expected to continue to do so.”
Prediction Open · timeframe Dec 2100
Smith: By 2100, four in every ten people worldwide will be African
“By the end of the century, that's going to be 40%.
By the end of the century, four in every 10 people are going to be African, and the urbanization story that goes along with that is absolutely colossal.”
Assertion Not checkable as stated
Smith: IFRS accounting is standard across all 20 African stock exchanges we trade
“In all 20 of the exchanges that we invest in, IFRS is standard and required.”
Assertion Not checkable as stated
Smith: Our portfolio would gain 50% just by re-rating to historical median valuations
“If our portfolio today, just re-rated to their own historic valuations, would be up over 50%. In dollar terms.”
Assertion Partly supported
Smith: A 20-year US inflation differential perfectly explains African currency depreciation
“The most important thing for us, the starting point is that if we look at any of our floating currencies over a 20 year period, the inflation differential to the US perfectly explains the depreciation.”
Assertion Not checkable as stated
Smith: One-third of the investable African equity universe has zero sell-side analyst coverage
“Out of our opportunity set, a third has zero analyst coverage whatsoever.”
Insight
Smith: Investors subconsciously anchor on valuation before even starting formal fundamental research
“One of the really key things we've learned is that the decision to pursue work on a particular company is usually done with an idea of what you think the valuation is before you've done the valuation.”
Assertion Supported
Smith: Inter-country correlation is much higher than sector correlation across African equity markets
“We know that inter-country correlation is much, much higher than sector correlation across Africa, for example.”
Assertion Not checkable as stated
Smith: Some top US endowments have significant exposure and strong performance in Africa
“But although there aren't a lot of people investing in Africa today, we know of some of the most successful of the large endowments and foundations in the U S today have very significant exposure to Africa and are achieving very good performance in those marke…”
Opinion
Smith: Reporting corporate results strictly in local African currency is extremely misleading
“In the context of Africa, I would say for me and probably for us, it's reporting in local currency without reporting in dollars as well. That can be extremely misleading in high inflation environments, and I really think that that shouldn't be allowed, basical…”
Assertion Partly supported
Smith: South Africa accounts for roughly 60% of investable African equities
“South Africa is a very, very big part of that, about 60% in terms of number of names, as well as market cap.”
Assertion Supported
Smith: 98% of Kenya's Equity Group transactions happen electronically outside physical branches
“So they were very, very quick to adopt all sorts of technology over time to the point now where 98% of their transactions are electronic transactions that happen away from any sort of bank branch.”
Assertion Partly supported
Smith: MTN Nigeria trades at a single-digit P/E and yields a 7% dividend
“And Ted, you can buy MTN Nigeria for single digit PE. You can buy Equity Group in Kenya for less than book value. Both of them pay us seven percent. Div yield at the moment.”
Assertion Partly supported
Smith: African stock markets represent just 20% to 25% of regional GDP
“African stock markets are still, what, you know, 20 to 25% of GDP. Miles behind the rest of the world. You know, China is up at 80, 90%. The U.S. Is well over a hundred.”
Disclosure
Smith: Eight of ten All Africa portfolio CEOs were educated in the US or Europe
“Eight out of the 10 CEOs of the companies in which we invest in today were educated in either Europe or the US.”
Assertion Not checkable as stated
Smith: Our African portfolio trades at half the valuation and triple the yield of MSCI ACWI
“Basically, Ted, our portfolio trades at half the price and triple the yield of ACQUI.”
Insight
Smith: African equity trades require extensive offline legwork and negotiation
“There's a lot of legwork that goes into it and very few of the trades are just as simple as going to your online account and plugging in a number and pressing go.”
Assertion Supported
Smith: African equity markets underperformed the rest of the world from 2015 to 2019
“The African markets didn't perform particularly well really since 2015, 20 15 through 19. The African markets in general underperformed the rest of the world and in particular the U.S.”
