Prudential plc And Old Mutual plc Are Two Great Plays On African’s Rapidly Growing Economy

Prudential plc (LON: PRU) and Old Mutual plc (LON:OML) at set to benefit from the African growth story.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Africa is widely considered to be the world’s next growth market, and with the continents rich mineral wealth it’s easy to see why.

Indeed, the Sub-Saharan African economy is expected to grow by 6% during 2014. A direct result of this growth is the rising personal wealth; for example, around 70% of adults on the continent can now afford a mobile phone contract, up from only 7% a few years ago.

However, despite its illustrious growth prospects, Africa is not known for its economic or political stability, which puts off many investors. Nevertheless, the continents prospects should not be ignored and investors can reduce their risk by putting their cash in an international and diversified company that knows how to navigate Africa.

African national

One company that really knows the African market is Old Mutual (LSE:OML) (NASDAQOTH: ODMTY. US).

Old Mutual was the biggest banking and insurance company in South Africa when it made its move to London back during 1999. The company still has a huge presence on the continent, with its banking arm, Nedbank looking after $80bn in assets, making it one of Africa’s biggest banks. African banks often achieve returns-on-equity, a typical measure of profitability, in excess of 20% to 30%, while banks in the West usually achieve a return on equity closer to 10% to 15%. In additionally, 70% of Old Mutual’s profits still come from South Africa.

Old Mutual’s African heritage means that the company’s management really knows the market. The company already has operations within 15 African countries, with a further $550m set aside for acquisitions to boost its exposure.

prudentialLofty growth targets

Prudential (LSE:PRU) (NYSE: PUK.US) is another insurer attempting to make its mark on the African economy by recently acquiring Ghanaian life insurance company Express Life. Customers of Express Life pay as little as the equivalent of $0.70 a month for its offerings, including health and life insurance, funeral cover and savings products.

This drive into Africa is only part of Prudential’s global growth plans. Indeed, at the beginning of this year Prudential’s management laid out a four year growth plan, which was focused on global expansion. Specifically, the company wants to increase profits by around 15% per annum during the four year period and generate £10bn in cash from operations over the same period; that’s one third of the company’s current market capitalization.

I have every confidence that Prudential can meet these lofty growth targets as this plan builds on a previous four year plan, where Prudential met five out of six self-imposed targets leading to a 126% rise in the share price and £1.8bn dividend payouts.

Foolish summary

So, for investors who want to gain exposure to Africa, the world’s next growth story, Old Mutual and Prudential could be the best way to do it. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article. 

More on Investing Articles

Investing Articles

With a P/E ratio of 9, is the Aviva share price a bargain?

Christopher Ruane looks at the Aviva share price and considers some strengths and weaknesses of the FTSE 100 insurance business.

Read more »

Surprised Black girl holding teddy bear toy on Christmas
US Stock

Is it too late to buy growth stock Shopify after its 25% pop?

Up more than 40% this year, Shopify is on fire at the moment. Here, Edward Sheldon explains how he’d play…

Read more »

Investing Articles

Investors should consider buying this energy AIM stock, up 50% in the past year

AIM stock Afentra has seen a stellar price rise in 12 months to November. I believe there may be room…

Read more »

Investing Articles

2 ISA shares to consider for a large passive income!

Looking for dividend shares to buy in a Stocks and Shares ISA or Lifetime ISA? Royston Wild reveals two of…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

A Bitcoin investment that can be held inside a Stocks and Shares ISA or SIPP

UK investors can’t buy Bitcoin ETFs for their investment accounts or SIPPs due to FCA regulation. This stock could be…

Read more »

Entrepreneur on the phone.
Investing Articles

As the Vodafone share price slides 6% on lacklustre H1 results, what does the future hold?

After posting moderate results this morning, Vodafone saw its share price sink further, erasing this year's gains. Our writer looks…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing For Beginners

If I’d invested £5k in a FTSE tracker fund after the pandemic crash, here’s what I’d have now

Jon Smith explains the extent of his potential gains if he'd invested in a FTSE tracker fund during the Covid…

Read more »

Investing Articles

2 top shares I’ve bought for my Stocks and Shares ISA in November

This writer reveals a pair of fast-growing businesses that he's recently added to his Stocks and Shares ISA for the…

Read more »