00:00When you think about the African economies and you think about what's unfolding in the Middle East, the geopolitics of
00:06it all, but also the impacts that we're seeing in the energy market, how does that affect, again, the economies
00:12in Africa?
00:13Well, the short term impacts of the Iranian war are quite devastating for African markets because the inflation shock, with
00:24the exception of some oil producing countries like Nigeria and Angola, the inflation shock is going to be very devastating
00:32to the cost of capital, interest rates and through that the preparedness of African markets to deal with that crisis.
00:41There were, in effect, many of them coming out of a long period of post-COVID difficulties and essentially the
00:50interest rate cycle and the inflation cycle in those economies was getting under control.
00:56So the oil shock now is very, very difficult. So a place like South Africa, there were a lot of
01:02green shoots emerging through the structural reforms in the logistics space that were being undertaken.
01:07And I'm afraid that these green shoots are going to face very difficult conditions and may not weather the storm,
01:17depending on how long the Iranian conflict is maintained.
01:22If it's three to six months, as I've heard today, it might be the case. That sustained oil shock will
01:29be devastating for these economies.
01:31Yeah, that's sort of what I was wondering. I mean, how great is the setback here? And you think about,
01:37you know, the different economies where you were seeing those potential green shoots.
01:40I mean, which countries are particularly vulnerable. I would say South Africa, Kenya, Egypt, these larger countries that are not
01:50oil producing are particularly vulnerable.
01:52We talked about in South Africa, the Minister of Finance produced a budget which was forecasting one and a half
01:59percent growth for 2026.
02:01I think most economists now are revising that downwards and one and a half percent growth is not sufficient to
02:08deal with the trifecta of poverty and unemployment and low growth in South Africa.
02:14And we were hoping to break out towards the historical three percent growth rates that were maintained under the Mandela
02:22and Berkey period in South Africa.
02:24In Nigeria, I would just say they have been undertaking some very positive structural reforms around the currency, around the
02:35oil markets and so on.
02:37And they have built the refinery through the Dangote refinery initiative. Yeah. And I think they may well benefit significantly
02:46through this.
02:47Yeah. In fact, Bloomberg reported earlier today that Dangote's businesses are seeing a material uptick right now in interest, given
02:55what's been going on.
02:56I do want to go back to South Africa and the importance or I guess in the past, the importance
03:00of that economy to sub-Saharan Africa.
03:02How intertwined are the economies down there right now? Or have they all pretty much diverged on their own in
03:09terms of in terms of policies and obviously in terms of just growth?
03:12No, there's a very strong correlation. Yeah. Still, the amount of inter-African trade is not where it should be.
03:21You should have a far greater dependency of inter-African trade, but it is significant.
03:26So that is a transmission belt for exports, imports and trade in in Africa.
03:35South Africa is still the dominant economy in Africa.
03:39Nigeria is sort of catching up and may well catch up through this crisis, depending on how long it is.
03:46I would say, you know, to your former guest, one of the most outstanding features of South Africa and understanding
03:53South African markets is its very deep liquid capital markets.
03:58In fact, South Africa is one of the only blocks in the EMEA where you have large equity participation in
04:05the merging market indexes.
04:07And the GDP to market capitalization ratio is the greatest in South Africa of all economies anywhere in the world.
04:19So the South African capital market is about 1.2 trillion and the GDP is about 400 billion.
04:26So it's three times GDP, which is a demonstration of how liquid the capital markets are.
04:34Yeah. And the the the funds love to trade South African currency, bonds and equity markets as a proxy for
04:42emerging markets as a whole.
04:43So South Africa's financial markets are a great asset that that is outstanding at this point.
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