Africa Matters is a blog that follows the news and offers analysis of African affairs. Our aim is to delve deeper into the issues of African politics and development. We don’t presume to be experts, and we don’t presume to have all the answers—we are just trying to ask the right questions.

Wednesday, November 5

African Stocks

Almost without exception, stock markets have fallen this year as the global economy reels from ripples of the U.S. financial crisis. Year to date through Oct. 31, the U.S. S&P 500 is down 34.03%. and other benchmark indexes have followed suit as battered banks, plummeting property values, and shaken consumer confidence have caused widespread selling.

Indeed, only three primary stock indexes are in positive territory for 2008, all of them in emerging markets. Of the remaining top six "best" performers, the others are in the red. All of them are volatile—and relatively good performance for 2008 doesn't necessary mean sound economic footing. The Ghanaian exchange, for instance, is illiquid, dominated by a few companies, and driven up by high expectations for commodity prices and oil extraction.

Africa is beginning to feel the ripples of the U.S.-rooted crisis, but three of the best five performing markers are on the continent: Ghana, Tunisia and Botswana.

Ghana (GSE All Share Index ) +63.35%
The best-performing stock market in the world, this small, illiquid exchange dominated by mining, commodities, and banking companies is up nearly two-thirds (after gaining 32% last year). Hopes remain high for the Ghanaian economy, with International Monetary Fund estimates of 7.5% annual growth from 2009 to 2011, thanks to factors like rising cocoa and other commodity prices and the country's first significant oil production set for 2010.

Tunisia (Tunis SE) +16.73%
This North African nation has so far managed to avoid the global economic downturn because of its relative isolation from world markets. Regulatory barriers keep capital in Tunisia, and foreign investors represent only one-quarter of the local market. Continued economic growth—at an estimated 6%—is expected next year, thanks to a relatively healthy banking sector and Tunisia's emergence as a low-cost manufacturing and service destination for Europe.

Botswana (Botswana Gaborone Index) -0.73%
Mining, especially for diamonds, anchors this economy, one of the most promising in sub-Saharan Africa. Botswana's financial sector is generally unexposed to the leveraged credit products that have devastated Western banks, but foreign investment from the U.S. and Europe—an important economic driver—will probably slow.