I have developed a keen interest in South African stocks lately. South Africa’s GDP growth is projected at 5.3% on average for the next 5 years. In order to expedite the growth process, South African leaders agreed upon the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). In short summary, the initiative’s goal is to end poverty and unemployment in South Africa.
With a new goal on hand, positive GDP growth projections, and shrinking negative current balance, South Africa presents itself as a prime investment opportunity.
Here are three South African companies to watch in the future.
Sasol Limited (SSL)
I love this stock because Sasol is the only major oil and gas company in the world that has access to GTL (Gas to Liquid Technology). This technology allows refineries to convert natural gas into a portable gaseous liquid, and to recycle waste products produced from gas into reusable fuel. As petroleum resources become scarce, GTL technology will be a major alternative energy source. This is one of the few oil and gas stocks I currently like.
Illovo Sugar (ILVO)
This South African sugar company should grow as the world demand for raw and refined sugar continues to grow. Sugar is in great demand, especially since the world population continues to grow so rapidly. In fact, sugar consumption has tripled since 1960.
There’s also the possibility of sugar being used as alternative fuel, which would send demand through the roof. Illovo Sugar went through a terrible 2005, but seems to have bounced back in 2006. Shares trade at around $3 on the OTC, so do your homework before buying into this stock.
Old Mutual (OML.L)
Old Mutual is the largest financial institution in South Africa. Higher wages and a growing South African middle class will increase net deposits and loan opportunities for the 120-year old bank. The 2010 World Cup will propel the South African economy to new heights. Such a strong catalyst will sends billions of dollars into the growing South African infrastructure. Just as Bank of America grew along with America’s wealth, Old Mutual maintains the same close knit relationship to its economy and its people.
Old Mutual has business relationships with other nations as well. Over 25% of net profits are generated outside of the Africa, mainly in the U.S and UK. As more dollars pour into the South African economy, I expect the institutional investors to take notice of South Africa’s largest bank.
Any of these South African stocks have the potential to earn very nice long-term gains, but there’s a great deal of risk in holding these securities. If you’re a conservative investor, iShares South African ETF (EZA) is an option.
While his background is mostly related to trading stocks, he recently gained interest in real estate crowdfunding with Fundrise.