Africa Opportunity Fund Limited
Climate Impact & Sustainability Data (2016, 2022, 2023, 2024-01 to 2024-06)
Reporting Period: 2016
Environmental Metrics
Environmental Challenges
- Unpredictable adjudication of legal disputes in Africa (Shoprite arbitration)
- Currency devaluations in several African countries (Egypt, Nigeria)
- Weak commodity markets
- Political instability in some African countries (Gambia)
- High all-in costs for Anglogold Ashanti
- Force majeure event at Lace Diamond Mine (flooding)
Mitigation Strategies
- Appealing the Shoprite arbitration award
- Accumulating fixed income securities of oil and gas and precious metals producers at discounted prices
- Selling puts on equities and purchasing more equity while trimming Tizir bond holdings
- Investing in companies with practical currency hedges and African export earners
- Treating currency collapses as opportunities to lower the average cost of good investments
- Focusing on companies with sober balance sheets and minimal debt
Supply Chain Management
Climate-Related Risks & Opportunities
Reporting Period: 2022
Environmental Metrics
Climate Goals & Targets
Environmental Challenges
- Tough year with NAV (including redemptions) falling 9%, despite a 15% share price increase.
- Inflation, Russian-Ukrainian war, volatile commodity prices, and global monetary tightening policies impacted performance.
- Ghana's debt crisis and currency depreciation significantly affected Ghanaian holdings.
- Zambia's sovereign debt renegotiations and Kwacha depreciation negatively impacted Zambian holdings.
- Zimbabwean property holdings suffered poor returns due to hyperinflation and currency shortages.
Mitigation Strategies
- Deliberate realisation strategy to maximise asset value returned to shareholders.
- Corporate transactions and secondary public markets used for disposals.
- Working to balance and achieve best possible values for remaining holdings.
Supply Chain Management
Climate-Related Risks & Opportunities
Reporting Period: 2023
Environmental Metrics
Climate Goals & Targets
Environmental Challenges
- Tough year with 9% NAV fall (including redemptions).
- Volatility in African economies (South Africa +2%, Nigeria -21%, Kenya -37%, Egypt +45%).
- Foreign exchange shortages in Nigeria, Egypt, and Zambia, imposing exit penalties.
- Ghana's economic challenges due to sovereign debt default.
- High inflation and foreign currency shortages in Zimbabwe.
Mitigation Strategies
- Deliberate realisation strategy to maximise value for shareholders.
- Sales of investments through secondary private and public markets.
- Cautious optimism about Ghana's investment prospects.
- Internal estimates of Zimbabwe Dollar decline used for valuation, minimizing devaluation risk on disposal proceeds.
Supply Chain Management
Climate-Related Risks & Opportunities
Reporting Period: 2024-01 to 2024-06
Environmental Metrics
Climate Goals & Targets
Environmental Challenges
- Weakness of African currencies (Naira devaluation by 36%, Cedi depreciation by 22%, Zimbabwe Dollar replaced by ZiG, cumulative devaluation of 60% if not replaced), sovereign spending obligations exceeding tax expectations in many African countries.
- Domestic unrest in Kenya prompted by government tax increases.
- Unaffordability of ALX programs for many students.
Mitigation Strategies
- New investment policy focusing on investments with substantial growth potential and capacity to thrive in stressed macroeconomic/political settings.
- Cautious optimism for Kenya Power's recovery due to cost-reflective tariffs and negotiated reductions in power purchase agreements.