There has been increasing talk of Africa being the next big boom, especially in technology. Without saying too much about what I think, I would like to hear WSO's opinion on the future of Africa, including for investment purposes.
I know there is a LOT of corruption, and I have great hatred for the ANC (as it currently is, not Mandela's ANC) and Mr. Zuma Booo. However, South Africa appears to be one of the more developed economies. Provinces such as the Western Cape that is run by the DA rather than the ANC, as well as a few select VC's / private sector people, are doing quite a lot to improve the investment ecosystem here.
If you believe there will be growth and improvement, where in Africa will the growth be led? South Africa? Nigeria? Why?
Nigeria. Oil.
Oil production in Nigeria is actually declining and with the upcoming election it's hard to see this turning around. Look to Angola to outperform among the oil exporters as they have best rep with oil major and also have ultra deep water reserves that have been untapped. East Africa (Kenya/Ethiopia/Tanzania/Rwanda) is the best bet for consumer led growth given demographics and relatively stable policy. Stay away from SOAF: huge structural issues leave little room for policy stimulus, will see pressure due to reliance on foreign capital flows, but as you mentioned is the most "developed" for the region. North Africa is less promising, but Morocco has a relatively stable macro/political regime and the economy is recovering. Best thing to keep in mind is there are 54 countries so a lot of differentiation is needed.
Couldn't have said it better myself (other than there are 57 countries). I have spent a decent amount of time in Africa and one of the biggest takeaways I have is that the countries can be very different from one another. If you are trying to invest in, or really look at, Africa at all, do not assume that something that is true in one country is true in all.
I agree, but does it not make sense for American or European companies to invest in Africa via partners, or e.g. via one country that acts like a hub to all of Africa? E.g. South Africa.
If a U.S citizen was looking to get involved with businesses (banking/lending/etc) directly in Africa (RPC, Nigeria, Morocco) which are some of the fastest growing countries other than south Africa how would you purpose they approach the task? You know I have been told the best research you can do is the research where you actually have to be there. Outside of booking a random ticket what would you do?
Oh Africa, Brave Africa
Why should an investor focus on Africa when the markets in Asia and Latam offer better investment opportunities and returns? Corruption is obviously a big issue in developing countries, but corruption in Africa is on a different level. The markets in Colombia, Turkey and Indonesia are becoming healthier and stronger. They're just better options than Africa's best - South Africa.
I wouldn't invest in Africa just yet.
Invest in what? Sovereign debt/equities/PE/a lemonade stand? Better returns? Have you seen what government bond yields are in the countries you mention? Turkey getting healthier? This post is very misinformed and misses the point that investment opportunities differ depending on what asset classes you're looking at. I'm not the biggest Africa bull out there but to say it doesn't offer some compelling risk/reward opportunities is wildy offbase. For example you can buy Nigerian t bills yielding 15% with a firm commitment to a stable currency (backed up by strong reserves).
I see that the Nigerian treasuries have a pretty juicy yield. Isn't their inflation rate close to 10% at times? After fees and everything I don't think you'd be compensated enough for the risk of hyperinflation or default/haircut. I'd definitely want to invest on the short end of the maturity spectrum and keep a close eye on things at minimum if I were going to put money into sovereigns over there.
OrKid,
You mentioned increasing talks on Africa. Do you have any links? I am curious about Africa myself
Just one example:
http://hbr.org/2013/10/seven-reasons-why-africas-time-is-now
Lots of opportunity in Africa in the mobile/wireless market. Africa may very well be the first region of the world that develops without any major fixed telco/dsl/broadbrand providers. As wireless data technology continues to improve, you may very well see Africa be the home to countries that are entirely covered by data connectivity, yet provide no fixed cable or the like. This is good for Africa, as much of Africa's population is still rural, and the high capex and needed to build a traditional telco infrastructure are simply not feasible in a place like Africa.
Bob Diamond, the former boss of Barclays (BARC.L) is setting up a $325 MM investment vehicle "Atlas Mara" aimed at Africa, so yes, there are opportunities in this largely underserved consumer market.
Lybia, Central African Republic, and Somalia. Target would be private military contractors.
/thread
Interesting point. For Somalia, why does anyone need to be there other than trying to pick up easy terror targets for kill / capture missions? Vi-si-vis, the only money to be had here for PMC's is / are running black ops for other government organizations that are too dirty for JSOC...which I don't even want to speculate how gnarly those ops are / will be.
Bro, if you're going to try to use fancy french words, at least spell them correctly.
http://en.wikipedia.org/wiki/Vis-%C3%A0-vis
Lots of money to be made, but it will require a lot more work than making money in the U.S. You're not going to get rich sitting behind a computer with excel on all day (very doable in the U.S. investment universe). On the other hand, if you're willing to do the legwork you can likely find far more truly compelling (from a returns perspective) opportunities than in most developed markets.
Greater risks, more work , possibly more returns
very true. I feel like in order to make money in Africa at such an early stage, you are going to have to be very hands on and on site. The infrastructure is just not strong enough yet
Invest in infrastructure?
Buy-side perspective here (mainly listed EM and African equities):
My sense is that Africa is where Asia was 10-15 years ago.
Asia offers a lot less risk right now to an investor, but those who will get into Africa early, do the due diligence and get a bit lucky stand to benefit disproportionately.
The comment above about the importance of differentiating between countries cannot be overstated - Africa is not a homogenous entity. Stay away from Congo. But Ghana is a rising star etc.
SA has it's problems but it still remains the best placed gateway to the continent (SA companies are making the most of first-mover advantage in the rest of Africa). Also it has pretty good financial infrastructure for an emerging market (probably one of the best regulated banking systems in the world - officially #2 after Canada), which can be leveraged quite powerfully into Africa.
As an example - check out MTN - SA telco currently printing cash in Nigeria.
Another point: PE (instead of listed capital markets) probably has a much more logical role to play given the early stage of development...
Your buy-side experience in the field probably gives you much better insight than what I have, but I do have to disagree with the above quote (mainly based on my own observation).
Looking at the whole of Asia ex-Japan 10-15 years ago and Africa as a whole today, I think Asia was still a much better investment opportunity than Africa. Maybe Asia ex-Japan 20-30 years ago would be a better comparison?
I think about it this way: what are widely considered to be Africa's best countries for investment? Nigeria, Botswana, and of course SA. Do any of these countries really compare to what South Korea, Taiwan, HK/Singapore, and China had to offer 10-15 years ago? My feeling is that, on a risk return basis, probably not. The Asian tigers were well-diversified economies that offered quickly emerging diversified economies. Most of the three African leaders are really nothing more than natural resource centers with small growth potentials for the consumer/retail sector. Add on the most risky countries and there's even more disparity. Risky Asian economies like Vietnam, Indonesia, and the Philippines still were much better risk-return wise than countries like Ghana, Angola, or Kenya have proven today. I know that's a rough comparison, but I'm trying to illustrate that Africa toda is a much thicker soup than a mid-late 90's Asia. If you disagree, I'd love to hear your thoughts.
I take your point but I do disagree, although it comes down to being country-specific.
The idea that the attractive African countries are top-heavy resource plays (1 horse races in oil/commodities) is rapidly changing. It was true a while back (and still true for some e.g. Angola (oil), Botswana (diamonds)), but countries like SA, Kenya and to some extent Nigeria are rapidly challenging those ideas.
To give you an idea: SA's GDP is mostly services, with an extremely developed (largely first-world) financial services sector. Company management teams are among the best in the world (definitely punching above their weight in emerging markets - companies like SABMiller, AngloAmerican, MTN, Naspers (Tencent) all have their roots in SA). Primary sector (agri + mining) has faded from being a key driver in previous decades (SA went from #1 gold miner in the world to an insignificant #6) to accounting for less than a third of total economic activity. Manufacturing is also substantial - surprising for some SA is one of the world's biggest exporters of BMW's and Merc's (left hand drives).
Regarding the consumer: African retailers (South African companies in the main) are seeing exponential growth out of Africa - while infrastructure/logistics remains a challenge in some areas, they are seeing the consumer with significantly more disposable income in their pockets and wanting to spend on quality and well-known western brands. To add to this, the number of new consumers entering the economies over the next few years is expected to be astronomical - these countries have extremely desirably population pyramids.
Technology is helping these economies leap-frog the infrastructural backlog - e.g. Kenya exploits high mobile penetration to do mobile banking (M-Pesa) on a large scale - largely intermediating the traditional bricks-and-mortar banking system completely. Affiliated financial products like funeral insurance and simple savings products (money market rates here are >15%) are starting to gain significant traction.
With regard to corruption/crime/political risk: yes, it's a problem and worse in some areas (e.g. DRC is still risky but Ghana has successfully managed a complete democratic transition - African democracies are rapidly maturing). Key institutions such as central banks, judiciaries and government treasury departments are on the whole surprisingly well run - I would argue significantly better than Asian ones 10-15 years ago (anybody remember the Asian currency crisis?)
But yes, the phrase above "This is Africa" remains true and will for a while. It's not for everybody.
pretty sure number of good opportunities, which require good duedil to find as mentioned above.
Let's have a conversation about corruption. Let's start with America. The level of corruption here is pretty close to Africa, yet it is just has a massive media system to distract people from it.
in response to heister comment about how US has almost the same levels of corruption:
That's ridiculous. Anybody from any really corrupt place can pick up the differences in America within hours. Try to open a small business in Russia, Cameroon, Zimbabwe or even Brazil and come back to tell me your story.
Most americans think WaterGate was preposterous. In many countries most people can't even understand what's was wrong with that.
Seriously? Do you have any idea about how things are done anywhere?
Non western countries Corruption is straight bribes
Western Countries Corruption is bribes through a 3rd party.
The only difference is that you have another party involved aka it costs more money.
Starting a small business is a terrible example, sure you can start a small business in America much easier and with out having to bribe off low level government officials. But guess what, thats a hell of a lot easier to deal with than trying to get EPA approval for a light industrial in the area where someone thinks that the spotted yellow dung beetle is more important than people having jobs. So yea, paying off some government lackey would be preferred.
South Sudan should probably be mentioned in this conversation.
Still very early stage compared to South Africa, Ghana, Ethiopia but has one of the more stable governments with less corruption (relative basis here) than most. Their economy is incredibly underdeveloped so the opportunity is much more vast than other countries. Think Myanmar levels of opportunity.
Investing in Africa - Emerging markets positions (Originally Posted: 10/21/2010)
Been making a lotttt of money on my emerging markets positions (Turkey, Brazil-Small Cap, Etc.). I know it's not a good idea to be overly exposed to emerging markets, but I have been keeping an eye on Africa and was wondering what you guys thought about investing in this region. I could do it through country specific ETF's- (EZA-S.Africa), but I was thinking of going into the AFK, which covers the Dow Jones Africa Titans 50....Obviously lots of political risk with these countries, but I was wondering what your guys outlook was on this region?
bump
Investing in Africa - Successful PE or VC firm (Originally Posted: 06/06/2011)
Hi,
I have read about a successful PE or VC firm that invest solely on the African continent. I believe they have a partnership with a respected German-based firm.
I read on WSO that they did a $ 1 billion investment in Africa. I don't remember the firm's name so I would appreciate if if you could tell me the name.
Thanks
I spent last winter in South Africa studying abroad. The professors I travelled with have been there multiple times over their years at my alma mater. When we went last January, it had been about 3 years since they had made the trip to SA and were amazed at the amount of development the country had been through in such a short time. They were amazed at the visible increase in American brands, the overall improvement in cleanliness in the major cities, and the economic progression. The entire time I was there I was thinking of the possibilites for investment in this emerging market. South Africa is a gold mine, literally. They have one of the most lucrative precious metals and minerals industries in the world and have the infrastructure to support it. Their position geographically is advantageous to trade, especially with Brazil and China who are buying a huge portion of these metals and minerals. The South African Rand (ZAR) is also gaining popularity in transactions. The exchange rate is extremely favorable for the U.S. Dollar. I lived like a king the entire time I was there and spent a fraction of what I had allotted for. Since countries like China and Brazil are engaging in regular transactions with SA they are begining to denote transactions in ZAR rather than converting first to the dollar, signaling strength in the ZAR and a diminishing reliance on the dollar as the global reserve currency. In terms of risk, there is definitely plenty of that. I would not invest in any areas other than the major cities: Johannesburg, Pretoria, Cape Town, and Durban. The government is becoming more business friendly and cleaning up some of the corruption, but political instability is still a major concern for many US companies. The only franchises recognizable are McDonalds and KFC (which kills it btw, stereotypical?). Coca cola has a huge leg up on Pepsi which halted all investment during the Apartheid. SABMiller is a legitimate monopoly on the beverage industry in SA. No beer companies sold to SA during the Apartheid, and the beer loving South Africans bought exclusively from SAB. SAB was able to amass a huge reserve which it then used to purchase Miller after the Apartheid.
Just sharing some interesting things I noticed/learned while over there. I would love to get involved with an emerging markets group focused in South Africa, mostly because of how badly I want to go back. If you have any SA related questions feel free to ask me.
They have a saying over there that is 100% true; "T.I.A.", "This is Africa", basically the African equivalent to a combination of our "Fuck it" and "Shit happens"
ECP or Emerging Capital Partners raised 1.8 B for their African fund.
http://www.ecpinvestments.com/
Not German though, based in DC
If you want to invest in Africa just send my friend Abuka Abacha from Nigeria some money to help pay his bank fees for his deceased uncle's bank account. His uncle is former dictator Sani Abacha known to pilfer billions from the Nigerian people. The bank account has over $100 million in it, but Abuka just needs $12,000 from you to pay bank fees and in return he will give you $20 million for your money and time.
Shut the fuck up. Everyone has heard of Nigerian letter scam but the joke's been made on this site like 50 million times.
@ OP:
Check out Kaizen Venture Partners: Distressed debt/SSG/Growth equity/early stage fund based in Lagos. Lotta really great guys (BB/HBS pedigrees) there I know personally.
Investing in Africa - Huge opportunity? (Originally Posted: 04/06/2013)
A couple weeks ago I posted something similar, requesting info on any PE firms who operate in Africa. The economist just ran an article about investing in sub-saharan Africa. The basic situation is: huge (though patchy) upside growth, incredible demographic potential, enormous mineral wealth, and serious lack of capital. This seems like a magic combination for risk-tolerant investors, especially for longer-term growth strategy PE firms.
Anyone have thoughts? If I want to push in this direction as I start my career in finance does anyone have any advice?
Here is the economist article: http://www.economist.com/news/finance-and-economics/21575769-strategies…
I spent three months working for an NGO in Ghana. They have some issues, but think they will continue to develop. The government has shown to be relatively stabile and they have a lot of resources ( cocoa, palm oil, gold, oil). How they handle the money generated from the Jubilee Oil field will be critical because their infrastructure is horrible.
I have a good friend who is from, and lives in, Mozambique. He brags to me constantly about his life and includes pictures for reference. I am incredibly jealous.
If you find a country with a stable government (Mozambique has been peaceful since 87 I think) the opportunities are amazing.
That's the problem. Those are few and far between. The amount of poverty and uncertainty there is worse than anywhere in the world.
I have been reading up on Africa for few month as well. I think that opportunities are tremendous but you really need to be thinking about Africa in terms of individual countries. All of the countries are different culturally and are in different in terms of political stability and living standards. I think the main issue with investing is lack of well developed legal system and stability.
What have you been reading?
I think Africa will become a much more popular investing trend in the next few years similar to China in the past decade. A majority of people in western countries still view the whole land mass as a bunch of tribes and animals running around the wilderness. You would be surprised at the development that is beginning to take place in some of the more stable countries in the continent. Just like China though corruption will always be an issue and you know there will be lots of money lost on companies with corrupt accounting but that doesn't mean we won't see significant legitimate economic growth from this region.
The standard of living in 2nd and 3rd world countries is going to continue to improve - at the expense of the the 1st world. As long as you are cognizant of this fact, you'll be able to adapt and prosper. The former World Bank President talks about this more at a speech he gave at Stanford.
Have you checked out the International Finance Corporation? It's the private investment arm of the World Bank.. They have offices around Africa and are always looking for Investment Associate/Officer positions to fill...
http://www1.ifc.org/wps/wcm/connect/Careers_Ext_Content/IFC_External_Co…
[quote=ChiTown82]Have you checked out the International Finance Corporation? It's the private investment arm of the World Bank.. They have offices around Africa and are always looking for Investment Associate/Officer positions to fill...
http://www1.ifc.org/wps/wcm/connect/Careers_Ext_Content/IFC_External_Co…]
The World Bank is incredibly difficult to get into if you are solely a U.S. Citizen. You'd have a much better chance if you were otherwise, due to political (and possibly tax) reasons.
Let me show you the real africa.
[quote=seabird]Let me show you the real africa.
]
Yolandi, do that thing
[quote=seabird]Let me show you the real africa.
]
what the fuck did I just watch
A smart investor is real fucking careful about touching something he doesn't understand. What do you know about Africa? If you talk about Africa as if it's a single, monolithic investment environment, my money is on "fucking nothing." You do realize that Africa is an enormous continent with dozens of countries with different legal systems and develpment levels, correct? From relatively highly developed (S. Africa, Botswana) to Mediocre but globally important (Nigeria, Egypt) to complete fucking basket case (Zimbabwe, Somalia) and everything in between. If you're going to be a fixed income/credit investor in "Africa" you should be able to tell me about what bankruptcy code looks like with respect to specific types of creditors in Kenyan law vs. Ugandan law, and what relative value there is between the two. Why is the Namibian economy more stable than Togo's economy? Is that even true? Could you even point out Togo on a map? Is Muaritania's central bank really as hawkish as everyone says it is? Same goes for equity. What disclosure to equity holders, if any, is required in Morocco but not in Algeria? This is the kind of shit you should be able to answer in your sleep if you're putting principle at risk.
Look - if you ever as the investor/money guy sit down at a table to make a deal, and you know less about the investment than anyone else at the table, there's only one answer. You run. Fast.
I mean... whether or not there is money to be made in Africa. As a rule if you have no fucking business touching a product, don't fucking touch it.
The guy put it straight up, NO-BS style. Africa is a great place at the moment and I do seriously believe its time for the continent to shine.
The continent does have a lot of marketing to do. Infrastructure is still a headache in most countries. Eventhough economies in the continent keep on registering amazing numbers year-on-year, the continent has still a long way to go.
Coming back to your initial question about PE firms, as far as I know, the major ones are either located at W.Africa (Nigeria), South Africa and Egypt.
I check out these two magazines regularly for fresh business info. Hope you can get insight from them.
http://www.newafricanmagazine.com/
http://www.africanbusinessmagazine.com/
I know jack shit about Africa and would be extremely careful about putting money (IF I HAD ANY!!) into it.
Basically what he^ said... Africa is a humongous continent with many different governments/issues. Start reading, brah.
If considering portfolio investment on the Johanneburg stock exchange.
The top performing mid to large cap companies can return in excess of 60% per year. Well performing small caps often exceed 100%.
Of course predicting which company is likely to do particularly well is the challenge. Additionally, you will have to deal with a good amount of exchange rate and interest rate risk.
If considering direct investment there are a number of additional considerations. Bribes and political connections are a very large determinant of company performance (more limited in South Africa but wide spead in most African countries). Also, most African economies are highly uncompetitive with extensive protection is place.
Yeah, I think the map test has value here. Africa isn't a monolith, it's a continent of very different countries. And if you can't find a country on a map and name its capital, then you probably shouldn't invest there.
But there are some interesting opportunities in Africa. One of my professors is really bullish about Botswana.
Botswana has been doing reasonably well although it can be attributed to vast mineral wealth (diamonds) and a very low population (2 mil). There is really not that much else going on there.
The opportunities there are HUGE. This is simply crazy, think like China 30 years ago. I have read several books about what is going on there, what are the challenges, the culture, etc unfortunately they are all written in French, not much help for you guys, but I'm sure that there is very good book in english as well.. Nevertheless as always, where there is great rewards lies also great risks. Investing there without having first visited the place and talk to people is a stupid idea, you can't decide on wheter to invest only based on news coverage or books.
I don't think it is fair to compare Africa to China. Much of China's success was due to its own rulers developmental agenda. This agenda is absent is virtually all of Africa. Yes there are isolated successes in Africa but I do not see any sustained long run development unless we first see some major political change.
Most of the governments aren't investing in growth, and the govt/culture is so corrupt that no private companies want to invest. But I think growth in Africa, , is still a "when" rather than an "if". I'm just wondering which country will step up to the plate first.
OP asked: "If I want to push in this direction as I start my career in finance does anyone have any advice?"
Besides reading, are there any large or mid-sized American banks/firms that have a focus on Africa, or would you just look for emerging market groups and see what they are doing?
[quote=White Lion]A couple weeks ago I posted something similar, requesting info on any PE firms who operate in Africa. The economist just ran an article about investing in sub-saharan Africa. The basic situation is: huge (though patchy) upside growth, incredible demographic potential, enormous mineral wealth, and serious lack of capital. This seems like a magic combination for risk-tolerant investors, especially for longer-term growth strategy PE firms.
Anyone have thoughts? If I want to push in this direction as I start my career in finance does anyone have any advice?
Here is the economist article: http://www.economist.com/news/finance-and-economics/21575769-strategies…]
No, our forefathers drained all the investment opportunities from Africa, if you know what I mean
Yes there is a lot of corruption but there is basically nothing, all has to be done. If you understand the market well you will have consumers. Of course because they are poor you won't sell them smartphones or nice cars. Indians are doing very well in Africa because they understood the market better than anybody else: they sell cheap phones, cheap subscriptions... The opportunities for Africa are mainly in the area around frugal innovation. There is already countries emerging as you say, South Africa and Nigeria are the two first that come to my mind.
Yes, I agree with you, for the first part. Politics in Africa is WAY different than anywhere else. You can ask government to maintain basic security and develop basic infrastructure but you won't have anytime soon states that will have the power like in China, or in some way in India, to impulse changes. African don't think that they are Congolese or Ghanaian, first they belong to a "tribe". Wars are too recent to ask these people to form a nation, all you can ask is for a government to maintain a basic peace.
haha yes but governments don't last very long and when its known that you had strong links with a previous government when the president change you will have a hard times continuing your business as did you did before.great place to invest if you or your firm has a connection in the respective government.
Unless you have a strong connection with Africa there are better places out there to invest.
I've been working in West Africa for a year now. So far I've worked Nigeria, Ghana, and Equatorial Guinea. The region is definitely unlike any other place on earth, but it's not as bad as I originally feared.
I would not even think about investing my money there though. I go in, do a job, have some fun, then get out. The potential is great but the rampant corruption, lack of infrastructure, low education quality, etc means it's going to be a long time coming. Something tells me people were saying Nigeria would be the next great thing when the first barrels of Bonny Light started flowing about 50 years ago. How's that turned out?
Ive been working in Africa for about a year now as well. Ive been focused solely on East Africa. Which is considerably developed. Corruption definitely exists but it is not by any means a barrier to entry. An earlier poster noted how there is nothing. Come here with the attitude that the fact that there is nothing means that opportunity exists and it will start to mess with you because you wont stop seeing dollar signs everywhere. Return opportunities are solid by any measure, the key, as with anywhere else, is finding the correct opportunities, which is impossible without networking on the ground here. Tribalism is definitely evident but you can get around that relatively easily here if the deal is right. At least that has been my experience. I am a US Citizen.
For some background, I work for a small fund with an energy focus in the region. Previously was at a BB in the Middle East and the US before that.
Recently met with couple of partners from a fund focusing on Emerging Markets, and they had good things to say about investing in Africa.
hey guys, thanks for a very interesting / informative thread. I was wondering, what do you think is the best way to get exposure to Africa in your own portfolio? Are there any SA and/or Botswana ETFs? Any other way you'd recommend?
Thanks! Patrick
Does this help? http://en.wikipedia.org/wiki/List_of_South_African_exchange-traded_funds
I live and work in South Africa and am myself in the process of building up a personal portfolio here.
Carlyle did a decent/small size raise recently for a fund that is targeting Sub-Saharan area, so pretty much most of Africa.
Outside of a few places in Africa I see little change from the resource based economies that exist now, at least in the next 10 year period. The region while improving is still riddled with economic suppression due to extensive NGO involvement in every little aspect of anything. The economy wont really turn around and take strong steps towards improvement until that happens. Its impossible to build an economic system from the base (agriculture) to the top (high level services) when you have impossible economic situations to overcome (free stuff). The problem is why plant a farm and grow food when people from America will send over free stuff and undercut any chance you have of making a profit, let alone cover your costs. Sure they can grow things that Westerns demand but the logistics of that are stacked against them because they have no base economy to build off of if those markets collapse.
You'd need some serious capital, both political and financial, to make any sort of headway in Africa in my opinion. Do not underestimate the level of corruption, inefficiency and infrastructural shortfalls you will encounter in many African countries. Simple things like fast internet access is a major challenge.
Take Nigeria for instance. Its a country of about 160+ million people, 70% of whom live on less than $1.20 a day. Average amount of time most people have electricity per day is about 4. IN fact, most people in the country have absolutely no access to the national electricity grid. Consumer buying power is still relatively low and there is very little access to cheap credit.
Invest in Africa? Sure, but you will need a very long-term view and patience, lots of it.
All your points refer to massive growth potential - all the boxes you mention will be ticked in the next 10-20 years, providing major tailwinds for growth of all kinds. But yes - long term view is essential. Quick wins will be few and far between.
Paraphrasing Bill Gates comes to mind: people tend to overestimate change in the next 10 years but massively underestimate it in the following 10. I suspect a significant Snowball effect as many of these development vectors start feeding off one another.
As an aside, places like Kenya actually have pretty good internet access now (thanks to a few giant fibre cables which have landed from India and further east).
I've looked at deals in subsaharan Africa over the past few years and did a few, but it's a tough place to do business. I'm sure SA is better but I feel like a lot of large corporates are already there and have taken a lot of the opportunity already so we've looked at Ghana, Kenya, Bots (it's just small), Angola, Nigeria, and probably a few more. Those are the countries where I physically went to check out deals at least. PE and project finance deals in nat resources, infrastructure, tcom, electric generation and some other random things. Corruption is rampant (and I've been doing things in India for about 7 years so I get the brown paper bag stuffed with greenbacks culture) and you really don't want to run afoul of FCPA, which is a huge competitive disadvantage as an American when you have China snapping up all sorts of nat. resources with no worry of going to jail for a bribe that's a 100% standard way of doing business there, it can get dangerous, the infrastructure, even in the best of countries (leave aside SA) is horrid once you leave the major cities (and they're not good in the cities) making logistics difficult, you have an largely uneducated populace so I feel like other than resources deals and some infrastructure it's a limited industry base (something like manufacturing would seem to make sense-very low labor costs-but there's no infrastructure to move shit around and power is hardly existent, and with other low cost manufacturing countries like Vietnam on the rise, there's no reason to do it in Africa, and other than SA, consumer credit is tough to come by so it's tough to sell to consumers anything unless you're selling a can of Coke.
Having been to SE Asia 15-20 years ago and having spent time in Africa recently, they're nothing alike. Maybe Asia 40 years ago and even then I doubt it. Probably comparable to India before they liberalized in the early 90's but India has less violence. When I was getting out of undergrad in the mid 90's you could go to the Gulf countries (Qatar, UAE, SA, etc) with a western education and get paid 2-3x what you could in NYC or London, and I know guys a few years older than me that said the same thing about Asia (ex Japan and HK) in the 80's, but Africa's not like that at all. They just don't have the money or infrastructure in place.
As other have noted, Africa sounds like one giant place from our ivory towers in the US or UK, but each country can be and is very different. We always try to find local partners we can trust and have them be the face of the company-less likely to rip off a local (but still likely to do so) and having a local is necessary to help you navigate how they do business and introduce you to the right people.
If you're truly interested in Africa, there aren't a ton of IB's (from what I've seen the BB's may have an office in SA that serves all of subsaharan africa, but I don't think you could very easily get recruited and ask to go to Africa) or funds (at least that I know of) that are totally focused on Africa, but you might want to check out a government org like the IFC. They co-invested on a couple of our things there and it's a safe way to get to know Africa because it's an World Bank sub so all of the infrastructure is there. There's also a group in DC, Delphos Intl, that's basically an IB that draws from US and intl govt funding sources like the IFC, ExIm or OPIC and funds deals. They're small and they work in any emerging country but they are pretty active in Africa.
Excellent post. SB for you.
The point I think what we're getting at is that, short of SA and maybe Nigeria, most of Africa has a long way to go before it becomes a viable investment opportunity. Most 'investment' will likely continue to come from NGOs, non-profits, and government agencies (something that I feel may be somewhat harmful in the long run if not done correctly.) I know there may be some bankers out there looking to be the Joseph Conrad of finance, or perhaps they just have a thing for models and bottles with some sexy brown sugar, but the fact of the matter is that Africa remains risky.
Good points here.
Not many people have experienced both Africa now and Asia 15 years go, so your comparison is valuable - thanks.
The partner issue cannot be overstated - a good (emphasis on good) partner probably the most significant predictor of a project's success and a lack of one a predictor for failure.
Africa? Yea, am more into investing in Europe or the American continent (South or North doesn't matter), isn't Guatemala just the same as the US? Might want to be a bit more specific... The place has a little bit more than 50 countries.
There is no general "future of Africa", there is a future for individual countries there and it is vastly different depending where you are located.
There are some forum posts about it, but this thread is getting some good traction, so I figured I'd post it in here- what about investing in the MENA region- what are the best ways to get some exposure there (for anyone who knows)? Seems to me that Africa is still the most untapped but also still a bit too risky with lots of uncertainty (particularly around the corruption issue), while Asia (at least the more advanced economies) is quickly maturing and offering less fruitful opportunities.
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