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Jan 13, 2015

Leading global investors increasingly understand the case for African investments. A sustained growth rate of over 6% a year for the past 10 years is certainly compelling; but how to access that growth efficiently and effectively?  Listed equity is the natural starting point, but cuts out several high-performing sectors.  Nor is a geographic focus the best route given the small size of individual economies.  A holistic view is needed, one that looks across countries, sectors and the three major investment channels, namely listed local equity, listed offshore equity and unlisted or private equity.

The attractiveness of listed markets

The most common way to gain exposure to a region is through local listed equity markets.  While African listed equity markets are developing and certainly face challenges, strong returns and continuing growth expectations have encouraged investment and rewarded investors in recent years. Capital has flowed into frontier markets to access the higher growth expected from these regions. As reported in the 2014 Bright Africa report (a guide to investing on the continent) the average listed market return over the last three years has been 16% (CAGR), outperforming developed markets by 4% annually (S&P 500 CAGR: 12%). 

Sector Concentration

When looking at listed markets excluding South Africa, it is apparent that there is a large element of concentration risk within specific ‘exchange sectors’ across the continent. This is particularly true in financial services, where around 60% of the available market cap is concentrated. Based on the investability of markets, if an investor decided to invest across the continent (excluding South Africa) this would result in a third of his or her capital being invested into the Nigerian financial sector, and a further 17% in Nigerian consumer staples.

The JSE, while providing the best reflection of the make-up of GDP in its sector representation, bears its own eccentricities due to the number of dual listed and foreign operationally exposed companies. Of the top 40 shares by market cap listed on the JSE, 40% of the revenue is derived from outside of the borders of South Africa. This is fairly common on global exchanges, but should be understood by investors looking to access African growth.

Accessing Africa from abroad

Energy and materials play a significant role in the African development story and still offer the value investors into Africa seek. Unfortunately, outside of South Africa, resources are poorly represented on the African exchanges, where financial and consumer sectors dominate.

However African energy and materials may be accessed on exchanges outside Africa. Often the motivation behind this is that, as mineral and energy extraction is highly capital-intensive, these listings take place on the more efficient and larger capital markets in order to raise funds. Exchanges such as London’s AIM and the Toronto Stock Exchange have positioned themselves to cater specifically to resources shares from across the world. The London Stock Exchange in particular is currently working on increasing the number of dual listings with various Africa exchanges.

Long-only asset managers focused on African markets realise this and usually attribute a portion of their portfolios to foreign listings of Africa focused companies. These listings, other than improving the exposure to resources, also increase the exposure to countries with underdeveloped bourses. They also introduce countries previously excluded, as they do not, in fact, have a bourse such as Mali and Angola.

Private equity investments 

Private equity is becoming well established on the continent especially in large markets such as South Africa, Nigeria, Kenya and through North Africa. Countries with large GDP, but difficult business conditions are naturally finding it harder to attract private equity investment.  South Africa is still the leader in private equity on the continent with historic returns of approximately 20% over the past 10 years, but West Africa in particular and East Africa to a lesser degree is attracting capital and investment and more transactions are happening in those regions.

The IFC Ease of Doing Business ranking and the IESE VC&PE Attractiveness Index ranking are useful measures already in place when assessing the attractiveness of a country to investment. 

Though a major consideration, ease of doing business alone is not enough to create the necessary conditions for successful private equity investment.  Factors such as economic growth, depth of capital markets, taxation and investor protections are all important and are included in the Attractiveness Index. Countries like Mauritius and Rwanda have scored well on the latest Ease of Doing Business ranking, but are relatively small and score lower on the other considerations necessary for private equity.

Of the 31 African countries ranked by the Attractiveness Index, 16 have achieved improved rankings over the 2009 to 2013 period, the most impressive of which were Rwanda and Mauritius (11 places each). Mauritius, South Africa, Tunisia, Morocco and Egypt feature in the top 60 countries out of the 118 ranked on the Attractiveness Index worldwide, while Rwanda sits at 93.


While African markets develop, investors should use several channels to access African growth. Local listed markets give good access to financials, telecoms and consumer staples in certain countries. Private equity allows stronger exposure to consumer discretionary as well as industrials and materials, and niche sectors such as healthcare and education. Certain other sectors such as some resources can further be accessed through foreign-listed Africa-focused companies.


Source: Rory Ord, Head of Independent Valuation, RisCura



Dec 28, 2014

Zimbabwe — Coins introduced by Zimbabwe's Reserve Bank earlier this month are receiving a cold reception from locals who are fearful this could be the first step to replacing the U.S dollar with the ruined Zimbabwean dollar.

Zimbabwe has not used its own currency since 2009 when it adopted the U.S dollar and the South African rand. The Zimbabwean dollar collapsed under record 231 million percent inflation, which forced the Reserve Bank to print $10 trillion notes in a desperate attempt to save what was once one of Africa's strongest economies.

The use of foreign currency has led to some economic stability, but in a country where the average monthly salary is $300, prices are often rounded up to $1. This month, the Reserve Bank introduced special Zimbabwean currency in one, five, 10 and 25 cent coins. The value has been secured against a $50 million bond to reassure Zimbabweans.

Still, Zimbabwean shoppers would rather swap candy or smaller items instead of accepting change. "I will stick to the sweets for now," said a shopper when offered change in a large retail shop in central Harare.

Arimando Machona, a 74-year-old who worked for the local municipality for nearly three decades said he was forced to take a security guard job when the Zimbabwean dollar collapsed. "I lost my entire pension, now they are starting again," he said. "If we accept the coins, then the Zimdollar will be back."

Reserve Bank governor John Mangudya has ruled out resuscitating the Zimbabwean dollar. Convincing informal traders, like minibus taxi drivers and street vendors, may be key to building trust in the new coins, experts say.

"There is inherent mistrust in the Reserve Bank of Zimbabwe, that's why there is this resistance in some quarters. It will take massive work to restore that confidence," said economist John Robertson. About two thirds of all businesses in Zimbabwe operate in the informal sector, which also employs 80 percent of Zimbabwe's workers, according to the Africa Development Bank.


Source: FARAI MUTSAKA (Associated Press)

From: http://www.therepublic.com/view/story/e3b264b26d1d4f60b404871b8f8dda44/AF--Zimbabwe-Coins
Dec 28, 2014

Zimbabwe has defended plans to sell elephants for up to $40,000 (£26,000) each, saying it needs the money to run its biggest game reserve.

An official said more than 60 elephants could be sold to buyers in China, France and the United Arab Emirates. Last month, a campaign group condemned the plan as inhumane. Some groups fear that African elephants could become extinct because of an increase in poaching.

Geoffreys Matipano, conservation director at Zimbabwe Parks and Wildlife Authorities, said the money raised could help meet the $2.3 million annual running costs of the Hwange National Park, Bloomberg news agency reports.

'Stealing natural resources'

"We are pursuing it aggressively as part of conservation efforts because we have plenty of elephants here," he is quoted as saying. "We don't receive state funding and we rely on selling animals for our day to day operations. We are nowhere near what we want," he added.


A room where elephant tusks and rhino horns are kept in Harare

Poachers target elephants for their tusks and rhinos for their horns


The money would also help fight poachers, Mr Matipano said. Last year 293 elephants were killed by poachers using cyanide poisoning, and this year 139 have been killed, he said. Mr Matipano said buyers from France were seeking 15 elephants, China 27 and UAE 15. He did not name the buyers.

Last month, the Zimbabwe Conservation Task Force (ZCTF) campaign group said it had received "very disturbing reports of animals being captured" in the popular Hwange National Park for export to China. They included 34 baby elephants, seven lions and about 10 sable antelopes, it said.

"Why is Zimbabwe stealing from the future generation's natural resources? The baby elephants quite likely won't survive the trip and the only crime they have committed is being born in Zimbabwe," the ZCTF said in said in a statement. "They are now being sentenced to a life of inhuman treatment. This is very traumatic, not only for the baby elephants but also for their families," it added.



Dec 26, 2014

High economic growth rates will remain a key attraction of many emerging markets, in our opinion. Even with major economies like Brazil and Russia slowing down, overall growth in emerging markets during 2015 is expected to be comfortably in excess of that achieved by developed markets, with China and India likely to drive the Asian region to particularly strong growth.

Moreover, many emerging markets, among them China, India, Indonesia, Mexico and South Korea, have announced or embarked upon significant reform measures that differ in details but are generally aimed at sweeping away bureaucratic barriers to economic growth, encouraging entrepreneurship and exposing inefficient industries to market discipline. 

Most are also looking to rebalance economic activity away from export- and investment-heavy models to become more oriented toward consumer demand. The ASEAN economic community planned for 2015, which will bring 10 economically diverse Southeast Asian countries together into a single economic organization, represents another strand of reform in which more technologically advanced emerging economies are becoming increasingly interconnected with less developed neighbors who possess resources of low cost labor and commodities, to the potential benefit of both groups. 

The reform measures have had some short-term costs, but we believe that, should governments succeed in driving them through, longer-term benefits could soon begin to feed into economic growth figures. The emphasis on market discipline could also create a closer correspondence between emerging-market growth and corporate profitability. 

We are enthusiastic about the potential of new technology to accelerate growth trends, with some Internet and mobile communications-based technologies in particular offering less developed countries the opportunity to leapfrog generations of economic change in more mature markets and move directly to efficient modern systems. This factor could be a particularly dynamic driver of development in frontier markets that include much of Africa, which could give additional impetus to markets that already benefit from highly favorable demographics, abundant natural resources and low starting points in terms of existing per capita gross domestic product. 

We do not disregard issues such as the recent weak economic performances in Brazil and Russia as well as the market-unfriendly direction of policy in those countries, nor do we dismiss the potential for Chinese military assertiveness in the South China Sea to create tensions or the profound nervousness displayed by investors at any sign that US monetary policy might be tightened. 

However, we believe both Russia and Brazil have the resources to bounce back strongly should more appropriate policies be adopted. With Russia in particular, much risk already has been discounted in exceptionally low equity valuations as of December-end, though the Russian government's unwillingness to soften its stance toward Ukraine could elicit more sanctions that result in a negative environment for investors. 

Chinese maritime assertiveness should be placed in the context of other foreign policy moves such as the "Silk Road" initiatives aimed at improving relations and building trade with neighboring countries. With regard to developed-market monetary maneuvers, it is important to note that many major developed countries are still loosening policy, with Japanese quantitative easing likely to be highly significant for Southeast Asia. 

Recently, exceptional levels of money creation have remained largely outside real economies as the velocity of money has slowed sharply, evidenced by the declining loan-to-deposit ratios of banks in the US, Europe, Japan and China. As banks become more confident and resume lending activity, stocks of newly created money could begin to influence the real global economy. 

As of December-end, the favorable trends in emerging markets appeared under-recognized in equity valuations that generally stood well below those of developed markets. Even after recent rallies in some emerging markets, they continued to appear relatively attractive to us in relation to history, particularly if very low bond yields and interest rates for savers are taken into account. 

With our ground-up stock investment research metrics continuing to identify attractive long-term investment opportunities, we remain optimistic about the potential of emerging markets. 


Source: Mark Mobius (India Times) (The author is Executive Chairman, Templeton Emerging Markets Group.) 


Dec 26, 2014

If you meet a travel executive on New Year's Eve, he or she is likely to be uncharacteristically cheerful. The average Brit travelled more in 2014 than ever. Most of us paid more, with package-holiday prices and airline profits rising. Good cheer, too, in Brazil, which welcomed the planet to a World Cup that proved successful from a travel perspective (if humiliating from a sporting point of view for the hosts and England). And the Tour de France put Yorkshire on the map.

Yet 2014 has seen some awful travel tragedies. For air safety, this has been the worst 12 months of the decade so far. One carrier alone, Malaysia Airlines, lost more passengers and crew than the total worldwide in any of the previous three years.

The loss in March of Malaysia Airlines flight MH370 while flying from Kuala Lumpur to Beijing has led to the biggest search in aviation history for the 227 passengers and 12 crew on board the missing Boeing 777. Four months later, another 777 on a flight from Amsterdam to Kuala Lumpur was shot out of the sky over eastern Ukraine. MH17 was the worst air disaster of the year, killing all 283 passengers and 15 crew on board. Apart from the terrorist attacks on United and American on 11 September 2001, no airline has suffered two big disasters in such quick succession in the 21st century.

Tragedy struck in a different manner for the people of Kenya. The Foreign Office has long warned of a high risk of terrorism in the East African nation, and had marked swathes of the country as off-limits. In May, it made a small amendment advising travellers to avoid Mombasa Island. Britain's biggest holiday company, Thomson, evacuated holidaymakers and cancelled its programme for the rest of the summer. Even though the FCO advice had changed only fractionally, the erroneous impression took hold that Kenya had become much more dangerous.

Misconceptions swept across the world when the most serious recorded outbreak of Ebola took hold in three West African countries: Liberia, Sierra Leone and Guinea. The disease has had a terrible effect on the people of those countries, and some of the courageous health-care professionals caring for them. Outside the region, the main effect has been to cause unwarranted panic.

Holidaymakers considered cancelling trips to Spain after a nurse who had treated Ebola victims in Madrid herself contracted the disease. Tour operators to East and Southern Africa reported a fall in business despite the huge distances between, say, Zanzibar or Cape Town and the affected areas. And eight hours after the government said it was following World Health Organisation advice not to impose screening, it announced a screening programme at a handful of UK airports.

If Ebola doesn't get you, some travellers seemed to think, Islamic State probably will. The spread of the jihadists through Syria as far as the Turkish border caused worries and cancellations among holidaymakers going to the Mediterranean coast, though there was no likelihood that the powerful Turkish army would allow an inch of incursion. To complete a miserable year for many communities dependent on tourism, chikungunya virus spread across the Caribbean during 2014. Many islands are affected by this most unpleasant virus, mainly spread by daytime-biting mosquitoes.

Yet despite these depressing trends, our appetite for travel is undimmed. While you would expect fast-expanding easyJet and Ryanair to report ever-growing numbers, a rejuvenated British Airways is experiencing its busiest festive season ever. In contrast, pilots at Air France and Lufthansa expressed fury at management plans to cut costs. They went on strike for several weeks in total, causing the cancellation of thousands of flights and losing their airlines hundreds of millions of euros.

One reason the "legacy" airline bosses are so keen to modernise is the soaraway success of easyJet and Ryanair. Monarch, which has been ferrying British holidaymakers around Europe and the world for decades, was unloaded by its owners, the Mantegazza family, who had spent a couple of hundred million pounds keeping it afloat.

Airports had mixed fortunes. Gatwick, Stansted and Manchester saw passenger numbers rise sharply, but their near neighbours suffered from concentration at bigger airports. Blackpool followed Manston into aviation oblivion. At home, the Shangri-La at the Shard in London brought high-altitude swimming to the capital. But it was a good year not to live in South-West England. Parts of Somerset spent the start of the year resembling a water park, while the main railway line from London and Bristol was severed at Dawlish in South Devon for two months.

More good news? The Girl with the Pearl Earring came home to The Hague, where she now resides in the ravishingly restored Mauritshuis. And Marlon Brando's private island in French Polynesia opened as an excellent place to dispose of excess income; the minimum stay of three nights for a couple costs just over €10,000.


Source: Simon Calder (The Independent UK)

Dec 26, 2014

Ghanaians are embracing the use of locally produced raw materials even though it is seen as inadequate. Ghana produces food crops in abundance and in their raw state, these food items often go waste due to lack of ready market for consumption. This is the case with cassava, Ghana’s most highly produced crop and a staple of the Ghanaian consumer diet.

Ghana is said to be the 6th largest producer of cassava in the world in terms of value, with the commodity constituting 22% of the country’s Gross Domestic Product (GDP), according to a Country Case Study of Cassava Development in Ghana prepared by the Ministry of Food and Agriculture (MoFA) and published by United Nations Food and Agriculture Organization (FAO) in 2005.

According to the FAO, about 50% of cassava produced in the country is lost along the value chain despite an annual production growth of 6% over the past six years. While the crop is cultivated in large enough volumes to produce an annual surplus of over 5 million metric tons, its commercialization is said to be significantly limited by rapid spoilage upon harvest and a lack of processing capacity close to production areas.

Cassava is most commonly consumed as Gari – fermented and ground into granules similar to fine couscous – or pounded into a mashed potato-like consistency as Fufu – eaten with soups or sauces. The crop is now slowly shedding its image as a “poor man’s crop” or a “home crop” to a business venture crop for farmers. Some experts in the agricultural sector are tipping it as a game changer crop for many local farmers. This is because of the ready market platform provided by some multinational brewery firms like Diageo Plc with its Ghanaian subsidiary Guinness Ghana Breweries Limited (GGBL). Businesses are now attracted to cassava, thus the sharp rise in price of the crop; therefore an attractive proposition for farmers.

In December 2012, following the introduction by the Ghanaian government of tax rates that promote the use of local raw material inputs, GGBL created Ruut Extra Premium Beer - a well-balanced, premium clear beer based on cassava. Through technological developments and close collaboration with the farming community, GGBL was able to bring to market Ghana’s first commercial cassava beer at a price affordable for a broader number of Ghanaian consumers.

This is Diageo’s first beer brewed using cassava and also holds the Diageo record for speed of development: eight weeks from concept to commercialization. Its introduction was made possible due to the Ghanaian government’s progressive policy on local raw materials, which has resulted in concessions on products containing a majority of local ingredients. This innovation also supports Diageo’s ambition to increase local sourcing in Africa, helping support agricultural development and benefiting local smallholder farming communities.

According to the Agric Sector Annual Progress Report 2013 published by the Ministry of Food and Agriculture (MoFA), the introduction of the beer has provided ready market to cassava farmers. This is partly responsible for the general increase in the area put under cassava production. The MoFA report indicated that as of 2013, GGBL has purchased more than 3,500 metric tons of cassava from local famers mainly in Atebubu (Brong Ahafo Region), Ho (Volta Region), Nkwanta (Volta Region) and Suhum (Eastern Region).

The report noted that a total 4,741 metric tonnes of cassava purchased for beer brewing in Ghana, GGBL buys over 74% of them. The opportunity to make beer by using cassava in Ghana is unique, perfectly fitting into the 2014 Farmers Day theme “Eat What We Grow”. Cassava farmers over the years have complained that after harvest, they are unable find buyers and majority of the crop goes bad. For this reason most farmers gave up cultivating cassava.

“But now we are very happy with the introduction of Ghana’s first beer Ruut Extra many are now cultivating more cassava,” James Akwetey Moore, farmer based in Suhum said. During the main crop season, farmers now cultivate about 100 to 150 acres of cassava and sell it to factories such as the Ayensu Starch Factory which the government has partnered GGBL to operate. “First and foremost, having a local supply chain that is resilient is important to the business. Furthermore, you do not have to spend huge amount of foreign exchange to import raw materials. The benefits of local sourcing for the community are extremely obvious. To be connected as a farmer to a business like Guinness Ghana is absolutely important,” said (Kweku Sekyi- Cann, Marketing Director of Guinness Ghana Breweries Limited)

According to the beverage company, it is committed to developing its local procurement in partnership with the government and the local smallholder farming community to provide economic opportunity within the agricultural sector while creating great products for the Ghanaian consumer. About 75% of consumers in Africa exist on about $4 a day, a situation that a consumer insight revealed and that led to the Ruut Extra project. It was to deliver quality product at a price the consumer can afford.

Combined with the knowledge in production and using local material to do something that is refreshingly unique to the Ghanaian people, the Ruut Extra project, according to officials was delivered in record time from idea to market within weeks. GGBL’s intention was to significantly expand the use of locally sourced materials. “We have developed programs to support farmers and we intend to invest in this program in further support of stakeholders including government,” said (Kweku Sekyi- Cann, Marketing Director of Guinness Ghana Breweries Limited)

GGBL approaches its agricultural supply chain knowing that the future prosperity of farmers, suppliers and the business is closely linked with the ability to create partnerships and generate joint business value in ways that are sustainable, secure, and mutually beneficial.

The company supports sustainable sourcing and, where appropriate, local sourcing of raw materials which meet their quality standards. Increasingly, it is looks at alternative raw materials which are more resilient and better adapted to their local climates.


Credit: GGBL

Dec 26, 2014

FUJIFILM South Africa (Pty) Ltd. (hereinafter "FUJIFILM SA") and Kemtek Imaging Systems Holdings Limited (hereinafter "Kemtek") - a trading company dealing in printing machinery and headquartered in South Africa's Johannesburg - concluded an exclusive agreement on the sales of plates for general commercial printing on October 1st. In the future, while working with its long-time sales partner Ferrostaal, Kemtek will serve as a key supplier of Fujifilm products, bringing Fujifilm's CTP plates (thermal and photopolymer type) to the South African printing market.

Kemtek enjoys a market share of approximately 50% in South Africa's commercial graphic arts industry, and supplies cutting-edge printing equipment and consumables to a wide-range of users, from major printing companies to independent, small-scale companies. Based in Johannesburg, Kemtek boasts service branches in Cape Town, Pretoria, Durban and Port Elizabeth, as well as technicians and a specialized technical team to provide support for inventory, supply and services across the country.

Regarding this partnership, Dave Savage, Kemtek's Chairman, commented as follows: "This milestone partnership between Kemtek and Fujifilm SA presents an excellent value proposition for the Southern African printing community...Fujifilm SA's executive team recognizes our philosophy to consistently strive for excellence in everything we do and both companies are dedicated to building a mutually beneficial, long-standing business relationship."

Fujifilm's plate production system guarantees stable worldwide supply

In order to ensure a stable supply of high-quality plates, advanced manufacturing technologies and an efficient distribution system are essential. At the Fujifilm Group, we have developed the best possible supply infrastructure in order to consistently provide world-class products to printing companies.

The lineup of CTP plates made by Fujifilm (thermal and photopolymer types) includes process-less and eco-friendly plates. Such products are highly regarded in the global printing industry, not only for their quality but also for their printability and stability. The outstanding performance of these plates is the fruit of synergy among the plate-making technologies developed by Fujifilm over 50 years, including proprietary aluminum surface processing and advanced coating technologies. The groundbreaking Multigrain technology employed in aluminum substrate, combining smudge resistance with plate durability, stands out in particular.

Also, in addition to the high-level performance and quality of the plates themselves, another important advantage offered by Fujifilm's CTP plates lies in the guarantee of continuous, steady supply in any area of the world. Fujifilm produces its plates at plants located in four areas across the globe (Japan, U.S., Europe and China). All of these plants were designed in accordance with unified standards, adopting shared production methods and facilities, and thus standardizing the production process. This allows us to offer a steady, punctual supply of CTP plates across the world for all purposes and of all types - be it for commercial printing or newspaper printing, thermal or photopolymer - while keeping quality consistent at all times. Furthermore, regarding commercial and commodity distribution, we are aiming to optimize our commercial distribution channels from a global standpoint by reinforcing our cooperation with local dealers, and have established the best possible supply system. In the context of Fujifilm's "global supply system", Kemtek, as a party to this sales agreement, will be responsible for part of our sales network in Europe and Africa.

Chairman Dave Savage made the following statement on synergy between Kemtek and FUJIFILM SA, "With its global reputation for quality, service and an R&D program dedicated to sustainable production, Fujifilm SA's product range delivers a host of value-added benefits to the southern African printing community. We're delighted to be nominated as principal supplier and, with our reputation for delivering only trustworthy, expert advice and assistance, I'm confident that Kemtek will take the Fujifilm SA brand to the next level."


Source: 4-Traders.com

Nov 21, 2014

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Nov 21, 2014

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Nov 21, 2014

The number of insurance broking firms licenced to operate in the country in 2011 has increased from 45 to 54. Five new companies were licenced in 2011, including a reinsurance broker and a loss adjuster.

  1. Opinions and Analysis


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