Africa Investment Horizons

Submitted by Rob Katz on May 2, 2008 - 12:03.
Published in:

As I turned the corner, it appeared almost out of nowhere - a monument to the successes (and failures) of capitalism - the New York Stock Exchange. I had ventured downtown to attend the premiere of Carol Pineau's new documentary, Africa Investment Horizons, which was being screened inside the Exchange. As first impressions go, you could do no better: it's impossible not to take Africa's investment potential seriously when you're talking about it inside the center of the financial universe.

Even the security line was interesting: long but vibrant, an impromptu salon of Africanists, investors, expatriates and activists, all of whom share a passion for the business of Africa. Not surprisingly, I saw a number of base of the pyramid and NextBillion allies: Liz Wald, of EDI Imports; Emeka Okafor, of TED and Timbuktu Chronicles fame; Joy Sun, COO of Market for Change. This was going to be a good event.

Before screening the movie, we heard from Carol Pineau, its director. Pineau's previous film, Africa: Open for Business, came out in 2006 and served to shine a spotlight on the quantity and quality of business opportunities in Africa. (Both high, by her estimation, and underexploited.) That conclusion was a natural starting point for Africa Investment Horizons: if there were high-quality, under-exploited business opportunities in Africa, wouldn't that be a recipe for solid returns?

For the next hour, the audience heard again and again about the fantastic returns delivered by the Botswana Stock Exchange, the Ghanaian mutual fund market, Africa focused investment funds, and a number of other vehicles. The movie features experts who regularly speak about return rates in the eighties, nineties and even triple digits.

I left the movie encouraged and enthused about investing in Africa, but also curious: if the returns on investment in Africa are so fantastic, why are so few investors getting into the space? Maybe it's an image problem - perpetuated by the mainstream media - whereby most of us know Africa only in terms of war, famine and strife. If that's the main barrier, then this movie should help paint a more accurate, optimistic picture of the investment landscape.

That said, there are very real, structural issues at hand in many African economies. The bottom spots on the Doing Business rankings are all taken by African countries, a good litmus test for "don't invest here." On the other hand, India, Brazil and Indonesia all rank in the bottom quartile of the rankings, and they are some of the fastest-growing, most invested-in economies in the world, delivering sometimes similarly dizzying returns.

If it's an image problem, then I'm glad to have been at the premiere. After all, as more and more investors stream in to Africa, the returns are bound to return to earth. With that in mind, I've just invested in an African mutual fund...we'll see how things go.

Additional coverage of Africa Investment Horizons:
Timbuktu Chronicles
Grandiose Parlor
African Loft
It Takes a Village


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Investing in Africa
Submitted by Chaz Littlejohn on May 5, 2008 - 09:41.
Investing in Africa is an awesome if near impossible opportunity for the average investor. The few funds that are available have a heavy Middle East weight, thereby making a pure play difficult. This is partly because the markets in Africa are thinly traded and also because of their small size. The capitalization of African stock markets pales in comparison to that of the US stock exchange and other emerging markets. In 2007, the IMF reported that African stock markets had a capitalization of $245 billion, which is little bit less than the size of Microsoft. The point you make about image also seems to be a real factor. Paul Collier describes this in his book "The Bottom Billion". What really stuck with me was that apparently, a large percentage of fund managers believe that Idi Amin still terrorizing Uganda. With returns like this, this is bound to change.
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Lack of Mutual Fund Options, but Promise
Submitted by Mike Heiss on May 5, 2008 - 22:14.
Simply a lack of options and reliable history may deter individual investors. When I searched for African mutual funds, all I found was CIMEAX which has been around since Feb 29, 2008 and TRAMX which started in September 2007. Both of these funds are only partially invested in Africa, and a majority of their holdings are in the Middle East. After a little more poking around, I found Coal of Africa (CZA) on the London Stock Exchange which is up 400% since last May. Going beyond tickers, I agree that Africa has been largely ignored by the Western investment community. However, I see Africa as the next frontier to rapid economic growth, following in the footsteps of Asia. As China, India, and much of Southeast Asia become more developed, they turn to Africa to natural resources and cheap labor. The Chinese have already begun investing heavily in Africa, and African leaders enjoy this because it comes without the West imposing its values (stipulations attached to World Bank loans, for example). While Chinese investment is boosting African economies, it has been criticized for funding and supplying conflicts and paying corrupt leaders for oil rights. The challenge now is for Africa to follow China in terms of economic growth while learning from its mistakes in human rights violations and environmental degradation. I know this is a jump, but what if Africa could leapfrog to an industrial revolution based on renewable energy rather than coal or oil?
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