Africa & Impact Investing
““Why are we having all these people from shithole countries come here?”
Donald Trump 45th President of the USA
“Where there is muck, there is Brass”
The two sayings represent the divide upon which the superpowers and the West view the richest continent in the World. China has adapted the second view while many in the West have taken and sympathise with the former.
For most Westerners when one thinks of Africa the images of Wild animals the big game, starving children, Band Aid, War or corruption spring to mind. In Britain we like to nod knowingly about Nigerian scammers, while forgetting that the PPI scandal dwarfs anything an unemployed Nigerian student could achieve, the mass rip offs of our Utility companies tariffs or the difficulties that the Financial Conduct Authority are having with the sector like debacle of London Capital Finance mini bonds, Neil Woodford fund or Beaufort Securities.
Let' s not get started with the biggest Bailout by the Government for the Banks using Tax payers money.
Question: Prior to 2008 Crash do you know what the biggest bailout this country had seen using tax payers money?
The picture below provides the clue:
Cape Coast Castle: Used actively during the 400 year slave trade
Answer: The bail out to compensate all the slave holders that would lose their "Property" due to the abolition of the slave trade!
Yet, people still view Africa through the lens of the Mass media that perpetuates the stereotypes that justified the Wests actions during the post-colonial and cold war era, where the CIA helped to topple one regime in Africa after another, or propped up a suspect one, think Maputo , think Apartheid South Africa.
NB: The 44th President Barack Obama & Fmr 1st Lady Michelle
visit Cape Coast Castle passing through the "Door of No Return".
If one thinks of Rwanda, no doubt one thinks of the horror of the massacre between the Tutsi and Hutu inspired by Belgium colonial rule. Which happened 26 years ago.
Were you aware that the economy of Rwanda in terms of GDP is current growing at 7.6% (2019)? The wounds are healing.
Or Kenya it’s economy grew to 4.9% GDP (2017). In deed if we think about British former colonies we see that Ghana’s GDP grew by 8.5%. Developments have come thick and fast and it has been the Chinese that have capitalised on them. The continent is rich in Gold, Diamonds, Coca, Palm Oil, Oil , Coffee and more importantly it’s people. Unlike Europe or America Africa has a very young population. And a growing middle class with increasing spending power.
NB: World GDP growth highest growth is the green zones, darker green the higher the growth, blue grey low growth.
In West Africa they are forging ahead with currency unions displacing the French CFA and the stock markets have been growing at an eye watering pace.
That is not to say that there are no difficulties. Of course there are.
But funny enough none that the Multi-nationals don’t see but still make money. The likes of Shell, Standard Chartered, Barclays, Unilever or BAT have known for decades that there is money to be made on the continent.
The rates on the Government bonds are high and stock markets with impressive growth. The question is how does one gain access to these markets and minimises the risks?
Obviously it can be done in a plain vanilla wrapper of ETF’s or other Funds, or as is most popular through private equity. Many family offices and Sovereign wealth funds have tapped into the agricultural, mineral or infrastructural sectors and projects.
On a local level micro finance has also been an enabler for the smaller business woman or man.
The soft spot for adventurous investors lies in that middle ground of Medium size businesses with a turnover in the millions, who are asset rich but whose business the Western Investment banks consider too small to deal with. Through assisting these businesses and providing them with financial facilities whether through introducing private equity from Venture Capital or Debt financing with smaller Tier II banks even forging joint-ventures with Western firms, Companies active in this sphere will reap significant rewards for their shareholders.
There is a third definition that is worth considering in conjunction with the second saying and that is the one of:
“Arbitrage is the purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists as a result of market inefficiencies and would therefore not exist if all markets were perfectly efficient.” Investopedia
In short "buy low sell high" before price discovery. Arbitrage opportunities, like this still exist in Africa. In abundance. This because the stereo types about Africa are still very prominent in Western Investors minds. Especially those that get their information from the Daily Mail, Investor Chronicle or UK financial forums boards filled with retired IFA's! To profit from the opportunity one needs to look under the bonnet.
Britain has virtually turned its back on Africa, Theresa May did a lukewarm trip to the continent in 2018 yet what with Brexit, trade with Africa is needed even more. Yet, in Anglophone Africa, many of the countries have similar political and judicial systems. We share the English language are members of the Commonwealth.
What we as a company seek to do is to locate and identify businesses that could benefit from public private partnerships or equity injection from Foreign Investment ( Venture capitalist, sovereign wealth funds or other entities) introducing them ,then being rewarded on successful completion of such transactions.
In order to achieve this we seek to leverage our position of being based in London with our African heritage, where being educated and of the African diaspora can be disadvantage in the UK (Name the last Black director or manager –non retail – you work for or with in the last 20 years?). The characteristic that is seen and subtlety labelled “Not the right fit in this organisation” becomes an asset when working in Sub-Saharan Africa.
There are risks when working in Africa, but essentially the rewards can be significant. Looking back at Britain’s colonial past the likes of Sir George Goldie, Cecil Rhodes or Lord Delaware saw the potential of Africa and made their fortunes there.
In the 21st Century we feel this can be done likewise only this time the communities in Africa will benefit through impact investing. In the 21st Century Africa has been standing on it’s own two feet. It is only through partnership that rewards pay off. This is what the Chinese and Japanese have known for the last 20 years. That co-operation could be thorough organising solar energy “off grid power” to Communities, schools or businesses enabling them to have uninterrupted power supply and thus increase productivity. Or Companies having access to institutional capital which allows them to employ more people within the community (Solves Donald Trump’s comment!).
Impact investing is simply placing people on par or above profit. We as a company are not in it for the money only but also for the social impact our facilitation will provide.
The Capital that we are raising for the company is to provide the decent office space, working and trading capital to make a viable impact. This is only one aspect of our business model, the main one.
Private equity investments are risky. An investor can lose all their money we do not shy away from that fact, but any shares subscribed to are a defined risk. There is no limit to the upside of the investment, especially as the company grows. We believe that Africa as a market has better growth potential and ROI than anywhere else. More over it is less correlated to the volatility of global stock markets.
We keep in mind and understand the saying:
“Where there is muck, there is Brass”
Click on the image for a Brochure
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NB: We will be writing more about both Impact Investing in Africa and Proprietary Trading in later videos (on our YouTube Channel) and Blogs.