March 13, 2015

WSJ: China’s CIC Wealth Fund Shifts Focus to Emerging Markets — Optimistic About Africa

China Investment Corp., a $653 billion sovereign-wealth fund, plans to invest more in emerging markets where there is less competition and a greater need for capital. PHOTO: EUROPEAN PRESSPHOTO AGENCY

The Wall Street Jornal BERLIN — China’s $653 billion sovereign-wealth fund is looking to invest more in emerging markets, according to an infrastructure investing official at China Investment Corp.

CIC, which has made several high profile investments in the U.S. and Europe in recent years, is targeting emerging countries where there is less competition, more opportunity to tap growth and a greater need for capital, the executive said. Click through the following link to read the full article: China’s CIC Shifts Wealth Fund Focus to Emerging Markets


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March 6, 2015

Bloomberg: Into Africa - China Plays U.S. in Great Power Game

Source: Brookings Africa Growth Initiative from International Monetary Fund data

Bloomberg - Africa has long been a battleground for world powers. Two giants playing there these days are China, which is spending freely throughout the continent to scoop up resources and tap some of the world’s fastest-growing economies, and the U.S., which is looking to do more business. Both Chinese and U.S. companies expect to profit from their African stakes. The question is whether Africans can win, too. Click through the following link to read the full article: Into Africa - ChinaPlays U.S. in Great Power Game


Sources: United Nations Conference on Trade and Development (investments); UN (populations); World Bank (electricity)


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March 5, 2015

The Financial Times: GE and Philips scan Africa medical market

The Financial Times - Judging by the long and determined-looking queue waiting to meet Samuel Were in London last week, executives from medical equipment companies fully grasp the near-$35bn value that the International Finance Corporation puts on Africa’s healthcare market. Click through the following link to read the full article: 

No electricity, no problem: Philips’s wind-up foetal heart rate monitor

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February 26, 2015

The Economist: Why Africa is becoming less dependent on commodities

Getty Images
The Economist: FOR DECADES commodities have shaped Africa’s economic growth. When prices were high, growth was good; when prices dipped, so did the continent. But that is slowly changing. Despite big commodity-price falls this year—oil is down by 50%—the continent will probably grow by 5% in 2015 (and more in the following years). While lots of African currencies lost value in 2014, they have performed much better than during other periods when commodity prices were falling. Few African countries will fall into recession in 2015—unlike other commodity exporters such as Russia and Venezuela. Why is Africa doing better than many expected? Two reasons stand out. Click through the following link to read the full article: http://www.economist.com/blogs/economist-explains/2015/01/economist-explains-5


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February 13, 2015

Bloomberg: Microsoft Plans Windows Phone Sale to Boost Growth in Africa




In an effort to boost its smartphone market share, Microsoft plans to introduce Windows Phones that cost $75 to $100 in Africa this year, according to a Microsoft executive.

Fernando de Sousa, Microsoft's general manager for Africa Initiatives, told Bloomberg that "It will be a global launch. Africa will lead in the consumption. Africa is growing smartphone use faster than anywhere in the world." 

Microsoft has launched its 4Afrika Initiative to sell cheap phones in Africa while investing in education and local technology companies. Click through the following link to read the full article: Microsoft Plans Windows Phone Sale to Boost Growth in Africa.

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February 2, 2015

CNN: Violence slams Nigerian economy

Violence slams Nigerian economy - CNN Video
Larry Seruma, Managing Principal at Nile Capital Management, spoke to CNN about the upcoming elections in Nigeria and Boko Haram. The interview covered topics such as the strengthening electoral process in Nigeria, the close presidential race and the international response to Boko Haram. In terms of the latter, recent strides have been taken to combat the Islamist insurgency. Chadian forces recently captured a Nigerian border town from Boko Haram as African leaders work to strengthen a Multinational Joint Task Force aimed against the militants. Forces from Nigeria, Cameroon, Niger, Benin and Chad will comprise the bulk of a 7,500 man force. The mission is awaiting approval from the United Nations. Although violence has escalated in recent months, the situation appears to be improving. To read more on the matter click through the following article: Bloomberg - Africa Seeks Boko Haram Fighting Force.

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Two-minute Guide to the Upcoming Nigerian Elections

The Nigerian general election of 2015 will be the fifth election to be held since the end of military rule in 1999. Presidential and National Assembly (House of Representatives and Senate) elections are both scheduled  for February 14, 2015. Governor and State House of Assembly elections are set for February 28, 2015. The incumbent president, Jonathan Goodluck will be seeking a second and final term. 

Political Parties

The two party frontrunners and their candidates are highlighted in the chart below. APC is a newly formed party, comprised of an alliance of four parties, and accordingly holds 139 seats in the National Assembly, versus the PDP’s 205 seats. The APC candidate, Retired General Muhammadu Bahari, ruled Nigeria from 1983 to 1985. Bahari also unsuccessfully ran for President in 2003, 2007 and 2011. Goodluck Jonathan, member of the opposing PDP, is the reigning Nigerian president.

Party
National Assembly Seats
Presidential Candidate
People’s Democratic Party (PDP)
205 (55%)
Goodluck Jonathan
All Progressives Congress (APC)
139 (23%)
Retired General Muhammadu Bahari

Polls

The race for the presidency has recently heated up. According to a December 2014 poll, Jonathan enjoyed a 19% lead over the opposing Buhari. However, recent polls by Afrobarometer, the leading continent-wide researcher of African public opinion, asserts that the election is “too close to call,” with both parties receiving 42% of respondents’ support. To win, a Presidential candidate needs an overall majority and at least 25% of the votes in two-thirds of Nigeria’s 24 states. In the case of the latter requirement, a runoff may be needed even if a candidate has secured an overall majority.

Investor Sentiment

Jonathan's government is expected to continue an expansionary fiscal policy ahead of elections in an attempt to bolster his standing. Many suspect that once the election is out of the way, monetary policy will need to tighten even further in order to reduce inflationary pressures and prevent the naira from falling. Earlier this month, the Central Bank of Nigeria held the key interest rate at 13%, already a record high.

Even though political violence should be contained, the expected increase in violence as elections draw near will also pose headline risks for investors. All the foregoing combined will make investing in Nigeria a volatile experience before the elections are settled.

Election Timeline:

12 February: Last Day for Presidential and National Assembly campaigning. Advertising within 24 hours of election prohibited.

14 February: National Assembly and Presidential elections.

28 February: Governorship and State House of Assembly elections.

Note: Runoff elections to the office of the President of Governor of State (if any) will be held within 7 days after the announcement of the result of the election.


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January 28, 2015

BloombergBusiness: Africa Nations Must Cut Fuel Subsidies on Oil Drop, IMF Says


(Bloomberg) -- African nations should cut fuel subsidies and oil exporters curb spending as a slump in crude prices takes it toll on government revenue, says IMF Managing Director Christine Lagarde. According to Lagarde, subsidizing countries "should think about reducing and phasing out the oil subsidies, taking advantage of the oil price and using public finance more wisely" while oil-exporting countries are advised to remain very cautious with public spending. The 60% drop in oil prices has already forced policy makers in Nigeria to devalue the currency, raise interest rates to a record and consider shaving the 2015 budget by 8 percent.  Lagarde claims that Nigeria should re-examine its fiscal and monetary policies immediately after elections to see if further action is needed.

Click through the following link to read the full article: 
Africa Nations Must Cut Fuel Subsidies on Oil Drop, Lagarde Says

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January 22, 2015

The New York Times: "Africa’s Economy Is Rising. Now What Happens to Its Food?"

Expressed in terms of purchasing-power parity. Source: Analysis of World Bank data

The New York Times: For decades, the economies of Africa were the world’s economic laggards. They aren’t anymore. Over the last decade, Africa’s per capita income has grown at a rate nearly identical to that of the rest of the world. It’s reasonable to imagine that the continent is in the early stages of a trajectory that could mimic that of Latin America or, more ambitiously, parts of Asia. Click through the following link to read the full article: Africa’s Economy Is Rising. Now What Happens to Its Food?


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December 15, 2014

Chart of the Day: Russia = Africa + more risk

Copyright© 2014 Bloomberg Finance L.P.


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December 11, 2014

Investopedia: "ETFs And Mutual Funds Investing In Africa"

Investopedia: “Invest in mutual funds,” the standard grandfatherly advice goes. Reduced risk, no overexposure, etc. It’s the responsible, conservative way to build a substantial — if unimpressive — nest egg. And judging by the size of the mutual fund market ($24 trillion worldwide), plenty of people indeed heed that counsel. Click through the following link to read the full article: http://www.investopedia.com/articles/investing/112614/etfs-and-mutual-funds-investing-africa.asp


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December 5, 2014

MarketWatch - Mark Mobius: Why Africa is the next emerging-markets success story

Bloomberg - Mark Mobius
LONDON (MarketWatch) — Emerging markets super-bull Mark Mobius has his sights set on a new region: Africa. Mobius has spent more than 40 years focusing on emerging markets. In the late 1980s, he joined Franklin Templeton and set up the company’s first emerging-markets funds, in the same year that the MSCI developed its first emerging-markets indexes. He said in an email interview with MarketWatch: “With this tremendous potential growth becoming increasingly available to investors, we believe that Africa could be the emerging-market story of the next decade”. Click through the following link to read the full article: Mark Mobius: Why Africa is the next emerging-markets success story


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MarketWatch: You aren’t investing in Africa — and you’re missing out

Bloomberg - Cosmo City, a suburb of Johannesburg, South Africa and a stronghold of the continent’s growing middle class.

















LONDON (MarketWatch) — If a financial adviser offered her clients a chance to invest in a country that expected economic growth of 6% or 7% a year for the next two decades, chances are the clients would jump at the prospect. But once they found out that country was in sub-Saharan Africa, chances are a lot of them would lose their nerve. David Snowball, publisher of the Mutual Fund Observer newsletter, says the two best Africa-focused funds are winning  “by consistently hitting singles and working hard not to strike out, rather than for seeking the highest possible gains.” Click through the following link to read the full article: You aren’t investing in Africa — and you’re missing out


















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December 2, 2014

CNBC: Investment opportunities in Africa





CNBC: Larry Seruma, Managing Principal at Nile Capital Management, is optimistic that the worst case scenarios for Ebola is over.

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October 17, 2014

CNN: Ebola spreading concerns investors



Larry Seruma spoke yesterday with Anchor Maggie Lake, World Business Today Show, from CNN International regarding Ebola Epidemic and the impact on Africa Investments. The interview covered important topics in our economy today such as the short term impact on the affected countries, what does this mean for growth prospects, investment flows and FDI, and the perspective from a global standpoint.


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African dollar-denominated bonds from Nigeria to Kenya tumble: BDlive

            Kenya central bank. Picture: BLOOMBERG/TREVOR SNAPPS

"AFRICAN dollar-denominated bonds from Nigeria to Kenya tumbled on Wednesday, sending yields higher, as an oil-price slump and concerns about the spread of Ebola put a damper on investor demand for assets in frontier markets," writes Robert Brand on October 15th on BDlive's Market Section. Click through the following link to read the full article: African dollar-denominated bonds from Nigeria to Kenya tumble
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September 7, 2014

CNBC: Tracking the impact of the Ebola crisis




Larry Seruma spoke to CNBC about the impact of the Ebola crisis and how it has affected Western Africa and various sectors.

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August 6, 2014

President Obama at the U.S.- Africa Leaders Summit


President Obama spoke yesterday at the U.S.- Africa Leaders Summit in Washington, D.C. (video courtesy of Politico.com), announcing that the U.S. government, World Bank and businesses will invest a combined $33 billion in Africa's economy. Obama said the United States will finance $7 billion in business exports and investments in Africa, while U.S. companies have inked $14 billion in deals with the continent, and the World Bank, Sweden and private sources have pledged another $12 billion in funding for Obama's Power Africa energy initiative, bringing the electrification program's total funding to $26 billion.

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August 5, 2014

The New Era for Business In Africa: Bloomberg TV



From Bloomberg TV: Foreign investment in African economies will reach a record $80 billion in 2014 with many U.S. companies leading the way. American companies continue to partner with their African counterparts to drive growth, yet significant business and financial opportunities remain untapped. This session explores the future of U.S.-African partnerships and identifies new ways to strengthen business ties and enable greater economic progress. Welcoming the panel is Ashish J. Thakkar, Founder and Managing Director, Mara Group. The group moderator is The Honorable William Jefferson Clinton, Founder of the Clinton Foundation and the 42nd President of the United States. Panelists include Aliko Dangote - President and CEO, Dangote Group, Jeff Immelt - CEO, General Electric, Andrew N. Liveris - President, Chairman & CEO, The  Dow Chemical Company, Phuti Mahanyele - CEO, Shanduka Group, and Doug McMillon, President and CEO, Wal-Mart Stores, Inc.


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Pritzker, Bloomberg See Deals at U.S.-Africa Forum: Bloomberg TV


From Bloomberg TV: U.S. Commerce Secretary Penny Pritzer and former New York City Mayor Michael Bloomberg spoke today in Washington, D.C., with Bloomberg TV's Hans Nichols about opportunities for U.S. investment in Africa, the outlook for corporate dealmaking in the region and the U.S.-Africa Business Forum. (Be patient - 15 second ad will proceed video.)

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August 4, 2014

Investing in Africa Becomes Attractive: USA Today

AFP DRCONGO-MINES-ECONOMY
(Photo: Gwenn Dubourthoumieu, AFP/Getty Images)
"As Africa's economies gain momentum, democratic governments take hold and the continent's young population grows wealthier, investing there is becoming both easier and more attractive to international investors," writes Hadley Malcolm in today's edition of USA TODAY's MONEY section. Click through to read the full article: Investing in Africa Becomes Attractive.


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GE Plans $2 Billion Africa Spending: Bloomberg

General Electric's Chairman & CEO, Jeffrey Immelt

General Electric Co. (GE) will invest about $2 billion in African nations by 2018 and regards the continent as its most promising growth region, as reported today by Bloomberg (click through for full coverage).
The money will be spent building new infrastructure projects, training local workers and improving regional supply chains among other activities, the Fairfield, Connecticut-based company said in a statement today. GE already supplies trains for Nigeria’s rail network and aircraft engines for Kenya Airways Ltd.
“We remain a committed partner to Africa’s sustainable growth,” said Jeff Immelt, GE’s chairman and chief executive officer. The company has “great momentum in Africa and other developing regions.”


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June 5, 2014

Main Street Invests in Africa’s Stocks: Nile Fund’s Larry Seruma on the continent’s modernising equity markets

(This article was first published by Financial Times - This is Africa)
Nairobi Stock Exchange.
Getting in on Africa’s economic boom is no longer reserved for CEOs or million dollar entrepreneurs. Main Street investors can now own a portfolio of Africa’s fastest growing stocks with as little as $1000. That’s the minimum investment required for Larry Seruma’s Nile Pan African fund, a US based mutual fund offering the public targeted allocations in African equities
Nile is well placed between greater interest in Africa’s business opportunities and the continent’s modernising securities markets. With assets of $45m, it now advertises across the US on Bloomberg Radio, offering investment options online. Nile won the 2014 Lipper Award for Best Emerging Markets Fund, returning roughly 9 percent annually through 2013.
“I got the idea to start the fund in 2008 when I was hedge fund manager,” Nile Capital Management CIO Larry Seruma told This is Africa. “Most of the investments we were making that were much more profitable and less understood were in Africa,” recalls the Uganda native.   
Tracking US portfolio trends at the time further sharpened Mr Seruma’s vision for Nile: “Then it was about supply and demand. On the demand side we saw an increase in flows to world equities funds, but options for Africa were lacking. So on the supply side, we saw an opportunity to become the only actively managed Africa focused mutual fund in the US that a client can come to with as little as $1000.”
Many investors, both at the individual and institutional level ($250,000), have placed financial bets with Nile. It invests across 21 of Africa’s 29 stock markets, with fixed income holdings primarily limited to Ghanaian bonds.
Rather than large multi-nationals, Mr Seruma prefers small to mid-cap African companies, those in sectors poised to show the most growth, and least likely to be traded in larger index funds, thus more likely mispriced. More than 50 percent of Nile’s portfolio is allocated to small to micro-cap stocks. The fund’s top sector exposure is to consumer related (35 percent), industrial (26 percent), and financial stocks (14 percent). Top three country exposure for Nile is Nigeria (27 percent), South Africa (22 percent), and Kenya (11 percent).
Top Nile Fund holdings span Zenith Bank and Dangote Cement in Nigeria to private schools education company Curro Holdings in South Africa.
NILEFUND
The events of 2014 may make stocks in African countries a harder sell. Fed tapering and a rebound in the performance of less risky American equities influenced a sell-off in emerging markets assets. Though most African equities (with the exclusion of South Africa) have a frontier market classification, they are often viewed similarly to emerging markets investments. Then there are elevated risk concerns born out of recent terrorist incidents in Kenya and Nigeria.
“There’s still a very compelling case for US investors looking at long-term potential to invest in Africa,” says Mr Seruma. He points to a number of reasons, starting with macro differences between the US and Africa. “The prospects for high growth in the US are still not so good, because of the demographics, because of low interest rates, because of high debt levels. If you look at those dynamics in Africa, it has high growth, growing youth populations with greater spending power, and the cost of capital in Africa is decreasing.”
And these macro-trends will translate into different yield opportunities. “If you look at the long-term return for US equities, most analysts place it at around 2 to 4 percent. In treasuries, US interest rates are low and will likely remain that way for a long time, especially if you believe in secular stagnation in the US,” says Mr Seruma.  
“African stocks and bonds are sometimes in the double digits. If you want a higher return you will have to go to Africa to gain those high yielding assets. It’s a pretty easy vanilla trade that’s going to be there for a long time.”
Mr Seruma underscores portfolio diversification. “Investors don’t want to put all their eggs in one basket. And the region that’s least been allocated to is Africa. So from a diversification standpoint, you want to have Africa checked out.”
He also references stock correlation, often employed to mitigate portfolio risk, as another draw to African stocks. “If you review asset data, you see African equities have lower correlation with the U.S. So adding Africa in your portfolio actually lowers your overall risk.”
On the topic of investor risk concerns, Mr Seruma references Africa’s modernising securities market infrastructure parallel to its improving business environment.
“To start, many countries have become better managers of their economies. So there are better macroeconomic policies with regard to inflation, taxation and fiscal management. There’s greater investment in infrastructure and record bond issuance to diversify government revenue sources. As a result you are seeing lower cost of capital and the discount rate for equities is declining. So other things being equal, you are going to get higher stock prices,” he explains.
Mr Seruma points to improving transparency, coordination, and trading platforms, while stressing there’s a great deal of discrepancy between exchanges and regions. “To put things in context, of the 29 stock markets in Africa, all of them vary considerably among each other. On the extreme side, you find well regulated markets like South Africa. On the other end, you have newer markets, where there is not enough regulation, but they are trying to make regulation work through a lot of new initiatives.”
One trend is regional coordination, “A good example is Rwanda, which has taken a lead in efforts to create one stock market in the East African community. In French West Africa, they have the BRVM, intended to gain some economies of scale, but also to build more capacity into the regulatory environment,” he explains.
Then there are efforts to upgrade and digitise platforms. “The BRVM has harmonised all their processes. Nigeria is working on implementing the NASDAQ system used in the US. Mauritius’ exchange systems are very sophisticated. The markets used to be very manual, they are becoming more electronic and linking more to developed market settlement systems and indexes,” notes Mr Seruma.  
He believes these efforts collectively will improve liquidity constraints with stocks and bonds in African markets, providing greater ability to buy and sell easily and frequently.
On financial reporting, Mr Seruma says listed African companies are reporting more frequently and the quality is improving. “Most African exchanges now require companies to provide audited financials. The big three auditing firms are becoming the auditors of most of these companies. Our view is if an auditor is good for a company in Chicago it should be good for a company in Kampala.”
On recent investor concern due to terrorism in key African equities markets Nigeria and Kenya, he sees more immediate portfolio effects in Kenya, “The recent bombings in Kenya have led to a drop in tourism. Some investments we’ve made in hotels, their revenues are directly aligned with that so that affects the returns on those stocks.”
With regard to Nigeria, while acknowledging the seriousness of the Boko Haram incidents, he notices less investor impact. “The events have been dominated in the north, which contributes only about 4-5 percent of the country’s GDP. So from that perspective we are not seeing a lot of capital that will not go to Nigeria because of Boko Haram. Most investments are in the south.”
He adds a caveat: “However, should the situation with Boko Haram persist and spread to wider parts of the country, it could lead to major changes in the economy.”
Mr Seruma notes that Africa’s growing stock market capitalisation will provide greater opportunity to diversify risk. South Africa aside, the total value of sub-Saharan Africa’s stocks has been relatively small – around $100bn, or less than many large-cap American companies.
“We are likely to see many more issues. The major indices in Europe and the US are adding more exposure. MSCI’s Frontier index will increase its weight in African stocks this month. You are likely to see a lot more portfolio flows and listings as a result. A number of countries, like Kenya and Nigeria, are providing incentives, like tax breaks, for companies to list.”
Mr Seruma predicts sub-Saharan Africa’s total stock market capitalisation will double within two years, and then every three to four years after that.
As for industries to look out for in the future, he points to telecoms related stocks, like MTN. “Mobile phone networks and platforms will be providing a number of services, banking, insurance, healthcare, digital content. There are many ways those platforms can be monetised in Africa, so we think it’s an interesting area to focus on.”
Overall, Mr Seruma thinks Americans will invest in African stocks primarily for yield, but also believes Nile represents a new approach to the continent beyond charity. “The best way to help Africa is to invest in Africa. That investment gets Americans first high returns and an allocation in the continent. But in Africa it also has the potential to reduce the cost of capital, to provide more stable jobs, more sustainable economic growth, and reduce poverty.”

Nile Capital Management
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