Tag Archives: Africa

Africa’s Global Competitiveness–4 Themes to Consider

1. Is the commodity supercycle turning back upward?

  • Oil seems to have bottomed. After falling to the high 20s West Texas oil is close to $50 a barrel. Latest forecasts expect a plateau around $60
  • Metals are soft but not falling fast with gold just under $1300/ounce and copper about $2.17/pound.
  • Coffee rising—ICO composite index up 15% this year
  • Cocoa down 13% this year though up 20% over the last 4 years

2. Global growth forecast is a lackluster 3.1%-Africa slows to 1.6%

  • Has Africa hit bottom at 1.6% growth? Slowdown due largely to slowdown in commodities and reduced imports by China. With oil and other commodities recovering African economies should return to above average growth.

3. Are African leaders prepared to take the policy steps necessary to liberate their economies from commodity dependence?

  • UNIDO’s 2016 Industrial Development Report report discusses the nature of African industrialization and why it has not progressed further. African industrial activities ends to be resource based and has a low and decreasing percentage of global manufacturing value added.
  • The Brookings Institution’s Learning to Compete project notes the virtuous circle in which productivity enables exports and exports raise productivity.
  • The clear implication is that governments must implement policies that increase productivity, promote exports, and reduce dependence on natural resources.

4. The dialogue has started—time for public and private sector action!

  • Africa’s role in global value chains was discussed at this year’s IMF meetings.
  • EFMA Oct 13 conference on Supply Chain Risks in Emerging Markets will address challenges developing countries face in joining global supply chains.
  • We need policies that support sustainable growth and private sector investments that support these policies and offer favorable risk adjusted returns.
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8 WAYS TO ASSESS THE IMPACT OF #AFRICAN #TECH #STARTUPS

 

I. Jobs Created

  • We of course want to know the total number of jobs created by startups. In addition we need to understand the type of jobs created and how that fits with the profile of the national labor force. What are the salary levels and how do they compare to the local statutory minimum wage? Will these startups have a significant impact on their local labor markets?

II. Capital Raised

  • Are these startups attracting new capital to Africa?
  • Are they attracting foreign capital from other African countries?
  • Are they attracting capital from within their own countries?

III. Increase in Skills and Know-How

  • Are the startups introducing new technology or management practices
  • Are skills and know-how spreading beyond the universities to the general population?

IV. Return on Capital Invested

  • Have investors in African startups experienced favorable outcomes?

V. Export Revenue Within and Outside Africa

  • Are African startups exporting?
  • Are African startups enabling exports by other companies in their home countries?

VI. Supportive of African Business

  • In what other tangible ways have these startups helped foster the growth of African businesses?
  • Training
  • Access to customers
  • Access to capital

VII. Social Impact

  • Environmental
  • Education
  • Poverty reduction
  • Financial inclusion

VIII. Intangibles

  • Inspiration – Is there a 12 year old girl in a village saying “I want to be an entrepreneur too!”
  • Positive influence on government – Is there a community of entrepreneurs who can make their voice heard in the halls of government to strengthen the entrepreneurial ecosystem?
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3 Lessons from the 2015 Africa Business Conference at Harvard Business School

As usual there was a palpable spirit of optimism at this year’s Africa Business Conference at Harvard Business School. While the facts on the ground may not be as rosy, I did come away with several observations that will be helpful in current tasks as well as in plotting strategy in the medium and long term.

1. Storage and transportation of both inputs and goods for sale are critical to improving farm performance.

2. Institutional Private equity is well entrenched in Africa and the characteristics of a successful deal are increasingly well known. In the second panel on closing the electricity deficit the parameters for funding power projects were clearly laid out:

  • A quality PPA deal is required. This is the guarantee of cash flow that investors look for. They’re not all created equal. For example, local currency denomination is a deal killer since it adds currency risk to the equation.
  • The PE folks will also need a sovereign guarantee as an indication that the government supports the project.
  • As always a strong management team makes the deal much more attractive.

3. Startup capital especially for non-tech ventures is extremely difficult to find. Angel investors and venture capitalists are slowly finding their way to tech-related, high growth startups. For others, it’s tougher but there are a few possibilities:

  • Impact investors. If one can demonstrate measurable social benefit in addition to financial returns then a new set of potential investors becomes available. Many impact investors use the IRIS standard to assess social benefit. African companies would be wise to seek out experts who can help the make their case using IRIS
  • Multilateral/DFI capital. Organizations such as the African Development Bank and International Finance Corporation sometimes have special programs for ventures with attractive features such as environments sustainability.
  • Trade promotion agencies. Agencies such as the U.S. Export-Import Bank can often provide funding or lean guarantees for capital purchases that meet certain requirements.

As always the Harvard Business School Conference showed us an Africa on the move—not without its issues, but with opportunities for businesspeople to benefit themselves, their organizations and the African continent. Successful entrepreneurs will assemble a skilled team that can execute on their vision and achieve financial and social results.

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Major Africa Stock Market and Exchange Rate Changes in Q4-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 4TH QUARTER 2014

AFRICA

COUNTRY

4TH QUARTER PCT CHANGE

GHANA-Local Currency

1.42%

GHANA-US$

2.83%

KENYA-Local Currency

-4.70%

KENYA-US$

-6.19%

NIGERIA-Local Currency

-15.66%

NIGERIA-US$

-27.06%

SOUTH AFRICA-Local Currency

-0.37%

SOUTH AFRICA-US$

-3.42%

WEST AFR. BOURSE-Local Currency

-1.91%

WEST AFR. BOURSE-US$

-6.05%

MSCI AFRICA-Local Currency

0.89%

MSCI AFRICA-US$

-2.52%

MSCI EMERGING MARKETS-Local Currency

-2.10%

MSCI EMERGING MARKETS-US$

-6.97%

Sources: Stock exchange websites, Financial Times, Advansa International data

Table 2

4TH QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

4TH QTR PCT CHG

YTD

DEC PCT CHANGE

CFA AREA*

-4.14%

-11.66%

GHANA

1.41%

-25.86%

KENYA

-1.49%

-5.08%

NIGERIA

-11.40%

-13.27%

SOUTH AFRICA

-3.05%

-9.56%

TANZANIA

-2.07%

-7.42%

UGANDA

-3.88%

-9.18%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

It was a rough year for emerging market stocks with the MSCI Emerging Markets Index losing 2.1% in the fourth quarter and 0.69% the full year 2014. African stock markets did better than emerging markets in Q4, though for the year the MSCI Africa index trailed emerging markets. Nigeria was the worst performer largely due to the fall in the price of oil. Its downward momentum continued into the first week of 2015 with the Global MSCI Nigeria ETF falling another 9%. Ghana was the strongest performer, up 1.42% in the 4th quarter, and 2.83% for the year.

All currencies in our table fell against the dollar in 2014, which diminishes returns (and increases losses) for foreign investors. This is partly a function of dollar strength rather than weakness of African currencies. The US economy finished the year strong and the dollar index was up from 99.1 at the end of 2013 to 102.8 at the end of 2014’s 3rd quarter. The currency depreciation also reflects the challenges to resource based emerging and frontier market economies that has persisted all year. A couple of currencies were especially weak. Ghana for example was down almost 26% in 2014. Aggressive action by the central bank, with the assistance of the IMF reversed the slide and the cedi has recovered, showing a slight gain in the fourth quarter. Nigeria’s naira showed the biggest loss of the quarter again influenced by the drop in the price of oil.

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Major African Stock Market and Exchange Rate Changes in Q3-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 3RD QUARTER 2014

AFRICA

COUNTRY

3RD QUARTER PCT CHANGE

GHANA-Local Currency

-4.18%

GHANA-US$

-3.87%

KENYA-Local Currency

7.92%

KENYA-US$

6.18%

NIGERIA-Local Currency

-3.24%

NIGERIA-US$

-3.86%

SOUTH AFRICA-Local Currency

-1.90%

SOUTH AFRICA-US$

-7.28%

WEST AFR. BOURSE-Local Currency

9.21%

WEST AFR. BOURSE-US$

2.28%

MSCI AFRICA-Local Currency

0.52%

MSCI AFRICA-US$

-4.41%

MSCI EMERGING MARKETS-Local Currency

1.44%

MSCI EMERGING MARKETS-US$

-2.13%

Sources: Stock exchange websites, Financial Times, Advansa International data

Table 2

3RD QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

3RD QTR PCT CHG

YTD

SEP PCT CHANGE

CFA AREA*

-6.92%

-7.85%

GHANA

0.31%

-26.89%

KENYA

-1.74%

-3.64%

NIGERIA

-0.62%

-2.10%

SOUTH AFRICA

-5.38%

-6.72%

TANZANIA

-1.16%

-5.46%

UGANDA

-1.89%

-5.51%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

Emerging and frontier market stocks showed mixed results as the MSCI Emerging Markets Index rose 1.44%, and the MSCI Africa Index was up 0.52%. Choppy commodities prices, and mixed economic performance lead to losses in some countries like South Africa and gains in others. The Nairobi Exchange in Kenya and the West Africa Bourse were the strong performers in Q3.

Currencies that were weak in the first half of the year—notably Ghana—have largely stabilized. Though most currencies are lower against the dollar, this is due more to a strong dollar than weakness elsewhere. The US Dollar index rose from 99.316 in Q2 to 100.342 in Q3.

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Major African Stock Index and Exchange Rate Changes in Q2-2014

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 2ND QUARTER 2014

AFRICA

COUNTRY

2ND QUARTER PCT CHANGE

GHANA-Local Currency

-1.42%

GHANA-US$

-18.45%

KENYA-Local Currency

-2.78%

KENYA-US$

-3.86%

NIGERIA-Local Currency

10.06%

NIGERIA-US$

11.33%

SOUTH AFRICA-Local Currency

5.62%

SOUTH AFRICA-US$

5.32%

WEST AFR. BOURSE-Local Currency

-2.17%

WEST AFR. BOURSE-US$

-2.99%

MSCI AFRICA-Local Currency

4.25%

MSCI AFRICA-US$

3.94%

MSCI EMERGING MARKETS-Local Currency

4.44%

MSCI EMERGING MARKETS-US$

6.22%

Sources: Stock exchangewebsites, Financial Times, Advansa International data

 

Table 2

2ND QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

2ND QTR PCT CHG 

 

YTD JUN PCT CHANGE 

CFA AREA*

-0.81%

-0.99%

GHANA

-17.03%

-27.12%

KENYA

-1.07%

-1.94%

NIGERIA

1.27%

-1.49%

SOUTH AFRICA

-0.30%

-1.42%

TANZANIA

-1.09%

-4.35%

UGANDA

-1.85%

-3.70%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

The big markets–Nigeria and South Africa performed well. Both markets were up in local currency and in dollars.It appears that the long term story–the demographic boom, the growing middle class, the improved political environment in some countries–are causing investors to look past current bumps in the road.

Despite lackluster growth, South African stocks have been strong. The country remains an attractive investment destination, its stock market being the largest and most liquid in Africa.

Nigerian stocks have proven attractive to investors and Boko Haram attacks and new competition from North American shale oil have not changed anyone’s thinking so far. Most of the market activity is in the financial services sector lead by such firms as Access Capital and Guaranty Bank. Consumer goods companies such as Nigerian Brew have also showed strength. The naira actually gained a little during the quarter and remains within the narrow range that has prevailed all year.

In Ghana, currency weakness continues as the nation has sought IMF assistance to help get its accounts back toward balance. Trading activity is as usual dominated by the large consumer and financial service companies such as Fan Milk, UT Bank, and EcoBank. The stock market has weakened, reflecting caution among investors even though the economy is still growing. Could be a chance to get in the market cheap.

In fact, the current period is a possible second chance for international investors to invest in African assets at favorable prices when exchange rates make deals affordable and much of the bad news is already priced in.

 

 

 

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Ghana’s Currency, Millennium Challenge and Economic Prospects

The Millennium Challenge Corp. recently signed a second compact with the Republic of Ghana.http://www.state.gov/secretary/remarks/2014/08/230295.htm  This compact’s focus on the power sector addresses a major challenge to Ghana’s economic growth and to Ghanaians’ overall quality of life. The signing of the MCC compact is a good time to reflect on current economic and business conditions in Ghana.
Ghana is potentially a strong economic engine for the region and Secretary of State Kerry is right to cite Ghana’s commitment to good governance and economic prosperity. However the country faces some major challenges. Among them is the rapid depreciation of Ghana’s currency. Our data shows that the cedi lost about 27% in the 1st half of the year and has continued to fall since then. Currency weakness in Ghana is a symptom of persistent trade deficits as well as rising government spending. The financial community has noticed and has raised the issue in several forums and publications. It doesn’t change the longer term story of Ghana’s growth potential (in fact dollar based investors might find favorable prices for Ghanaian assets) but it does raise questions about how government will handle the problem while remaining investor friendly.
Red flags went up earlier this year when the government began to restrict the movement of currency, damaging Ghana’s reputation for financial openness. The more sensible answer is to change the character of Ghanaian trade. Surpluses might be a lot to ask but Ghana should at least aim for smaller trade deficits. Ramping up the nascent oil sector would help but there should also be greater orientation toward exporting in several sectors. This is why reliable electric power is so crucial. It’s location, general business friendliness and political stability make Ghana a logical export platform for the West Africa region as well as destinations further abroad. However for indigenous and foreign investors to locate in Ghana reliable electric power is essential. For that reason we should all hope for the success of this second MCC compact.

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Major African Stock Index and Exchange Rate Changes in Q1-2014

 

 

 

Advansa International follows exchange rates and stock market indexes for several emerging and frontier markets. Exchange rates and stock indexes are recorded on the last trading day of the week. The tables below show changes from the last trading day of the last full week of the quarter for several key markets in Africa.

Table 1 

 STOCK MARKET INDEX TRACKER 1ST QUARTER 2014

AFRICA

COUNTRY

1ST QUARTER PCT CHANGE

GHANA-Local Currency

11.37%

GHANA-US$

-0.80%

KENYA-Local Currency

1.76%

KENYA-US$

0.88%

NIGERIA-Local Currency

-4.72%

NIGERIA-US$

-7.45%

SOUTH AFRICA-Local Currency

0.48%

SOUTH AFRICA-US$

3.68%

WEST AFR. BOURSE-Local Currency

5.07%

WEST AFR. BOURSE-US$

4.88%

MSCI AFRICA-Local Currency

3.80%

MSCI AFRICA-US$

0.33%

MSCI EMERGING MARKETS-Local Currency

0.79%

MSCI EMERGING MARKETS-US$

-0.23%

Sources: Stock exchangewebsites, Financial Times, Advansa International data

 

Table 2

1ST QUARTER 2014 EXCHANGE RATE TRACKER

AFRICA

COUNTRY

1ST QTR PCT CHG

YTD

MAR PCT CHANGE

CFA AREA*

-0.18%

-0.18%

GHANA

-12.16%

-12.16%

KENYA

-0.88%

-0.88%

NIGERIA

-2.73%

-2.73%

SOUTH AFRICA

-1.12%

-1.12%

TANZANIA

-3.30%

-3.30%

UGANDA

-1.88%

-1.88%

Sources: Financial Times, Advansa International data

*Includes most French speaking countries such as Benin, Cameroon, Cote D’ivoire, Guinea, Senegal, Togo and others

2014 marks a change in investor sentiment towards the emerging and frontier markets. We see a shift from the mad rush into EMs of the past 3-4 years to people wondering if all the emerging market hype is a bit overblown. The announcement of tapering by the US Fed in 2013 was the trigger. In Africa the new outlook is manifest in continued currency weakness and retrenchment in several key stock indexes.

Every currency in our table lost ground in the first quarter. This is in spite of monetary tightening and rising interest rates across the board. Indeed, monetary policy in most of these markets has been fairly rational. On the fiscal side, however governments are finding it difficult to control spending. These are countries with young populations climbing out of poverty. They are at a developmental stage that demands rapid growth and are under tremendous political pressure to deliver social services and better infrastructure, all of which leads to deficits in the trade and fiscal accounts.

Ghana is a conspicuous example among this group. We see from the tables that Ghanaian stocks performed quite well while the currency was the weakest among prominent African economies. Many companies are performing well and investors anticipate future growth so stock prices are rising. However the trade benefits of the nascent oil sector have not materialized and have in fact generated additional imports as production ramps up. Thus the trade balance deteriorates. The resulting inflation on top of politically driven spending increases puts downward pressure on the cedi.

Yet it is these same characteristics that make the emerging markets such as Ghana attractive to investors. Among the larger markets that attract most of the trading volume, the currency issue is not as urgent. If this is a short term correction and if governments and investors don’t panic, then the long term trends will continue to imply growth and favorable investment outcomes.

 

 

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Angel Fair West Africa 2014

 

 

In our last post on emerging market private equity we mentioned the African startup infrastructure and its potential to attract local and international venture capital. The startup community will be on full display in two weeks at Angel Fair West Africa, starting March 31 in Lagos, Nigeria.

 

Startups at the seed venture and growth stages will be featured. There will be two rounds of entrepreneurs pitching their businesses and panel discussions from founders and investors. In addition to the home country there will be startups from Cameroon, Ghana,Kenya and Senegal.

 

African venture capitalists and other investors will also be in attendance including 32 members of the Lagos Angel Network.

 

 

For more on Angel Fair West Africa, click here.

 

 

 

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Emerging Markets Exchange Rates & Interest Rates 14 March 2014

 

 

EXCHANGE RATES 3/7/2014 3/14/2014 %CHG
AMERICAS
 
ARGENTINA 7.8613 7.8945 -0.42%
BRAZIL 2.3407 2.3598 -0.81%
CHILE 565.3500 571.5900 -1.09%
COLUMBIA 2,038.3300 2,041.4800 -0.15%
COSTA RICA 559.6900 549.9650 1.77%
JAMAICA 108.2650 108.7450 -0.44%
MEXICO 13.1922 13.2290 -0.28%
PERU 2.8035 2.8040 -0.02%
TRINIDAD & TOBAGO 6.3820 6.3810 0.02%
VENEZUELA 6.2921 6.2921 0.00%
 
 
AFRICA
 
BOTSWANA 8.7873 8.8456 -0.66%
COTE D’IVOIRE (CFA) 473.2050 471.0640 0.45%
GHANA 2.5333 2.5520 -0.73%
KENYA 86.5500 86.5000 0.06%
NAMIBIA 10.7383 10.7215 0.16%
NIGERIA 164.6000 164.6500 -0.03%
SENEGAL (CFA) 473.2050 471.0640 0.45%
SOUTH AFRICA 10.7383 10.7215 0.16%
TANZANIA 1,633.0000 1,635.5000 -0.15%
UGANDA 2,515.0000 2,520.0000 -0.20%
ZAMBIA 5.9600 6.0500 -1.49%
ZAMBIA-Boz Bid 5.9401 6.0208 -1.34%
ZAMBIA-Boz Ask 5.9501 6.0308 -1.34%
ZIMBABWE 378.0000 378.0000 0.00%
 
INDIA 61.0950 61.1650 -0.11%
 
 
INTEREST RATES 3/7/2014 3/14/2014
 
UNITED STATES
3 month T-Bill 0.06% 0.05%
6 Month T-Bill 0.09% 0.08%
10 Year T-Bond 2.80% 2.65%
30 Yr Fixed Mortgage-Bankrate.com 4.45% 4.50%
30 Yr Fixed Mortgage-MBA 4.52%
 
 
AMERICAS
 
BRAZIL
SELIC Rate-Daily 10.65% 10.65%
 
MEXICO
3 Month T-Bill 3.29% 3.30%
6 Month T-Bill 3.45% 3.44%
1 Year T-Bill 3.64% 3.62%
 
PERU
Central Bank Reference Rate 4.00% 4.00%
 
AFRICA
 
GHANA
3 Month T-Bill 21.23% 22.89%
6 Month T-Bill 20.99% 21.11%
1 Year T-Bill 17.00% 20.00%
2 Year T-Bill 17.50% 20.00%
3 Year T-Bill
5 Year T-Bill
 
KENYA
3 Month T-Bill 9.12% 8.95%
6 Month T-Bill 10.35% 10.05%
1 Year T-Bond 10.61% 10.41%
4 Year T-Bond
 
NAMIBIA
3 month T-Bill
6 Month T-Bill
1 Year T-Bill
 
NIGERIA
91 Day Gov’t Security-OMO
182 Day Gov’t Security-OMO
364 Day Gov’t Security-OMO
91 Day Gov’t Security-PMO 12.25% 12.25%
182 Day Gov’t Security-PMO 14.31% 14.31%
364 Day Gov’t Security-PMO 15.61% 15.61%
 
SOUTH AFRICA
3 Month T-Bill 5.76% 5.75%
6 Month T-Bill 6.21% 6.21%
1 Year T-Bill 6.63% 6.50%
10.5% (2026) 8.44% 8.54%
13.5% (2015) 6.94% 7.01%
 
UGANDA
3 month T-Bill 9.76% 9.76%
6 Month T-Bill
1 Year T-Bill
2 Year T-Bond 13.72% 13.72%
3 Year T-Bond 13.19% 13.19%
5 Year T-Bond 13.92% 13.92%
10 Year T-Bond 13.94% 13.94%
 
ZAMBIA
3 Month T-Bill 8.00% 8.00%
6 Month T-Bill 14.90% 15.00%
1 Year T-Bill 15.23% 15.45%
2 Year T-Bill 14.00% 14.00%
3 Year T-Bill 15.00% 15.00%
5 Year T-Bond 16.00% 16.00%
10 Year T-Bond 17.90% 17.90%
15 Year T-Bond 17.90% 17.90%
INDIA
3 Month T-Bill 9.19% 9.27%
6 Month T-Bill 9.10% 9.12%
1 Year T-Bill 9.03% 9.03%
Base Lending Rate 10.25% 10.25%
Policy Rate 9.00% 9.00%

 

 

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