Tag Archives: Foreign Direct Investment

Spotlight on Cameroon

Things are looking up in the land of Bikutsi and Makossa.

The Africa Rising story often features a few high profile countries that have dominated investors’ attention: Ghana, Kenya, South Africa, Nigeria and a few others are where most of the deals seem to happen.

Meanwhile, flying under the radar is Cameroon. Lately we are seeing an increase in business and entrepreneurial activity in the public and private sectors that leads one to think that this market deserves a closer look.


The Republic of Cameroon is officially a democracy with executive, legislative and judicial branches of government. Paul Biya has been president since 1982.

Like most of Africa, the economy is based on natural resources, chief among them, timber, aluminum, agriculture (particularly, cocoa, palm oil), and oil & gas.

In addition there are hints of entrepreneurial activity that could lead to a larger private sector contribution to the nation’s economy.


Just this year we’ve encountered several examples of entrepreneurial ventures and development initiatives that could be attractive to investors:

  • Ovamba is a financial services company that uses an innovative lending model to provide short term capital to small and medium sized businesses.
  • An American entrepreneur has made a big bet on palm oil in Cameroon. His business produces substantial volumes and has strong support from the local community.
  • We have been made aware of a major initiative by government to improve the Cameroonian infrastructure. Contractors an financial investors can select from dozens of projects in several sectors including transport, agribusiness, and electric power.


Anglophone meets Francophone. Though mostly French speaking, Cameroon has a significant English speaking population, making partners, and staff available for both language groups.

Bridge to West and Central Africa. Cameroon often identifies and is identified by others as a Central and West African nation. For this reason, and due to its location Cameroon can serve as a base of operations for Central or West Africa.

On the verge of becoming an LNG exporter. Oil and gas are fields have been developed on and off shore on the West African coast. Cameroon is a part of the west coast African oil story. LNG reserves are large enough that Cameroon may soon become a gas exporter.


President for life? President Biya his held office for 35 years. The country seems stable so far, but one wonders about the succession plan and whether an orderly transition will occur.

Anglo & Franco living together. The combination of Anglophone and Francophone that is a source of strength for Cameroon can also be a source of division and instability. So far that has not occurred and we consider this to be a minor issue.

We would love to hear from other business people about their experiences and impressions of the business climate in Cameroon. Your comments are welcome.

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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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3 African Currencies – Outlook for Direct Investors

What follows is a brief analysis of the behavior of currencies in 3 important African economies.

The persistent trade deficit that is the norm in Ghana seems to be increasing. That deficit contributes to price inflation and the two conditions combine to weaken the currency.
The Ghana Central Bank is fighting back by raising interest rates which are already high. The cedi is likely to remain weak until the general pattern of Ghanaian trade changes. One of the reasons for Ghana’s growing trade deficit is the increase in equipment imported to support oil production which has not yet reached the desired production levels. When oil production will grows to the point at which it reduces the need to import, and when Ghana develops additional sources of high value export earnings, then a lower trade deficit will become the norm.
Although investors should build currency weakness into their assessment of Ghanaian deals and projects, they should also build the ability to raise prices locally into financial forecasts, and consider Ghana as a possible export platform.

The shilling has fallen only about 1% in the last year and a half through March 2014. Since then it has stayed within a narrow range.
Kenya’s trade surplus is rising and so are international reserves. The Kenyan Central Bank has kept interest rates steady and treasury bills have fallen slightly. It seems a radical devaluation is not likely, though the shilling/dollar rate might move outside the 86-88 range where it has been for about the last 18 months.

Recent inflation has been falling on a quarter on quarter basis. Nigeria’s trade surplus increased during 2013. Interest rates held within a narrow band during 2013 and have fallen a bit in 2014. Naira has stayed between 155-165 for 2 years. While the naira could lose a little ground vs the dollar simply due to much lower US inflation, many investors consider it stable for investment purposes.


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For managers and entrepreneurs seeking private investment to fund an enterprise, the current environment is challenging, though still an improvement compared to prior decades. In Part III of our series, we offer 5 takeaways from 2013. These are concepts that are particularly appropriate to current market conditions and sensible in any period in the cycle.

1. Be mindful of the investing environment. We recall from Part I that private equity activity was down somewhat in 2013. Deals were down 7% and fundraising down 19% from the previous year. We know that the BRICS and other emerging economies have slowed down. So for the time being at least the emerging markets have lost some of their luster. All this has affected investor’s attitudes. Yet the long term outlook still looks good which is the message we stick to and the reason emerging economies still attract investor interest.

2. Owners and management should have a realistic understanding of the value of their enterprise, and where it fits into the spectrum of potential investments. They should also have thought through carefully their mission and objectives for the enterprise, for themselves, and for their communities.

3. Demonstrate the strength of the business model including evidence that the business or project can provide consistent cash flow. Examples include:

  • Signed contracts for current and future sales
  • For housing developments, a significant proportion of homes pre-sold either to residents or a large employer buying for its staff.
  • Offtake agreements for energy and power projects
  • Infrastructure projects that can collect tolls or user fees

4. Government support never hurts. Although most developing countries have improved business and political climates, they are still relatively difficult places to do business. It is therefore desirable to be on good terms with the relevant government bodies so. When everyone’s interests are aligned the red tape can be minimized.

The extent to which government backing is needed varies with the type of deal. For small startups it may not be necessary at all. In some cases the government is the customer then of course the company must be in a position to win a contract. In lieu of a contract, an MOU or government guarantee may be sufficient.

It should be noted that while government support is crucial, companies should avoid any activity that can be construed as corrupt as it will be an immediate turnoff to the investor. US investors are especially wary of running afoul of the Foreign Corrupt Practices Act. Any investor not appropriately concerned is probably one to avoid.

5. Strength of the management team. Investors look for relevant experience, a level of professionalism and an understanding of international performance standards. Most important, management and founders/owners should be prepared to act in the interest of building the value of the enterprise.

Current market conditions in emerging market PE investing indicate a plateau in deal growth. In this environment founders/owners should pay special attention to those factors that attract good investors. We think this is a short term phenomenon—a sensible pullback from the emerging market fever of the past few years. However the broader demographic, economic and geopolitical trends will continue to favor emerging markets in the long run. We believe capital will flow towards companies that have strengthened their foundations during the current slowdown.


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This 2nd installment of our private equity series looks at how investors have succeeded this past year. While these tactics are well known by major private equity institutions we also consider the smaller investor and those investors new to emerging market investing. This investor could be a family office, or an accredited individual investor or investor group that prefers direct investing over the limited partner role. [We will use the term “small investor” to encompass all of thee groups realizing that they are not always small in dollar terms] The approach we advocate comes under the general heading of value enhancement or value creation.

Successful emerging market investors contribute more than money to the success of their portfolio companies. With their own resources and by marshaling expertise in their networks they can enhance the value of these companies leading to a more favorable outcome at exit. This is typical of the large PE firms whose senior staff often have operating as well as financial experience.

Although not all investors will have this kind of expertise on staff, those with strong networks can mimic the kind of value enhancement that is standard procedure at the large institutions. There are professionals with region or sector specific expertise that can deliver on an outsourced basis what they cannot do in house.

Here are three value enhancement strategies:

1. Upgrading business processes


The investors’ due diligence should include an assessment of the company’s strengths as well as any challenges that would impede its ability to implement its business strategy. Process improvements can occur in any of several areas:


  • Distribution

  • Strengthening the management team

  • accounting/finance/risk management

  • ESG (Environmental, Social, and Governance) upgrades such as social impact measurement using IRIS, implementing a diversity strategy, or improving environmental sustainability


Small investor’s approach: Engage advisors with background in: the portfolio company’s industry, accounting and/or finance, ESG reporting & measurement.



2. Help portfolio companies open new markets


Within their region – especially important in African countries where it makes sense to combine several small country markets into larger regional ones.


In investor’s home market. There are companies that assist international firms in entering and selling in the US.


Essential for companies with small domestic markets. Opening new markets is key for Caribbean companies who need to go outside their small markets in order to scale.


Small investor’s approach:


Use investor’s network to link portfolio company to export opportunities.


Engage business development & marketing firms that specialize in helping foreign firms enter the US market



3. Provide constructive influence to portfolio companies even with a minority share


Small investor’s approach:


Work with companies where entrepreneurs’ managers’ and investor’s interest are aligned. Use the due diligence period to assess the mindset and culture of management. Look for:


  • Management teams and shareholders with a long term outlook

  • Shareholders with skin in the game, cash or mortgageable real estate for example.

  • In some cases it is feasible and desirable to have a level of decision making authority written into the deal.


Create alliances with like minded shareholders.


These are some of the ways in which a small PE investor can be helpful to emerging market portfolio companies to the benefit of all stakeholders.



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Emerging Market Investing – Lessons from 2013




Investors from large institutions to family offices are showing considerable interest in investing in emerging and frontier markets. The slowdown in emerging market growth is seen as a short term detour in a long run growth story. This post is the first of a three part discussion of private equity investing in today’s emerging markets.


As background we begin with highlights of private equity activity in 2013, culled from various reports from The Emerging Markets Private Equity Association, Alternative Emerging Investor, and Ernst & Young, with our particular focus on Latin America and Africa:


  • Total emerging market PE investing in 2013 was $224 billion in 883 deals, a 7% decrease in dollar volume from the prior year.

  • Most of the growth in capital deployed occurred outside the BRICS—on the so-called frontier. Several of these deals were in East Africa and Latin America (not including Brazil). These economies are growing during a time of relative sluggishness in the BRICS.

  • One non-BRIC, Mexico reached a five year high in capital deployed in 2013. Mexico was also the scene for Axis capital’s buyout of Oro Negro for $200 million, one of the ten largest emerging market deals of the year.

  • One fast growing sector within the private equity universe is venture capital. VC investing made up 43% of the deal activity in 2013 vs 17% in 2009. Many of these deals were in emerging Asia where the tech sector is more developed and more connected to the western tech ecosystem. Most of the major investors have been US based firms like Sequoia Capital and other familiar names from Boston and Silicon Valley. That said, one of the biggest emerging market VC deals was online language school Open English of Panama. A burgeoning tech sector is also developing in Africa with hubs in Kenya, Nigeria and Ghana. We discussed the growing African startup ecosystem in an earlier post. Many of the companies are of a type that can scale across borders and would be attractive to VC investors.

  • 2013 Deal volume in Africa reached its highest level in five years, up 43% to $1.6 billion according to EMPEA.

  • In Africa these industries saw the most deal activity in 2013:

  • Oil & gas
  • Electric power
  • Financial Services
  • Telecommunications


One sector where we do not see a large private equity presence is housing and property. Yet there are vast housing shortages in the most attractive countries. One possible reason could be the emphasis on affordability which requires holding prices down which would of course depress potential returns to investors. We have nevertheless seen that with the right mix of properties, a project can be structured in a way that satisfies investors and contributes to the availability of housing. Investors with a model oriented toward project financing should find attractive deals in the housing and property sector.


It has also been noted that African deals have tended to be smaller than those in other regions. It is possible that the bigger PE shops are passing on deals simply because they are too small or have less opportunity to scale or to grow a pan-African enterprise. For this reason we believe there is an opening for smaller PE firms, family offices and other direct investors.


In the next post we will explore the lessons from 2013 from the investor’s perspective, focusing on the smaller direct investor in a family office or small fund.



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African IT expert Comments on African IT Challenges, Value of the Cloud and Virtualization

This post features the insights of Walter Kwami, an infotech expert and entrepreneur.  Walter has spent several years supplying computer hardware and accessories in the developing world. He currently owns an internet cafe in Accra, Ghana. Walter’s comments are part of an ongoing dialogue we’ve had on the state of computing in Africa. This is real food for thought for anyone interested in developing human capital, seeking investment opportunities and improving African economies’ access to global supply chains.

English: Diagram showing three main types of c...

English: Diagram showing three main types of cloud computing (public/external, hybrid, private/internal) (Photo credit: Wikipedia)

You hit the nail on the head – training is by far the weakest link in the chain. It is the single most important reason that previous efforts at computer education hasn’t lived up to expectation. Case in point – a primary school in our neighborhood would rather avail themselves to the resources at our cafe than use their own computer lab. When I asked why, the teacher told me the students were the ones that brought the school’s attention to the fact that their lab was practically useless compared to what they are able to do in our cafe. The requisite knowledge to train, maintain, upgrade and update the school’s computers was simply lacking. 
Cloud computing and virtualization is already upon us, the average African user is already heavily invested in the cloud in one way or the other. The main issue facing providers is bandwidth, but that is also changing. Take a look at this map: http://manypossibilities.net/african-undersea-cables/. Less than a decade ago the entire country of Ghana was sharing a 340Gb undersea cable with other West African countries. Today two new undersea cables with bandwidths of 1920Gb and 2500Gb have gone live (see map). Of course the challenge remains the last mile. Once that last mile access improves, bringing down the cost of bandwidth, cloud and virtualization will really take off in the enterprise and institutions. 
Imagine a company that currently depends on its internal IT to host servers, applications, support users, manage and update their systems, protect against intrusions, all in an environment where the infrastructure is unreliable – i.e. frequent power cuts, requiring further investment in expensive generators. In many instances their IT personnel have limited expertise and lack the requisite technical skills. With cloud and virtualization such an organization can host their applications such as email, Office 365 http://www.microsoft.com/en-us/office365/compare-plans.aspx), in the cloud and simply access them through their browser. Not to mention data backups to the cloud. Power cuts wouldn’t be as disruptive since they can use laptops, tablets, and mobile gadgets to access their applications and productivity tools. Such an organization could even employ a well qualified IT person in the US who would work with the local IT personnel to support the organization. 
I am currently doing something similar for a company in Ghana, and since the bandwidth is reasonably reliable, I’m pretty much always online with the guys in Ghana through my iPhone, Skype, Google+, etc. We share ideas, and train on new technologies as they become available  Often times some of them bring new technologies to my attention before I even know about it. The key here is access to, a) expertise/mentoring, which is made possible by b) reliable bandwidth. Recall the distance education product we discussed about 5 years ago? Slow bandwidth was the bane of distance education. Distance education will explode with improved bandwidth (this is already happening to some extent).
I once asked a class I was training how many people knew how to use computers. A few hands went up. But when I asked how many people have a Facebook account almost everyone raised their hands. How were they accessing Facebook?  You guessed it, every single person in the class had a handheld. Folks have Yahoo and Gmail accounts, store their photos taken with mobiles phones in the cloud, chat, email, text, watch YouTube, etc, all from their handhelds. Google recognized this major trend a few years ago, which is why they debuted Google Trader in Ghana and Uganda (they have since expanded to Nigeria). http://www.google.com.gh/local/trader
Basically, anyone with a mobile phone or computer (the vast majority of users are accessing the service on the mobile phones) can advertise and/or browse what’s for sale on Google Trader and transact business. The service has caught on quite well and will continue to grow in leaps and bounds. Bear in mind that accessing the cloud on a mobile phone is as simple as topping up your device – you buy credits, load it to your device and start browsing, whereas accessing the cloud through traditional computers is a lot more complicated. The ease and simplicity with which mobile devices enable access to the cloud is what drives adoption, as well as being largely immune to those frequent power cuts (most folks have multiple batteries for their mobile device). Services such as TxtNpay http://txtnpay.net/ even make it easy to load your device by purchasing and distributing phone credits through that very device. 
Without question cloud computing and virtualization will enable Ghanaian companies compete globally, maximizing their IT investments, while cutting costs. I believe their IT employees stand to gain more as they will be able to focus on improving their technology skills and supporting the organization as opposed to being distracted by infrastructure issues unrelated to their job. 
As to how best to solve the training issue, my bet is any initiative should consider access to reliable bandwidth as a critical component of the overall strategy. I believe there will be no shortage of volunteers from developed countries willing to share and collaborate with those in the developing world if they can easily do so in the cloud.

Best regards,

Panorama of central Accra

Panorama of central Accra (Photo credit: Wikipedia)

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Emerging Market Private Equity Investing in the First Half of 2012

The Emerging Markets Private Equity Association has just released its private equity industry statistics for the first six months of 2012. In the first half of the year emerging market fundraising is on pace to be slightly lower than 2011. Several pan-regional funds had very large closes while funds investing in Latin America or Africa had a smaller share of the emerging market total.

Definition of Sub-Saharan Africa, according to...

Sub Saharan Africa

The story in Africa is one of deals closing amid a sluggish fundraising climate. Africa’s share of emerging market fundraising is down slightly in the first half of 2012. Meanwhile contrary to emerging markets as a whole, investments in Africa are on pace to increase in 2012 compared to 2011. One could speculate that there is excessive risk aversion towards Africa caused by concerns about institutional strength and political risk. Consequently general partners are finding a steady stream of deals in the pipeline and available funds are quickly invested. Given the growth potential in energy and other sectors and the urgent need for improvement in housing and all manner of infrastructure, there will be no shortage of potential deals to be constructed.

The African investment landscape suggests a need to better inform investors and assist them in evaluating and managing


Latin America and the Caribbean


Latin America & Caribbean

After a strong 2011 PE fundraising in Latin America has been much slower in 2012, though probably still ahead of the 2010 pace. 2011 was probably a bit inflated by a few large fundraises for Brazil.

Investment in the region also appears to be at a slower pace than in 2011. After a big year in 2010 investment fell in 2011 and this year looks weaker still. The weak global economy is probably a factor, but also the threat of nationalization in some countries has to be a cause for concern.

Brazil in contrast with the rest of the region is seeing healthy levels of investment in 2012 as investors see the country as investor-friendly and a decent long term bet despite the current slowdown in economic growth.

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Smaller projects soon eligible for Carbon Emission Credits

According to the Bloomberg story below, entrepreneurs will be able to access the carbon credit market for smaller projects.  Could be time to adjust those business plans.  Investors, this is an additional boost to the ROI!



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Game Changing Gas Finds off East African Coast

It’s  not the cleanest fuel but it’s the cleanest fossil fuel and each new discovery promises to bring the price down and offer a cleaner alternative to oil and coal.

Anadarko proposes $15bn in new investments to access newly discovered natural gas off the coast of Mozambique–whose entire GDP is on l $12bn!

If managed correctly the subsequent increase in foreign direct investment will be a huge boost for the economies of Kenya, Mozambique, Tanzania and other East African nations.

The US Geological Survey says East Africa’s coastal region has more natural gas than Saudi Arabia!

For the full story click below:



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