Monday, December 29, 2014

Africa Investing insights & enlightenment

I intend to cover a few key points regarding overseas investing with focus on Africa.

First off, its harder to generate returns in Africa than I imagined a few months back. 

Returns are likely to be in a very narrow set of stocks.

Essentially, I can lie with statistics, ( to prove just about any point. That is why crowds of men (and women included) diverge vastly on opinion in the world on just about any domain, even ready to kill each other, not recognising, perhaps they can be ignorant, or worse blind. 

This difference of opinion persists due to ignorance. Concentrated portfolio makes money and Diversified portfolio makes money, equal, depends on the person and circumstances. Consensus equity ideas make money, abstruse and arcane make money, equal, depends on the person and circumstances.

I can prove that future of Nigeria is great, or bleak or mediocre with statistics and facts and pull the wool any which way.

In truth, we are operating in a range of probabilities in every discipline.

20 / 2

This is not the 2% of Assets and 20% of commission of Hedge Funds but the stark reality of Africa.

Earning 20% consistently in Africa is 2 hard, there simply aren't companies growing that fast as they are in India. 10-15% expectation is more likely to keep your sense of balance and sanity.

Few Stable Countries

Most of the continent is still under developed with key levers of infrastructure, stability, political will, strong institutions missing to make exponential gain.

Not to say that there will not be 100 baggers in Africa, but the soil needs more tilling. The proverbial mall is still under construction and you are unlikely to sell you wares in the shop.

Few countries offer the stability one seeks, with about 2% of portfolio investment in Nigeria made till date, waiting keenly for the next economic outcomes to increase holdings. 

Exchange Rate Risk

Most of the currencies depreciate against USD as they run deficits, one can hedge but there is a cost involved. That may further mar the returns in USD terms.

South Africa

Perhaps what I overlooked at first was the opportunity to invest from South Africa, disregarding it as an already mature market. 

One of the issues with South Africa is the Market Cap / GDP ratio of 160% ( around 12% for Nigeria, 90% for India, 115% for United States and 15% for Bangladesh), that would be repelling for a value hunter.

One can however, sift through companies that are keen and aggressive on expansion outside their frontiers.With local knowledge hey are best placed to win, rather than companies from United States, India or Europe.

One can relish the 70-80% cash cow margins of South Africa's stability and bet on aggression and exponential growth (whenever that happens) in other African countries.

Manufacturing or Trading or Service

I always had the bias for niche manufacturing, remember that Walter Schloss ( also expressed on one of his interviews his inclination to buy companies that make widgets or things than Service oriented companies.

Surprising, thanks to wisdom of John Sutton's Enterprise Maps (,companies with local knowledge in countries like Ghana or Ethiopia with trading background score over and are superlative to, manufacturing companies. An exception where local knowledge trounces niche manufacturing. These small trading companies eventually build out and conquer with manufacturing base.

Suitable Time cut-offs for fudging with statistics

There are only 15 companies listed on Dar Es Salaam stock exchange in Tanzania. And 5 out of those 15 have returned between 58% and 124% in the past 11 months. 

That does not tell you, after how many years of plateau. A couple of large institutions can move the market of total (30 Billion USD market cap) of Tanzania. 

Don't expect an encore next year from Tanzania. There are 54 countries in Africa. Next year one may see a different country where puck will be. This effort is an exercise in futility, akin to betting on the list of gainers in next one week ( on Bombay Stock Exchange where over 5000 companies are listed).

Mark Mobius Fund

"Nothing is cheap and this world is a vastly different place as it used to be in 70s or 80s. You may find value investor in unheard of countries" - Charlie Munger

Was reading on Mobius who is an emerging market super bull, he does not find anything cheap in Nigeria other than Banks (something I don't like to touch unless as a basket bet which as exactly what Templeton Frontiers Market Fund has done).

This 1.2 Billion USD fund has compounded at 11% CAGR for the past six years

New Markets

Waiting for more markets to come online. Angola grew GDP at 11% between 2001-2011 and may have equities listed by 2016.

Myanmar stock exchange has two listed companies and eight employees, a failure in short. Has plans to restart in 2015

Consciousness (Guy Spier)

Was reading an investment book recently by Guy Spier, Education of a Value Investor and around page 35 of 202 author approaches topic of Consciousness, how it builds the world and how we need to imagine the future even before it happens, so as to help create the future we want.

Any physicist will tell you we are just a vibration, the laws that we have not yet discovered are considered to be miracles. 

Mind and Spirit are the stuff where western Science (19th, 20th and 21st century western) falls silent, and has nothing to say. I find it somewhat strange that I grew up in India in 70s, 80s and 90s on stable western educational diet of cramming in intellect, no food for soul, despite the fact that literature of the country is richly preserved on matters related to spirit. 

Only intelligence is a valued currency, not emotion, not morality, spirituality is not even understood clearly because it is above mind, super mind, supra mental. Generally one does not even aspire for spiritual insights until material ambitions are nearly or somewhat exhausted and one challenges the existence intensely. This madness needs to reach a crescendo as gasp for breath for a drowing man, I don't believe yearning is so strong for the most of us, but I will try to sow a few seed thoughts.

Angola with GOL in its name reminds me of Sanskrit (several thousand years old language) word for EARTH is Bhugol.

Bhugol = BHU (EARTH) + GOL(ROUND). Nasa figures it was discovered around 500 BC by Greeks

Some other sources cite as recently is few hundred years back. This is not about which civilization and country gets the credit, but about the truth. All evidence points that numerous past civilizations in Atlantis, Greece, India had interstellar travel and vast knowledge. Sri Yukteswar explains the basis of how the knowledge gets lost, descending cycles through which mans ability and consciousness descends, intelligence loses its keen-ness and dark ages come about.

Similarly, it is generally believed that Universe is Expanding was discovered by Edwin Hubble ~1929, only thing incorrect with this statement it is that it was re-discovered.

Numerous past civilizations have already figured this. Again a 5000 year old example from India, in Sanskrit the word for Universe is Brahmanda, BRAHAMANDA =BRHA (Expanding) + ANDA (EGG)

Unfortunately, even in India, aspiring for expanded consciousness is considered a wild goose chase, a retirement plan or something to be accomplished after death :-) and not something to be done with day job ! Knowledge of Spirit wasn't the only thing that was discovered by the ancients. Western science at large believes that man was a mud eating nincompoop monkey just 10,000 years back.

Our plan for ourselves is too small, the maximum an ordinary individual can conceive of is only some material riches, health and long life, eg: becoming a King of United States (that may require change in constitution), a harem of Miss Universes. The problem with this plan is that ordinary person cannot imagine being a superman, an insect that thinks and imagines like an insect is still an insect still, be it in a mud puddle or in a palace.

 A quote would not be out of place here: "My Guru found no insuperable obstacle to the mergence of human and divine. No such barrier exists, I came to understand, save in man’s spiritual unadventurousness."

Disclosure: Vested interest in Africa. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.


  1. Dear Amit,
    Lot of distractions in your write-up....from Markets to Sanskrit to Astronomy...etc
    Still good to read.

  2. Dear Karthik

    Sorry :-)

    Technically Guy Spier started the topic on Consciousness on a book on Value Investing

    So, I would not let him have the last word :0


  3. Interesting read. More one studies a subject, more he realizes that how little he knows. Trend following backtests go to fractrals which break further till infinity, ed seykota gave up, Richard feyman while solving quantum said, u cannot calculate it, probabilities r in zillion. May i i direct u to Gary weber, happiness beyond thought blog (google it) who is a ramana maharishi follower who talks about everything being predestined. Who knows, ur thinking about this topic at this time and my writing to u also part f the bigger scheme.

    1. Have lot of respect for Ramana Maharishi, read about him and how he transformed experiential-ly so many around him.

      Thanks for the link, will go through. There are 10,000 books written daily on this planet, probably many zillions in a day in the Universe.Obviously we cannot read and retain all the knowledge.

      So, how to know everything. Upanishads raise this question: "What is it by knowing which everything else is known?".

      One interesting thing I have learnt is that even though we are 99.9% similar to a Chimpanzee, both physically at genetically, we are at the cusp of breakthrough to expansive consciousness, a new species ready to evolve out of us, some of which have been at the forefront of this evolution, whose books have become the scriptures of the world.

      I don't why people read fiction, reality is so intriguing and full of mystery and wonder.

      All the best

  4. Great article on agriculture in Africa

  5. Hi Amit,

    I'm a small retail investor and have been reading your blog since December 14. I know i've missed the boat as far as india is concerned ( burnt my hands pretty badly in 2008-2010 )but looking at your insights of other markets it looks promising. I'm working as an IT professional and get a regular income. I'm interested in stocks and markets but do not get enough time to read about value investing. I almost lost 80% of my capital as a first timer in stocks. I've learned my lesson but still missed the boat ( pretty busy with timelines ).. I would like to know your suggestion for someone with 2-3L seed capital how to invest in international markets. I know your fund minimum amount is 5-6L, but i'm more into putting money regularly.

    Will miss your Multibagger pics for India :o(.. I've read on now MF charges will eat up the returns in long term.

    Chetan Jain.

    1. Dear Chetan

      Sorry to know about your losses, everybody loses in stock markets, more initially and less later. You are no exception. Just take heart that you have not lost 200 crores which you could have as well if you were first timer with that much of capital. Eventually you will build several 10s of crores in stock market.

      Please go through the previous years' posts, you should find links to brokers in Bangladesh, Sri Lanka and Nigeria. You can invest with 2-3 lacs or even 1 Lac INR yourself in those countries.

      I got your email and some of the advisors you have mentioned, you can subscribe to them for their advisory services for Indian market.

      All the best

      Kind regards



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