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Investing in Africa


Guest Schwab711
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Guest Schwab711

Has anyone invested in Africa or looked into it? I'm specifically interested in the Kenyan market. Do you have any suggestions on a broker to use? I was looking at SBG Securities but none of the options seem overly appealing. Does anyone know of a relatively safe/secure broker that cover multiple countries on the continent, including South Africa and Kenya?

 

If you have researched or invested in Kenya (or generally, in Africa), how did you consider your rights as a minority shareholder when valuing these companies? Has anyone run into problems with asset seizures or illiquidity? Has anyone had their account or assets frozen temporarily or permanently?

 

Any personal accounts of investing in the region would be greatly appreciated!

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Guest bksimon

Africa Capital Group: Why we are bullish on Kenya

http://www.africacapitalgroup.com/2016/02/04/why-its-a-great-time-to-buy-kenyan-stocks/

 

Investing in Africa: Why it's a great time to buy Kenyan stocks

http://investinginafrica.net/time-to-buy-kenyan-stocks/

 

Posts on opening a brokerage account on various African exchanges:

http://investinginafrica.net/how-to-invest-in-africa/

 

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Guest Schwab711

Thanks, I found the same sites. I was just wondering if anyone had experience with a certain broker. It would also be great if anyone could share personal investing experiences. I'm wondering how badly minority shareholders are treated in reality or if I'm over-estimating the risks involved.

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I hold 2 stocks in S Africa. That may not be what OP had in mind. I would call S Africa a developing country and all others frontier countries.

 

I like the corp governance. They have a news service like edgar call SENS. So you get pretty prompt notice of things like earnings warnings, change of directors etc.

 

But I got blindsided by the drop in in the rand. It dropped some 30% due to the commodities slump. I regret ever opening a position in S Africa but now I just have to stick it out......

 

I trade this in the US with fidelity. It is completely online.

 

 

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But I got blindsided by the drop in in the rand. It dropped some 30% due to the commodities slump. I regret ever opening a position in S Africa but now I just have to stick it out......

 

Since I don't invest in Africa take this with a grain of salt - I think EM is a challenging space right now between the commodities slump, crazy high debt/ GDPs, and accelerating capital flight.  The links posted above illustrate basically why I'd tend to avoid Nigeria as a secular bet - the major index is well into its bear market amidst the general unwinding of credit.  If you were particularly unlucky currency controls might be instituted after your investment (I believe these have already been implemented in the case of the rand) and you'd pay a penalty if you tried to sell.  FWIW I considered shorting the rand last fall but my intuition for central bank policy is too limited at this point to render these safe trades.  But just keep in mind that when you buy stocks in local currency you take a double hit in bad times due to the stock decline/ currency effects as the poster noted.

 

Of course, the same effects might have worked in your favor in earlier times.  Africa was sexy in the early 2000s when the commodities bull market was well underway.  Go back and read the Jim Rogers interview in Inside the House of Money.  Rogers was extremely bullish on Africa at the time and visited extensively.  I can't recall his views on Nigeria specifically.  Other managers in the book were also buying up stocks and bonds in Pakistan, Turkey, etc.  My impression is the whole international diversification thing has gotten a bit out of hand.

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A slightly different tack you can take is to invest in USA & Canadian listed companies with all, or a vast majority of their sales & earnings in Africa.

 

I have done this for several years and have had mixed results.

 

Of course, this is heavily skewed towards commodities....

 

Two stocks that you could look at would be:

 

A). Nevsun (Copper, Gold, Zinc) miner in Eritrea.  It is listed on NYSE as NSU.  The stock pays a healthy dividend, has a healthy balance sheet and could be crazily cheap!

 

B). Caledonia Mining (Gold Mining) in Zimbabwe!  It is silly cheap and is listed on Toronto and USA OTC (CAL.to & CALVF).  I've done very well with this one.  It is a very exciting stock.  Very good balance, crazy good dividend, good earnings.

 

Of course, investing in ANYTHING to do with Africa carries an additional layer of risk.

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Colfax, through its subsidiary Howden Group, owns a majority stake in South African company, Howden Africa. Howden (HWN) is listed on the Johannesburg Stock Exchange.

 

It has a rock solid balance sheet with R600M in cash on a market cap of R1500M. Profit for TTM was R245M. Ex-cash it is trading at 3.6x. The stock is down YTD by 45%. Similar to Colfax, the end markets are challenged. I learnt about it when I was looking at Colfax. I have not looked deeper, but at 3.6x, it may be worth looking into it further.

 

Here is more info:

http://www.howden.com/AboutUs/bu/HAHL/Pages/Investor-Relations.aspx

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I looked into this in 2012. Looked at Brawlira, spoke with local Rwandan brokers etc. Google "oddball Brawlira" and you should find a few posts with comments. The comments are from people who acted and made the trade.

 

Africians are very happy to wok with Americans. Email them for info on opening an account and you're off to the races.

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One additional problem: I would not feel comfortable sending a broker in, say, Nigeria a copy of my passport and a proof of address. I feel the same about most other African countries. The damage that can be done by identity theft is so huge that it just seems like a bad idea to me, no matter how cheap the stock is that you're considering. You really need to be able to trust the people that have access to your personal information and be able to trust the security of their systems from outside attack.

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One additional problem: I would not feel comfortable sending a broker in, say, Nigeria a copy of my passport and a proof of address. I feel the same about most other African countries. The damage that can be done by identity theft is so huge that it just seems like a bad idea to me, no matter how cheap the stock is that you're considering. You really need to be able to trust the people that have access to your personal information and be able to trust the security of their systems from outside attack.

 

This +100.  I couldn't get over the same hump myself and never opened an account.  "Just send us a copy of your passport and bank details" is fine if everyone is trusting and everything secure.  But what if it isn't?  I imagined my details sitting in a manila folder somewhere on a desk just waiting to be "lost".

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One additional problem: I would not feel comfortable sending a broker in, say, Nigeria a copy of my passport and a proof of address. I feel the same about most other African countries. The damage that can be done by identity theft is so huge that it just seems like a bad idea to me, no matter how cheap the stock is that you're considering. You really need to be able to trust the people that have access to your personal information and be able to trust the security of their systems from outside attack.

 

This +100.  I couldn't get over the same hump myself and never opened an account.  "Just send us a copy of your passport and bank details" is fine if everyone is trusting and everything secure.  But what if it isn't?  I imagined my details sitting in a manila folder somewhere on a desk just waiting to be "lost".

 

Lol.  If you can't even trust your broker not to steal your identity, how are you going to feel comfortable enough with the local regulatory disclosures to make an investment?

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  • 1 year later...
  • 1 year later...

Has anyone invested in Africa or looked into it? I'm specifically interested in the Kenyan market. Do you have any suggestions on a broker to use? I was looking at SBG Securities but none of the options seem overly appealing. Does anyone know of a relatively safe/secure broker that cover multiple countries on the continent, including South Africa and Kenya?

 

If you have researched or invested in Kenya (or generally, in Africa), how did you consider your rights as a minority shareholder when valuing these companies? Has anyone run into problems with asset seizures or illiquidity? Has anyone had their account or assets frozen temporarily or permanently?

 

Any personal accounts of investing in the region would be greatly appreciated!

 

Did you finally opened a broker account in Kenya? I also would like to invest in some stocks of the Nairobi Stock Exchange, and I am trying to see in some body was able to do it. I also read the links in the first posts.

 

Thanks.

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