Business Trends and Opportunities in Africa

Africa is becoming increasingly attractive to international investors. Only Asia is ahead of Africa in terms of investor perception of future economic growth. Indeed, Africa’s share of new global foreign development investment (FDI )projects has steadily improved over the past decade and is forecasted to grow to US 150b in 2015 while Africans themselves are leading the growth in investment across the continent, according to study by Ernst & Young’s 2011 Africa Attractiveness Survey.

While the usual preferred investment destinations such as Angola, Egypt, South Africa and Nigeria still account for the bulk of FDI, other countries which were not initially the focus of international investors such as Sudan, Republic of Congo, Ghana and Mozambique are quickly rising.

As one can imagine, the reasons for Africa’s attractiveness are largely based on her immense natural resources. Indeed, Africa holds 40% of the world’s gold; 80% of precious metals (i.e: chromium and platinum); 10% of oil reserves and 60% of the world’s total uncultivated, arable land – a resource in short supply and sure to be in high demand given population pressure and increasing food prices. As for oil, new producers such as Ghana, Sudan and Equatorial Guinea are being added to the traditional power houses (Nigeria, Libya, Angola and Gabon) and that list is certain to grow as new oil reserves continue to be found. A U.S. government study show that 25 percent of the U.S. oil supply will come from Africa’s Gulf of Guinea by 2015. Finally, Africa is also home to the world’s largest producer of cocoa in Cote D’Ivoire and ranks first or second in the world as a producer of bauxite, cobalt, industrial diamond, phosphate, platinum, zirconium, etc.

And while investors have often focused on these traditional resources, they have overlooked Africa’s other achievements and assets. Indeed, Africa has a young population on which to lay the foundation for her future growth – the top 10 countries in with youngest population in the world are all in Africa. Some of the reforms undertaken on the continent are bearing fruit as evidenced by African economic resilience through the global financial crisis with the sub Saharan region rebounding and recording a growth rate of 5% in 2010; 5.5% in 2011 and 6% in 2012. Perhaps an even more telling sign of Africa’s economic strength and outlook is that from 2000-2010 the fastest growing economy was Angola – not China. During that same time, six African economies were among the fastest growing economies in the world (See Business Trends in Africa: Myths, facts and the way forward for more info on best countries and investment sectors)

It is important however, to not lose sight of the fact that Africa is a vast and very diverse continent and both economic progress and the business environment are uneven as evidenced by research from the World Bank aptly titled 50 things you didn’t know about Africa:

• Exports rose from $319.0 billion in 2007 to $413.7 billion in 2008, a 29.7 percent rise; conversely, imports rose less than exports, from $305.3 billion in 2007 to $372.1 billion in 2008, a 21.8 percent rise.

• In Mauritius there are 22 children per primary school teacher; the ratio is 91 per teacher in the Central African Republic.

• It takes 16.6 days average time to clear customs on direct exports in Cote d’Ivoire and 3.8 days in Gabon; conversely for imports it takes 31.4 days in the Republic of Congo and 4.4 days in Lesotho.

• In 2010, starting a business in Guinea requires 213 days for each procedure; it takes 3 days in Rwanda.

• South Africa has 924 mobile phones per 1000 people; Eritrea has 22 per 1000 people.

• The percentage of firms expected to give gifts to secure a government contract is the highest in Congo Republic at 75.2 percent and lowest in Mauritius 8.8 percent.

• Between 1990 and 1999 PPP GDP per capita growth was 15 percent ($1,158.9 to $1,327.8) for Sub-Saharan Africa; in between 2000 and 2008 it was 54 percent ($1,372.9 to $2,113.9).

• In Chad, 9 percent of the population has access to improved sanitation facilities; in Mauritius 94 percent have such access.

It is therefore important for businesses and individuals who plan to invest in Africa to be aware of the business areas and countries that hold the highest potential for return on investment as well as obstacles and associated risks of the business environment. You can learn more about sectors with high potential for return on investment and how to mitigate investment risks on the continent by accessing a presentation I made in Amsterdam on Business Trends in Africa: Myths, facts and the way forward.

Property Management Tips For Investment Property Owners

Property management knowledge and experience is very important when it comes to managing the properties that are in your portfolio. The care and attention that a property manager takes with an investment property can make a huge difference to the success of an investment property.

If a property manager is careless with the management there are several things that can happen, some of which are listed below:

1. Rents will start to accrue and will be difficult to recover, even to the point where there may have to be legal proceedings

2. Tenants damage the property

3. Maintenance is not kept up to date and over time what would have been ‘repairs’ become ‘replacements’ which is a much more expensive exercise

4. Rents are not achieving full potential because the property is not as attractive and competitive as others on the market due to it looking ‘tired’

5. There is major damage to the property and tenants are not removed promptly

So to ensure that your property will be managed properly here are some tips:

1. Research the area and find out where the good property management teams are. Speak to them and interview them to find out exactly what services they offer and what charges they make.

2. Check that they send you monthly reports on the property and three monthly inspection reports. In this day and age there is no excuse that they cannot take dated photos to send to you.

3. Tell them that you would like to inspect the property with them at least once a year so that you can personally keep updated.

4. Discuss with your property manager your purpose for owning this property as regards cash flow, costs, future goals (rehabbing or freshening up between tenants, etc) so that they know exactly how you want the property managed.

5. If you find that you cannot get the satisfaction you want from a property management team do not hesitate to finish with them. Before you do though, make sure that it has not just been poor communication that has caused the problem and one which can be fixed quite easily.

As a property investor you are in the business of property investing to make money so you do need to take responsibility of the running of it as a business. You need to treat the property manager as an extension of your business and ensure that there is good and frequent communication between both parties. Don’t do as I have heard being done, not make contact then 12 months later wonder why everything is not going as well as it should be. Insist on those reports and make sure that you are reading them and giving them the tick of approval.

Equity Investment: Benefits And Risks

Equity investment refers to a long-term stock investment strategy whereby profits are made through dividend payments and capital gains made on the equity of any particular stock in the market. Equity capital is the money that is gained by a company in exchange for a share of ownership in the company. It is a type of loan to the company which is sometimes paid back and sometimes not, by way of dividends paid out of the company profits or through the sale of the ownership rights. Though investing in the stock market can be extremely lucrative, it can also be risky at times. The equity investment market has produced remarkable profits over time and many experts expect the performance to be consistent even in the future. Equity investment ranges from common stocks, preferred stocks, real estate and any other forms of real estate.

Having an equity investment means that you are free to choose and pick with whom you want to invest your money. You can do your research regarding the company, and find out about how long the company has been into business, the profit that the company has made, their stock prices and many other things. Also when you begin to invest, what you can do is take some stocks that are of your interest and mark their price everyday. Repeat the same thing for the next four to five weeks. At the end of this period, you will come to know how your investment has performed. If over the period the stock has made some profit, you can go ahead and invest. It has been the latest buzz in equity investment. The companies that offer equity investment banking keep their clients updated about the performance of their portfolio through regular monitoring, performance analysis and consultation.

But between the profits, we should not forget that equity investments are subject to market risks. Equity investment banking should be handed over to a professional fund manager who has ample experience and knowledge in the field. You should not solicit advice in brevity, if you wish to invest. However, you need to keep in mind that you won’t be able to make money if you are not ready to take risks. Investment and risks are two sides of the same coin. However, as an investor, you should take only those risks that are related to the economy and the performance of the company. There are also some industry level risks which refer to the state of any current industry, company-level performance risks, governance norms, regulatory risks, etc. Therefore, you should read the offer documents carefully before you invest.