Tag Archives: Africa

Maybe Not Time For Recovery But Its Right Time For Investing

trade routes asia africaEncouraged by a rising demand from African consumers for mobile phones made in China, as well as by a sharp rise in the demand for commodities in Asia in general, cargo volumes from Asia to Africa are experiencing remarkable growth. In some instances, these incredible traffic figures are increasing two to three times faster than volumes between Africa and Europe; or even Africa and North America. This thriving trade between China and Africa, has created circumstances that have resulted in extremely profitable business opportunities for investors and shipping companies; from all corners of the world.

In Hong Kong for example, Tribini Capital and Mandarin Shipping both purchased container ships from distressed investment firms in Germany, with the intention of immediately chartering the vessels to shipping industry leaders already operating on the busy Asia and Africa trade route. The first two ships acquired by Mandarin are 2,100 TEU container ships equipped with cranes, that are currently sailing the trade route between South China and Africa. The container vessels were purchased because of their ability to serve niche markets across the African continent, where that type of container ship is well-suited for restricted-draft ports and are helpful in places where their cargo handling gear is needed to accommodate the loading and unloading of cargo.

Although neither Tribini Capital nor Mandarin Shipping has expressed an interest in exclusively focusing on the container ship sector of the global shipping industry, they did communicate that they “do see opportunities there, given the current problems in the German KG market” (Mandarin Shipping Director). In fact, Tribini Capital has told their investors that they can expect an internal rate of return of (more than) 20 percent, as a result of these purchases and favorable trade market conditions.

I don’t think it is the right time for a recovery in shipping, but it is the right time to buy assets.”- Tribini Capital

investments in africa

Strong Growth in African Economies is Attracting Investors

africa investments

If you are considering an investment in emerging markets, Africa’s equity markets are becoming a very popular destination. An increasing number of investors have been attracted by the sub-Saharan region’s GDP growth rate of more than 5 percent, as well as by the performance of the main markets in Nigeria and Kenya, which experienced a rise of more than 50 percent in the last year. The downside for Africa’s economic growth, is that the country is short of savings and capital. Albeit unfavorable for a growing nation, this creates an incredible opportunity for investment-seekers who are searching for a better investment return, than is typically available in their domestic markets.

North Africa, which is closely tied to Mediterranean trade, is fairly well developed and is seen by some investors as an appealing investment option worth considering. South Africa, the continent’s biggest economy, has a slower growth rate than most of its neighbors; but has developed much more mature consumer and financial industries. With that being said, the real source of excitement for many investors is the so-called “frontier markets” of sub-Saharan Africa. Although sub-Saharan Africa is the largest of the frontier markets, only a small percentage of the slightly more than two hundred shares listed on Nigeria’s stock market, are liquid enough to make mutual-fund managers want to invest. Beyond the established markets in Nigeria and Kenya, investors are likely to discover (what analysts are referring to as) a big “liquidity cliff.” At this point, the next-largest exchange for investment-seekers is Zimbabwe and it has been said that on any given day, even reputable stocks can be hard to buy and sell in that market. Because of these challenges, investors are seeking an opportunity that will deliver long-term investment success for interested members of the international investment community.

Nevertheless, given the political and financial troubles in other parts of the world, Investors in Africa are investing in the continent’s progress towards a formal and regulated economy; with stable politics, the rule of law, independent central banks and stricter accounting guidelines. And, as Africa’s stock markets deepen and valuations start to rise as a result of the consistent progress, private-equity firms will increasingly look toward the region’s markets, in hopes of identifying profitable business and investment opportunities; that offer investors very good reasons to invest. Even so, there are some members of the investment community who worry that because private equity in Africa is different from its equivalent in America and Europe, family-owned businesses may be unwilling to concede control of their company; by selling “shares.”

This has captured the attention of investors who have repeatedly expressed concern that the supply of fresh equity available in African businesses, may not be able to keep pace with the demand from wealthy international buyers. Whereas a typical deal in wealthier parts of the world might involve acquiring an established company and then loading it up with debt to magnify the returns, investors are quick to learn that in Africa, investment returns must come from revenue growth and efficiency gains; not from financial engineering.