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At least 364 Kenyans crossed the $1 million (Sh92 million) mark in net worth last year, which excludes their primary residences, according to The Wealth Report 2015 released by Knight Frank.
The circle of Kenya’s affluent expanded to 8,764 in 2014, a 4.3 per cent increase from 8,400 in the previous year, according to research carried out by WealthInsight for the report.
The country’s dollar millionaire numbers have nearly doubled over the past decade from 4,482 people in 2004. High net worth individuals are forecast to increase by nearly three-quarters in the next 10 years to reach 15,249 in 2024.
“There’s a high concentration of wealth in Kenya because it’s a regional hub,” Ben Woodhams, the Knight Frank Kenya managing director, said during launch of the report yesterday. This is the first time The Wealth Report has been released in Nairobi.
Knight Frank said Kenya’s population of ultra-high net worth individuals – those with at least $30 million in assets – grew to 115 last year, and is projected to increase by 82 per cent over the next decade to 209. The country has 32 individuals worth at least $100 million, also known as “centa-millionaires”.
Most of the super-rich have substantial portions of their wealth decked in real estate, with respondents to The Wealth Report’s Attitudes Survey saying this currently stands at 31 per cent, nearly a third of investment portfolios.
“Kenya’s ultra-wealthy have been investing in overseas property in the past and have now started focusing inwards, raising their stakes in the local property market. Real estate is the world’s primary investment of choice for the wealthy and Kenya is certainly no exception,” said Woodhams.
Andrew Shirley, editor of The Wealth Report, said: “At least $100 million (Sh9.2 billion) is coming from Kenyans in the diaspora into the country every month. More of the mass affluence is being invested back home.”
Africa-wide, the number of super-rich grew to 1,932 in 2014. The UHNWIs are expected to increase by 59 per cent by 2024, much faster than the 34 per cent projected growth globally.
Ivory Coast and Tanzania are the two African states in the global top 10 list of countries predicted to more than double their UHNWI populations over the next decade. Tanzania will see its super-rich numbers doubled from 78 in 2014 to 156.
Uganda also features in the list of top 100 countries predicted to grow their UHNWI populations fast. Uganda’s dollar-millionaire population was 1,556 in 2014, and 21 individuals had $30-million-net-worths. Its UHNWIs will grow by 67 per cent to 35 by 2024.
“We have witnessed an increase in the number of ultra-high net worth individuals on our books, which backs this trend. For them [UHNWIs], it is increasingly becoming obvious that they are looking beyond just banking, and the overall management of their wealth is critical,” said Anjali Harkoo, head of wealth and investment at CfC Stanbic Bank, which sponsored release of the report locally.
The Wealth Report shows that of the $619 billion global commercial property investments made in 2014, private individuals channelled $153 billion into the asset class.
Ugandan farmer Ephraim Opusi had managed to make ends meet growing corn on his 5-acre plot in the hilly Kumi district in eastern Uganda. But now that he cultivates white sorghum, a grain used in beer brewing, Mr. Opusi has struggled to feed his six children.
“It has been a bad season,” says the 52-year old farmer, who is under contract with beer makerSABMiller PLC.SBMRY +2.68%
During his first season in 2010, Mr. Opusi harvested three tons of sorghum. It earned him $750, one of his best seasons. An average Ugandan makes $510 a year, according to World Bank data.
Encouraged by the earnings, Mr. Opusi ditched other profitable crops to concentrate growing sorghum. But he didn’t count on many other farmers doing the same, leading to a 20% increase in the price of corn and beans in his district.
Brewing giants such as SABMiller andDiageo DEO +2.11% PLC have invested millions of dollars into African farms, providing a guaranteed market—and better returns—to smallholder farmers as they look for more locally sourced materials such as sorghum. Food staples cassava and yams are also being supplied to brewers. Farmers are also growing less food, preferring to cultivate sorghum varieties specifically developed for brewing.
The result: Shrinking food supplies have led to higher prices, putting staples out of reach to many families.
“There isn’t enough land to accommodate both kinds of crops,” said Okasai Opolot, the head of Uganda’s crop production and marketing for the agriculture ministry. “More families are exposed to food shortages.”
Heavy investment in power, energy and transportation led to a 46-percent increase in investment in African mega projects in 2014, according to financial advisory firm Deloitte’s African Construction Trends Report.
The number of projects valued at $50-million plus fell from 322 to 257, but the total value of projects under construction as of June 1 increased from $222.77-billion in 2013 to $326 billion in 2014, Deloitte reports.
Southern Africa accounted for half of Africa’s construction load. South Africa had half the projects in the Southern Africa region, followed by Mozambique with 15 percent and Angola with 13 percent. Australia and India entered the project ownership database in 2014.
Of the 257 projects listed in the 2014 Deloitte African Construction Trends Report, 26 were public-private partnerships; 88 were private-sector projects and 143 were public-sector projects, according to SouthAfrica.info.
Energy and power accounted for 37 percent of the mega projects that broke ground in Africa in 2014, followed by transport (34 percent), mining (9 percent), property (6 percent ), water (5 percent), oil and gas (4 percent), mixed-use facilities (2 percent) and health care (1 percent), according to Deloitte.
So where did the money go?
North Africa got eight projects worth $9 116 million, Deloitte reports.
Crowdfunding is a way to raise money from a large number of people over the Internet to support a project. Crowdfunding has become common in many Western countries. Kickstarter and Indiegogo are two crowdfunding websites. Such sites have helped launch Western-operated projects. Yet crowdfunding websites are almost unknown in Africa.
Recently, the World Bank launched a program to help business owners in Kenya make use of crowdfunding. The bank’s Kenya Climate Innovation Center provides crowdfunding mentorship programs for small companies.
A World Bank study found crowdfunding could have a major effect in the developing world. But to raise money through websites, business owners need specific skills.
Edward Mungai works at the Kenya Climate Innovation Center in Nairobi. He says business owners need to be well connected to both individuals and organizations. He says they also need to know how to show their ability to use the money they collect. Finally, he says, they should show how their business would help society.
Three businesses in the program have launched campaigns. One of them is Wanda Organic, an organic fertilizer business. Marion Moon started Wanda Organic three years ago. Like many small African entrepreneurs, Ms. Moon found it hard to finance her business.
So, Ms. Moon says, she decided to try something unusual: online crowdfunding. She says banks would not finance her business in the early days. She had to depend on friends and family to keep her business going.
In some ways, Ms. Moon says, crowdfunding is similar to the more traditional ways Kenyans raise money from their communities.
“I think the word ‘crowdfunding’ is new to people. But the idea or the principle of everybody putting in a little bit to help a project, I do not think that is new at all. So I think one of the things we maybe could have done better is how we linked what people are used to, to this word ‘crowdfunding.’”
Edward Mungai says getting local support for crowdfunding has not been easy. He says most of the money is still coming from Westerners, and not from Kenya.
“Unfortunately, the people who are being reached, they cannot be able to contribute because there is no infrastructure to contribute.”
He adds that most Kenyans do not have credit cards. Marion Moon notes that those who do have credit cards are worried about online security.
Her Wanda Organic is halfway through its campaign. The company has only raised around six percent of its $45,000 goal.
She has one month left to raise enough money to build storage centers for her fertilizer. The campaign has been slow, she says, but she has not lost hope.
TED Fellow David Moinina Sengeh explains why he’s bullish about the “microgrid.”
Nearly 70% of the sub-Saharan African population doesn’t have electricity. That’s about 600 million people who are completely off-grid, often paying high prices in cash and health to use diesel generators, kerosene lamps and charcoal fires.
Recently, we’ve seen a wealth of stories about entrepreneurs who promise clever solutions for these unhealthy, smoke-belching products. The replacements may differ, but all seem to agree: Installing actual electricity infrastructure in Africa would take too long and be too expensive to be practical. So instead there’s a focus on products that, while often very smart, and certainly well-meaning, serve only one single use. I’m talking bike-powered mobile phone chargers, solar-powered lamps, “pot-in-pot” refrigerators.
I’m not alone in finding something grating about the idea that people living on the continent should make do with an inferior solution that westerners wouldn’t tolerate for a second. The cleverest solar lightbulb in the world is no replacement for a standard AC-current plug that allows you to power anything you want or need. Pot-in-pot refrigerators will not store and keep safe large volumes of vaccines and bicycles will not generate enough power to support any form of manufacturing or production.
A friend of mine, Sam Slaughter, is the co-founder of PowerGen, a company that wants to install “microgrids” across the continent. Microgrids are small, local versions of the traditional electricity grid. They can run independently, powered by fuel cells, wind, solar, and so on. Their autonomy makes them appealing in remote locations where sustainable energy such as wind and sun are abundant — and they help to pull the focus away from these one-by-one solutions, and toward giving homes and businesses real power they can use as they choose.
PowerGen’s “PowerBox” comprises 1.4kW of solar panels, 9kWh of batteries and a 3kW inverter. It supplies power to 14 clients in Nkoilale, Kenya, all of whom pay for the electricity via mobile phones. Photo by David Sengeh.
When I spoke to him recently, Sam compared the current state of the African energy sector to the state of the African telecoms industry decades ago. “The pioneers of wireless telecommunications in Africa made a big bet that African consumers wanted world-class mobile communication service, and they invested in the infrastructure to deliver it by building tens of thousands of telecom towers throughout the continent,” he told me. “They faced enormous risks — including serious regulatory headwinds from government-owned landline telecom operators.”
The result: African telecoms have famously leapfrogged the west, building mobile payment systems, for instance, that many western countries haven’t yet managed to pull off.
“Now,” Sam continued, “we are faced with a similar question in energy: do we as the private sector invest in infrastructure like microgrids to deliver the solution that the consumers want — which is grid-style, AC electricity — or do we ignore the lessons of the telecom revolution and decide that African consumers should settle for something less, which is DC-only solar lanterns and solar home systems?” No prizes for guessing which bet Sam is preparing to make.
I saw one of PowerGen’s microgrids in action recently at the Nkoilale community in Kenya, about 250 kilometers west of Nairobi and home to a solar-powered microgrid unit known locally as PowerBox.
It was managed by Lillian Muthoni, a restaurant owner who told me about how her life has changed since the orange box was installed. Before PowerBox, Lillian owned a set of solar lights and intermittently used a diesel generator to power her music system and a small TV for her customers.
She spent about 12,000 Kenyan shillings (US$ 130) a month on diesel for her generator and hated the fumes. Now on the microgrid, she pays about 2,000 Kenyan shillings (US$ 22) each month for the power she needs, leaving her money to buy new equipment for her business, such as a refrigerator.
Lillian Muthoni owns a restaurant in Nkoilale; now hooked into the microgrid, she now pays about $22 a month for power. Previously she’d spent up to $130 on diesel for a generator. Photo by David Sengeh.
PowerGen certainly isn’t the only company experimenting in this space (see Anil Raj’s TED@BCG Talk, Bringing power to millions). A December 2014 report from Navigant Research estimated that worldwide investment in microgrid enabling technologies will total more than $155 billion by 2023. All of them have challenges to overcome — microgrids, like many infrastructural developments in Africa, are expensive to install, and the initial lump sum necessary to finance these grids won’t be paid by poor clients.
Companies like PowerGen have their work cut out to explain the model: the Nkoilale unit that I saw was set up through funding from Kiva.org. And continued cooperation of regulators is also key. Thus far, East African governments have been open-minded about allowing micro-utility models to test and develop their approaches, but ultimately, access to electrical power must involve partnerships with the bureaucrats in power.
As a Sierra Leonean and entrepreneur who has lived in off-grid communities, I passionately believe that access to the reliable and sufficient power provided by microgrids can result in national-level improvement in education and economic prosperity. To create power for all, private and government institutions must invest in and harvest renewable energy to provide reliable microgrids for communities far away from connected major towns. That way, Lillian’s story can be echoed across the nation, and Africa can shine brightly.
Two Australian mining companies, Blackthorn Resources Limited and Intrepid Mines, which recently completed a merger, have embarked on a $460 million copper project in western Zambia.
Mozambique published a law enabling groups led by Anadarko Petroleum Corp. (APC) and Eni SpA to proceed with multi-billion dollar gas projects, setting financial and legal terms and allowing much of the revenue to be kept offshore.
The southern African nation’s council of ministers approved the law on Nov. 25 and included it in the Bulletin of the Republic dated Dec. 2, which was published yesterday in the capital, Maputo.
Eni and Woodlands, Texas-based Anadarko are considering whether to develop offshore fields that are estimated by Mozambique’s national oil company to hold 250 trillion cubic feet of gas. That’s enough to meet world consumption for more than two years. The country may become the world’s largest exporter of liquefied natural gas after Qatar and Australia.
The law “gives both sides considerable certainty and sets out clear parameters for future revisions, Anne Fruhauf, senior vice president and Africa energy analyst at Teneo Intelligence, said in an e-mailed response to questions.
The groups will have the legal and fiscal framework guaranteed for the 30-year duration of their exploration and production concessions, subject to meeting with the government 10 years and 20 years after the delivery of the first gas cargoes to revise the levels of taxation, it said. If no agreement is reached, they will pay a 4 percent production tax, or royalties, for years 10-20, and then 6 percent from years 20-30.Royalty Rates
The normal royalty rate for gas projects in Mozambique is 6 percent, but earlier deals with Anadarko and Eni had put it at 2 percent, Fruhauf said. Lower tariffs for the first 10 years of production are important for cost recovery, she said. ‘‘The government can seek to improve its take after 10 and 20 years, respectively, but within clear boundaries set out within the decree law,’’ Fruhauf said.
Another key provision is that companies involved with the projects will be allowed to keep gas revenue in bank accounts outside Mozambique, using a local account only to pay taxes, buying goods and services in the country, and paying local workers. Expatriate employees will also be able to be paid in foreign currency into foreign bank accounts.
The groups now have six months to submit a joint plan on how to develop gas reserves that straddle the two areas they are licensed to exploit in the Rovuma Basin on Mozambique’s Indian Ocean coast. The decree law says 12 trillion cubic feet of gas should be developed from these areas, either by the groups separately or working together.Foreign Workers
The decree law also sets out specific regulation regarding the project companies’ use of foreign workers, and the building of a gas liquefaction facility onshore.
Passing the decree law was necessary ‘‘to provide the legal and contractual framework to progress the project towards finalinvestment decision,” John Peffer, Anadarko’s country manager for Mozambique, said in October.
Mozambique’s revenue may reach as much as $212 billion over the life of the project, based on 45 trillion cubic feet from Anadarko’s Area 1, Standard Bank Group Ltd. said in a July 31 study. That’s less than half of the total estimated resource.
Area 1 and Eni’s Area 4 combined hold technically recoverable reserves of 120 trillion cubic feet, according to industry consultant Wood Mackenzie Ltd.
From East Africa to West Africa, women have been playing an integral role into the future development of socio-economic growth. At first, we thought, why have a day to focus on women, shouldn’t we be appreciating women everyday?
Anne Bouverot, Director General of the GSMA has said the mobile industry has transformed the lives of millions of people across Sub-Saharan Africa. Bouverot said this while commenting on ‘Mobile Economy 2014: Sub-Saharan Africa’, the new GSMA report released at the Mobile 360-Africa event in Cape Town, South Africa.
“The mobile industry has transformed the lives of millions of people across Sub-Saharan Africa, providing not just connectivity but also an essential gateway to a wide range of healthcare, education and financial services,” said Anne Bouverot, Director General of the GSMA.
According to the DG, over the next years, Africa will record millions of new subscribers.
“As today’s report shows, millions of additional citizens in the region will become mobile subscribers over the next six years, with many being able to access the internet for the first time via low-cost smartphones and mobile broadband networks. Operators and other ecosystem players, as well as governments and regulators, all have a role to play in ensuring that affordable mobile services can be extended across the region,” said Bouverot.
According to GSMA, over the last five years, Africa has been the world’s fastest-growing mobile region in terms of both unique mobile subscribers and mobile connections, and is forecast to continue to lead global growth through 2020. It said unique mobile subscriber penetration as a percentage of the region’s population is forecast to rise to 49 per cent by this point.
South Africa signed a partnership agreement with Russia’s state-owned nuclear company that may see Rosatom Corp. build reactors in Africa’s second-biggest economy.
“The agreement lays the foundation for the large-scale nuclear power plants procurement and development program” using Russian VVER reactors with installed capacity of about 9,600 megawatts, or as many as eight nuclear units, Rosatom and the South African government said in an e-mailed statement today. The country also has a draft nuclear cooperation pact with China.
South Africa’s integrated resources plan envisions 9,600 megawatts of nuclear energy being added to the national grid to help reduce reliance on coal, which utility Eskom Holdings SOC Ltd. uses to generate 80 percent of the country’s electricity. The state-owned company is struggling to meet power demand,
The National Treasury said in February 2013 that a 300 billion-rand ($27 billion) nuclear program was in the final stages of study.
Areva SA (AREVA), EDF SA (EDF), Toshiba Corp. (6502)’s Westinghouse Electric Corp., China Guangdong Nuclear Power Holding Corp., Rosatom and Korea Electric Power Corp. (015760)have expressed interest in building the plants.Local Procurement
“This agreement opens up the door for South Africa to access Russian technologies, funding, infrastructure, and provides a proper and solid platform for future extensive collaboration,” South African Energy Minister Tina Joemat-Pettersson said in the statement. It will allow the country to implement its plan to create more nuclear capacity by 2030, she said.
The collaboration will result in orders worth at least $10 billion to local industrial companies, Rosatom Director General Sergei Kirienko said in the statement.
In addition to building the nuclear units, the agreement provides for partnerships including the construction of a Russian technology-based research reactor, assistance in the development of South African nuclear infrastructure and education of specialists at Russian universities, the parties said in the statement.
Rosatom currently holds projects for the construction of 29 nuclear power plants, including 19 foreign commissions in countries including India, China, Turkey, Vietnam, Finland and Hungary.Financial Implications
Eskom operates a 1,800-megawatt nuclear facility at Koeberg, near Cape Town. In December, the Energy Ministry published a revised 20-year energy plan, which projected that new nuclear power won’t be required until at least 2025.
If finalized, the deal may have significant financial risks and implications for electricity prices in South Africa, said Anne Fruhauf, an analyst at New York-based consultants Teneo Intelligence.
South Africa’s energy regulator last month approved a power-tariff increase that could amount to 5 percentage points on top of the above-inflation 8 percent previously agreed, and prices may have to rise even further for Eskom, which supplies 95 percent of the country’s electricity needs, to plug a 225 billion-rand funding gap.
“The million-dollar question will be the financing details and equity ownership,” Fruhauf said in an e-mailed response to questions. “We don’t have the details yet but it could be one of the biggest public procurement programs on which South Africa has ever embarked.”
EU launches new programme to support Africa's continental integration
The European Commission has launched the first phase of a new programme that will foster Africa's integration process at continental level - the first ever EU programme in development and cooperation that covers Africa as a whole. The so-called Pan-African Programme will fund activities in a broad range of areas and offer new possibilities for the EU and Africa to work together. Today’s decision will launch projects for the period 2014-2017, with a total allocation of €415 million.
The President of the European Commission, José Manuel Barroso, said: "The challenges with which we are faced can no longer be tackled within national borders. This is as true in Europe as it is in Africa or elsewhere. This is why I have proposed to create a Pan-African programme to find solutions at regional and continental scale and support the process of African integration, where the African Union plays a critical role. The alliance between Africa and Europe is indispensable, today more than ever. This programme will make it even stronger”.
EU Development Commissioner Andris Piebalgs commented: "The major innovation of this programme is that it allows the EU to link up the cooperation it has with Northern Africa, South Africa and sub-Saharan Africa. It will also help us to achieve better policy coherence for development by building synergies between development cooperation and other EU policies."
The Pan-African Programme, which was announced by President Barroso at the 4th Africa-EU summit in Brussels in April 2014, will amount to €845 million from 2014 to 2020. It will contribute, amongst others, to increased mobility on the African continent, better trade relations across regions and also better equip both continents for addressing trans-national and global challenges, such as migration and mobility, climate change or security. The first phase that was launched today will include projects ranging from sustainable agriculture, environment, and higher education to governance, infrastructure, migration, information and communication technology, as well as research and innovation.
Concrete projects will, for example, support election observation missions operated by the African Union in its member states or improve the governance of migration and mobility within Africa and between Africa and the EU. Some initiatives will benefit citizens directly, such as a student’s academic exchange programme or the harmonisation of academic curricula across a range of African universities facilitating the mobility of African students and academics.
Africa's continental integration has become a key priority for both the African Union and the EU. The Pan-African Programme will provide a major contribution to the EU-Africa Partnership, which the two continents established in 2007 to put their relations on a new footing and to establish a strategic partnership, responding to mutual interests and based upon a strong political relationship and close cooperation in key areas. The programme, which is financed from the EU budget will be a key instrument for the European Commission to implement, in close cooperation with African partners, the joint political priorities of the roadmap which was adopted by African and EU Heads of State and Government during the 4th EU-Africa summit in April this year.
For more information:
Multiannual Indicative Programme 2014-2017 of the Pan-African Programme:
For more information on the Africa-EU Partnership:
For more information on the EU-Africa Summit:
Chile’s mining industry is heating up. According to a new report by the state copper commission Cochilco, investments in the country’s mining sector are expected to reach $105 billion between 2014 and 2023.
Of the total investment, it’s reported $81 billion will go towards the copper industry while $23 billion will be used for gold, silver, iron ore another industrial mineral projects.
The massive investment will also include $28 billion in allocated funds for Codelco, the state-owned copper mining company, for new mines and the expansion of one of its major projects.
"Certain projects are currently facing delays," Cochilco executive VP Sergio Hernández said.
According to Hernández, some projects may be running behind schedule as a result of delays in securing permits or meeting new environmental and social standards, but nothing has been terminated.
"There are no trust issues here; mining investors are confident. No project has fallen through.”
Mining investments in Chile will feature 14 companies that are looking to implement medium or large-scale mining projects in the country for the first time, according to the report by Cochilco.
The planned investment will also include nine new mining projects with an estimated investment of $8.9 billion, including seven for copper.
Cochilco said once all projects are completed, the country’s copper production will exceed six million tons by 2015 and eight million tons by 2025. Gold production is expected to rise as well, increasing by 191 percent to 149,480kg a year.
Chile, the world’s top copper producer, has been battling sliding prices, rising costs and falling ore grades.
The South Africa stationed Standard Bank study this week named 11 African nations topping in middle-class status in Africa, with Ethiopia included among the well-performing states.
According to the Standard Bank's latest study, Ethiopia, together with ten other African nations, is said to be home to millions of middle-class households and that the trend will keep increasing in the next 15 years. Simon Freemantle, the author of the report, told the African Press Organization (APO) that the report has been conducted on the basis of the South African Living Standards Measure (LSM). Previously, 300 million people were said to constitute the middle-income societies of Africa. That number has dwindled to 22 million.
In its "Understanding Africa's Middle Class," the Standard Bank listed Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan, Sudan, Tanzania, Uganda and Zambia as prospective countries that would have millions of households as middle-income earning societies in Africa. Previously, the African Development Bank (AfDB) reported in its "middle of the pyramid: Dynamics of the middle class in Africa" in 2011 that the middle class were those individuals who could earn USD 4 to 20 a day. In addition, those individuals earning USD 2 to USD 4 are also counted in the middle-income earners category. The Standard Bank, however, scrutinized such categorizations of one-third of the African population, precisely over 300 million, as a mere aggregation where such individuals remain vulnerable to "economic shocks and prone to lose their middle-income status," Freemantle said.
The previous estimates of middle-income Africa were argued to be a reflection of the "knowledge gap" and hence, based on the LSM methodology, 11 states were labeled home to 14 million additional middle-income households. That said, the author cautions that out of the 110 million people of the 11 states, 86 percent are under-achievers of the middle class. "Though there has been a meaningful individual lift in income, it is clear that a substantial majority of individuals in most countries we looked at still live on or below the poverty line (measured as those with a daily income of USD 2 or less)." Hence, individual-based analysis is a non-quantifiable measurement. Either way, the middle class in Africa has been rising since 1900, the report stated.
Yet, these countries were able to swell in Gross Domestic Products (GDP) tenfold increase since 2000. In a related case, the FDI report 2014 dubbed The Global Greenfield Investment Trends, issued by the FDI Intelligence magazine, named Ethiopia as one of the top ten foreign direct investment destination countries in the Middle East and Africa in 2013. Ethiopia amassed USD 4.5 billion in the stated year and stood eighth before Algeria and Kenya.
The Standard Bank is one of the oldest financial institutions in the continent, some 150 years old and currently employs some 49 thousand people across the region. In the 2013 fiscal year, Standard Bank registered revenue of USD 1.8 billion.
Real estate company Jones Lang Lasalle (JLL) has announced its plans for expansion in sub-Saharan Africa to include hotel service and has appointed Xander Nijnens as head of hotels and hospitality for the region
JLL hopes to capitalise on the vast set of real estate opportunities in sub-Saharan Africa. (Image source: David Stanley/Flickr)
Nijnens, who is a regional industry expert, will focus on providing a sector-specific advice in sub-Saharan Africa and will function out of Johannesburg. He will partner with Mark Bradford, chairman of regional Sub-Saharan Africa at JLL, to serve the firm’s current and prospective client base as well as integrate with JLL’s 100-strong EMEA hotels and hospitality team.
In addition, Nijnens will assist clients in a suite of services including strategic consulting, transactional advisory, corporate structuring, operator selection, management contract negotiations, feasibility studies and asset management.
Nijnens said, “Sub-Saharan Africa is an exciting and emerging region for the hotels and hospitality industry with a highly diverse sector across the region. In establishing a presence, we aim to facilitate cross-border capital flows into the sector and assist in attracting investment into the region for our global and regional clients. JLL has an excellent track record of assisting clients in both emerging and developed hotel markets and I am excited to be able to bring this level of expertise to this region as well.”
Mark Bradford, chairman of sub-Saharan Africa, said, “We see the expansion of our hotel service in sub-Saharan Africa as an excellent opportunity to provide clients with advice across the real estate asset classes. JLL has identified sub-Saharan Africa as a priority region for long-term growth and we have seen an exceptionally positive response from our global clients to our regional offering.”
According to officials at JLL, there is favourable interest in the region for hotel development, as investors and developers are showing keen interest to enter the market. Jon Hubbard, head of investor services EMEA for JLL Hotels & Hospitality noted that JLL has provided advisory and transaction services to clients in 22 African markets and felt that the establishment of an office in Johannesburg would allow the company to further develop on-ground expertise for clients.
Sharm El-Sheikh, Asharq Al-Awsat—Egyptian President Abdel-Fattah El-Sisi outlined Cairo’s long-term development strategy in his address to the Egypt Economic Development Conference on Friday as media reports confirmed that Egypt had secured more than 19 billion US dollars in investment pledges on the first day of the summit.
Sisi announced that Egypt is aiming for economic growth of 6 percent over the next five years and a decrease in the unemployment rate to 10 percent over the same period.
“The march of Egypt to the future will continue . . . Egypt is open to the whole world,” Sisi said, calling for greater international investment in the North African state.
“We are committed to moving forward with the development and modernization of the Egyptian economy,” he told investors, highlighting the package of investment reforms that has recently been announced by his government.
Egypt’s closest Gulf Arab allies, Saudi Arabia, Kuwait and the United Arab Emirates, pledged a combined 12 billion US dollars in investment at the Sharm El-Sheikh conference on Friday.
Each Gulf state pledged 4 billion US dollars. The UAE announced that it would deposit 2 billion US dollars in Egypt’s central bank, with the remaining 2 billion US dollars being invested directly in the Egyptian economy. Saudi Arabia said that 2 billion US dollars of its pledge would be deposited in the central bank, while the remainder would be distributed as development aid, according to the Saudi Press Agency (SPA). Kuwait, for its part, did not announce how its country’s pledge would be divided.
The Saudi pledge was made by Crown Prince Muqrin Bin Abdulaziz who is heading Riyadh’s delegation to the three-day conference.
In comments made on his arrival in Sharm El-Sheikh, Prince Muqrin highlighted Riyadh’s “permanent and continuous stand” with Egypt.
He said that his visit to the Egypt Economic Development Conference highlights the “historical close ties between the two countries and confirms the Kingdom of Saudi Arabia’s stance in support of development and stability in Egypt.”
He added that Riyadh is committed to enhancing the bilateral ties between the two countries in the coming period, particularly praising Egyptian President Abdel-Fattah El-Sisi’s leadership.
“The Custodian of the Two Holy Mosques King Salman Bin Abdulaziz is confident in the wisdom of President Abdel-Fattah El-Sisi and this will have the greatest impact on the success of this conference to promote the march of the Egyptian economy,” he said in comments carried by the SPA.
Saudi Finance Minister Ibrahim Al-Assaf told Asharq Al-Awsat: “We are seeking to support the implementation of the [financial] assistance that was announced by the Crown Prince.”
“The priorities for the support of the Egyptian economy will be determined by the desire of our brothers in Egypt,” he added.
“We are also seeking to contribute to development projects [in Egypt], in addition to financing Saudi exports to Egypt and investing in the private sector,” he said.
A number of public and private sector companies have already announced major investments in Egypt. British oil company BP announced on Saturday, the second day of the conference, that it has finalized a 12 billion US dollar deal with Egypt to develop 5 trillion cubic feet of gas resources and 55 million barrels of condensates in the West Nile Delta, according to a Reuters report.
Egypt also signed a number of memoranda of understanding with foreign states and companies worth tens of billions of dollars. Cairo signed a memorandum of understanding with Saudi Arabia’s ACWA Power International and the UAE’s Maadar Company to construct a number of power plants, including solar and wind farms, worth approximately 10 billion US dollars.
Egypt’s Ministry of Electricity and Renewable Energy also signed four memoranda of understanding with Siemens International worth approximately 10 billion US dollars to construct several “conventional” power plants.
Egypt is undergoing its worst energy crisis in decades and Cairo is seeking to strengthen its energy sector, recently pushing through a new electricity law which privatizes electricity production and transmission.
The law limits the state’s role in the electricity sector to regulation and supervision with the goal of creating competitiveness within the private sector and driving prices down.
The UN has set June as the deadline for moving from analog to digital transmission. Only a few African countries seem prepared for the change. Even the largest television markets on the continent are lagging behind.
Staring at a blank TV screen has become a reality for most Kenyans, and many other African TV viewers could face the same fate come June 17. That is the deadline set by the UN's International Telecommunication Union (ITU) for television programs to be transmitted only digitally.
After the deadline, satellite dishes and antennas will receive their signals via a different technology. Theoretically, it will be possible to receive many more channels and enjoy improved image quality.
There is a story behind Kenya's black screens. President Uhuru Kenyatta's government ordered a consortium of four major television networks to be blocked from broadcasting in analog. This happened after they refused to change their signals to digital. The media houses argued that they were not ready yet, and now they are in court trying to push for one hundred more days to prepare for the digital transition.
Apart from Nigeria and South Africa, Kenya is one of the largest television markets in Africa.
The Standard Group,one of Kenya's leading media house, says it needs more time for the switchover
All three countries are not ready for the switchover, says Mike Jensen, an IT specialist with the Association for Progressive Communications (APC) based in South Africa. "The Kenyan situation is probably the worst-case scenario on the continent; South Africa is pretty close," Jensen said. "In Nigeria, only one state has made the switch," Jensen told DW.
Nationwide coverage after the switchover to digital broadcasting is by no means ensured in African countries. As in Kenya, it is often about money. The change is costly for governments and citizens alike, the APC states on its website, which seeks to create an awareness of the issue.
Television viewers will usually need a decoder, which costs about $50 (44 euros), to decode the digital signal. Moreover, television companies will have to dig deep into their pockets to be able to broadcast their programs using the new technology.
Tanzania a digital model
Vera Moses, a Tanzanian viewer, says she is happy with the digital reception. "The quality of the pictures is good," she told DW in an interview.
Tanzania is one of three countries that has already largely switched to wide-band Digital Video Broadcasting (DVB). "In Dar es Salaam we already switched off analog transmission at the end of 2012," John Nkoma, the director of Tanzania's Communications Regulatory Authority (TCRA), told DW. Most cities are now receiving programs via DVB-T, which is terrestrial digital broadcasting via antenna. The remote parts of Tanzania receive broadcasts via satellite.
Dar es Salaam has already gone digital
It took some persuasion to convince citizens and businesses of the merits of the new system, Nkoma said, as he revealed two secrets to Tanzania's success: Firstly, decoders were taxed less. "The price for the decoders is artificially low," Nkoma said, "so they have become affordable." Tanzanians can get a decoder for $30.
Secondly, user habits were taken into consideration. "The public was used to free-to-air channels, so we required that in the digital broadcasting platform there would be the five popular channels of this country and those would be available as free channels." Viewers whose subscriptions expire would have these five channels to fall back on.
But according to APC's Mike Jensen, that is not the whole story. Tanzania and neighboring Rwanda had forced the switchover on the public by shutting off the analog signal. Of course, there were citizens in both countries who simply could not afford the necessary equipment, Jensen said.
He thinks governments should guarantee a realistic compensation for the costs. The price of a decoder, Jensen said, was also a big issue in Mauritius. The government ordered large amounts of cheap decoders from China. Many of which had defects.
Satellite transmission is also to be digitalized
Jensen also does not understand the date the ITU has chosen. He estimates that by then only six countries may succeed in formally completing the switchover.
Germany has already changed to digital broadcasting, and so have most of the other industrialized nations. But Latin America has planned the switchover for as late as 2020.
Jensen says African telecommunications companies pushed for the early date for Africa. These companies, he said, were the only ones to profit from such a date, because they wanted to monopolize television broadcasting.
The Minister of State for Power, Mohammed Wakil, has said the federal government has upgraded Nigeria’s electricity transmission capacity by an additional 40 per cent growth ratio within the last couple of years.
Wakil noted in a recent statement from the ministry that transmission capacity of the power sector has improved by 40 per cent in line with generation capacity, which he said has also increased owing to massive injection of fund by the federal government into the sector.
While signing a Memorandum of Understanding (MoU) with Global Business Resources USA for the generation of 50MW of electricity in Abuja and Kano, the minister explained that with the construction of new transmission lines and substations across the country, the capacity of the country transmitting its generated electricity has been upgraded by an additional 40 per cent.
“I am happy to say that power sector has improved tremendously compared with what President Goodluck Jonathan inherited when he assumed office. Records of where we were in generation, transmission and distribution in the electricity value chain have confirmed that the sector is placed on a strong footing for growth and service delivery,” he said.
In the runoff to the privatisation of successor generation and distribution companies created from the unbundling of defunct Power Holding Company of Nigeria (PHCN), the country, the country’s transmission network was described as the weakest link in the value chain with a meager wheeling capacity of about 6000MW and unable to convey all the generated electricity to distribution points.
At the earliest periods of government’s reform of the sector, frequent collapse of the transmission network and subsequent power blackout were recorded as a result of such weakness in the system and which prompted the government to muscle up huge funding outlay for its upgrade.
Funding has come in forms of grants, loans and investments from international and regional finance agencies such as the World Bank, African Development Bank (AfDB), and French Development Bank amongst others to total approximately $2.7 billion as funds for expansion of the network.
Loans such as the World Bank’s $700 million, JICA’s $200 million, African Development Bank (AfDB)-$370 million, $1.65 million proceeds from the sale of National Integrated Power Project (NIPP), EXIM China’s $500 million and contractor financed turnkey projects worth $1 billion, all make up the funding outlay within TCN’s disposal.
In a related development, Nigeria’s attempts to diversify her energy sources is gradually beginning to attract attentions from different quarters with the recent disclosure that an indigenous firm, Torrent Energy Limited has concluded plans to build a 30 megawatts waste-to-energy plant to augment electricity generation of the country.While reports have put Nigeria’s immediate electricity requirement to 40,000MW for it to achieve a near regular power supply to domestic and industrial users in the country, the country currently generates a meager 4500MW on the average to distribute to about 50 per cent of her population that have access to grid electricity.
In their presentations for a proposed waste-to-energy plant at the Ministry of Power in Abuja, both the Managing Director of Torrent Energy, Okey Chidume and its Executive Director, Tudor Mikko stated that the planned 30MW, though not huge, could contribute immensely in boosting the country’s efforts.
According to them, the waste-to-energy technology will utilise extant waste generated in country and which are in abundance to generate electricity for local consumption.
They emphasised that adequate power supply was necessary for economic development and as such the waste-to-power plant has been planned to be a state-of-the-art concept for generation of electricity from waste which allows efficient power generation, efficient waste disposal, and low environmental impact.
“Nigeria is facing rapid growth in energy demand, persistently high-energy prices, and a challenge to reduce carbon dioxide emissions from power generation. Despite current efforts, access to electricity still remains low and there is still inability to produce enough electricity to meet demands,” Chidume said.
He further said: “In Nigeria, millions of tons of waste are generated on daily basis, with an estimated ratio of approximately 0.8 kilograms per person per day, and rising.
Out of the total solid waste generated, 30 to 45 per cent is collected, while over 94 per cent is disposed unscientifically.”
He noted that the company intends to latch on that opportunity to generate and distribute municipal electricity to Nigerians.
Chidume equally noted that the plan is to generate electricity for the consumption of the rural, underserved communities at a rate less than what is currently obtained in the electricity market, a development the Assistant Director, Renewable Rural Power Access in the ministry of power, Tope Seton, commended.
Seton noted that the initiative was in line with current realities in meeting up the country’s energy requirement, adding that the government is currently looking at renewable sources of power, other than hydro-power generation and that the ministry will lend its support to the project.
The planned location of the project was however not disclosed by the promoters.
Investors often try to profit by betting on short- and medium-term shifts in stocks and bonds. But the real money comes from anticipating long-term trends, the kinds of changes that take place over many years.
That’s why some experts encourage investors to focus on shifts that may develop over the next decade or so.
The largest profits come from investing “across multiple business cycles” and on themes that last many years, argues John Brynjolfsson, who runs hedge fund Armored Wolf.
Below is an attempt to identify a few trends in the global economy and financial markets that could affect investments over the next decade or so, along with a few ways to take advantage of them. These shifts are hard to predict, but if they pan out, big profits can result.Demographic Shifts
Investors will have to grapple with aging populations in many developed economies, something that could weigh on economic growth by boosting health-care and other costs, reducing the number of workers and draining the pool of entrepreneurs.
The trends are especially troubling in Asia and Europe. In Japan, the sale of adult diapers began to exceed those for babies a few years ago, and more than 25% of the population is at retirement age. The birthrate also has fallen in the U.S. Immigration to this country has offset some of the problems, but the nation’s working-age population is growing at less than 1% in recent years, down from 2% between 1960 and 1985, according to Wells Capital Management.
“The biggest long-term trend investors should consider is aging developed-world demographics,” says James Paulsen, chief investment strategist at Wells Capital Management. “Expect perpetually weaker average growth in the developed world, including the U.S.”
Population trends aren’t a reason to exit developed-market investments. Slower growth doesn’t mean no growth. Still, the populations of emerging-market nations are growing at a fast clip, a good reason to maintain exposure to those economies, which will become a larger part of global demand despite setbacks over the past year. The Vanguard Emerging Markets Stock Index Fund (VEIEX) is a low-cost way to wager on those markets.
Jared Dillian, an ex-trader who publishes a financial newsletter, says investors should focus on so-called frontier markets, which are among the smallest and least-advanced of the emerging markets.
“The only place you will get growth in the next 10 years is in frontier markets, with growing populations and massive productivity increases, along with huge improvements in the rule of law and property rights,” says Mr. Dillian.
He recommends the iShares MSCI Frontier 100 ETF (FM).Conquering Cancer
Innovations in fracking and horizontal drilling have transformed the world of energy and elevated the U.S. as an energy power. The next American breakthrough appears to be in the world of cancer research, which already is causing a frenzy of interest among investors and excitement in the medical world.
Advances in immunotherapy, which uses the body’s own immune system to fight cancer, have helped those suffering from melanoma and will likely be applied to other cancers, experts say. Immunotherapy has disappointed in the past, but recent advances seem to offer breakthroughs that patients and investors have been waiting for.
Making money as a biotech investor is a challenge. Many of the companies leading the way with these treatments, such as Bristol-Myers Squibb (BMY) and Roche Holding (RHHBY), are so large that even successful immunotherapy products would provide only a modest boost to their stocks. A group of smaller companies developing their own immunotherapy approaches, such as Juno Therapeutics (JUNO), Kite Pharma (KITE) and Bluebird Bio (BLUE) are already at expensive levels.
The best approach: Buy Bristol-Myers and Roche, and wait for shares of the upstarts to fall a bit before wagering on them.Energy Prices
Oil prices have tumbled below $50 a barrel as rising crude supplies overwhelm meek global demand, upending financial markets and giving consumers a lift. Analysts don’t think the shift will last very long, though. Eventually, they say, global demand will outstrip the new supplies. The U.S. Energy Information Administration recently predicted that benchmark Brent global oil prices would hit $235 a barrel by 2040 as global consumption grows, amid a growing middle class around the world.
Experts were caught flat-footed by the remarkable supply of oil pouring out of U.S. fields, though. They could be just as wrong about demand over the next few decades.
For one thing, consumers and companies are becoming more efficient in their use of energy. The average American new car and truck will get nearly 55 miles a gallon by 2025, up from 24 miles in 2012. Chinese oil demand is starting to slow. Alternative-fuel vehicles, such as all-electric cars and hybrids, are gaining popularity. If the Chinese government can push citizens to embrace electric cars, an expected source of new oil demand could evaporate.
Google expects to roll out a self-driving car in the next five years. Any widespread embrace of self-driving cars could also cripple oil demand. Meanwhile, demand for urban living also will reduce auto use.
Ed Morse of Citigroup , one of the few analysts to anticipate the U.S. energy revolution, predicts global oil demand could drop to around 74 million barrels a day from about 93 million today, as global transportation shifts from a reliance on oil to plentiful natural gas.
The upshot: Be wary of investing in energy shares in the years ahead.Low Interest Rates
Investors assume interest rates, held down by an aggressive Federal Reserve, eventually will rise, making it harder to make money. But Darren Pollock, portfolio manager of Cheviot Value Management, says rates could stay low for years to come, to bolster markets and deal with debt that’s built up throughout the economy. Tepid inflation also could sideline the Fed, some say.
“The U.S. held interest rates low from the 1930s into the late 1950s,” he says. “Japan has suppressed rates since the early 1990s. Markedly higher rates in the U.S. may not be something we see for a very long time.”
Bitcoin crowdfunding has taken off as a means to grow startups in China, with dozens of projects embracing the popular funding method to finance a variety of novel use cases.
One of those use cases currently being explored is selling part-ownership in a discussion forum to encourage quality over quantity in user behavior. Chinese forum Bikeji.com is offering its members the opportunity to become part-owners of the site through a crowdsale of shares in the company. In doing so, the forum's founder hopes to demonstrate the value of crowdfunding to the wider Chinese digital currency community.
Gang Wu, the founder of forum Bikeji.com, said selling valuable stakes in his online community has already made a dramatic improvement to the quality of conversation.
Explaining the thinking process behind creating Bikeji.com, Wu told CoinDesk he was fed up with the incumbent Chinese language bitcoin forums which, according to him, have too many advertisements, unsubstantiated rumors, and even outright slander.
There needs to be a space for more rational discussions, Wu said at his Zhongguancun, Beijing, office from which he also runs interest-bearing bitcoin wallet service Haobtc.com.
The result is his member-owned forum. Dedicated to cryptocurrency discussion, the forum has a Reddit-style reward point system and gives users the option to verify their ID – both measures intended to incentivize responsible posting.Bitcoin crowdfunding in China
What is most remarkable about this forum, however, is its fundraising process.
On 16th November, Wu posted a proposal to raise 85 BTC in a WeChat group called 'Aisi Shuzi Huobi' (爱思数字货币 or 'love thinking digital currency'). Anyone who sent a bitcoin to a designated address would own 1/100 of the site, which had already already been online for two weeks by that point. Wu personally owns 15 shares and is responsible for the website’s day-to-day maintenance.
Within hours, the fundraising target was reached.
This is just one example of the newly emerging Chinese bitcoin crowdfunding scene. A quick scan on the Internet reveals about a dozen such projects over the past year – with most taking place in the mining sector.
One of the largest is Silverfish, a scrypt-coin mining operation. The project raised 5,600 BTC in late 2013. At that time, with the BTC price above $800, the valuation of the company was well beyond $10m.
The share value today, however, has dropped from its IPO price of 0.5 BTC per share to 0.07 BTC over the course of about a year. On 2nd December, the company announced that it would suspend dividend payments, citing capital strain as the cause.Benefits and downsides
Wu concurred that "high fatality" was the norm for these ventures. He said he has personally invested in several bitcoin crowdfunded projects, including the aforementioned Silverfish. Most floundered. Some were outright scams, more were unprofitable due to bad timing, like Silverfish.
Since its launch, the litecoin price has dropped from $23.80 to $3.73 at press time, while hashing difficulty has grown substantially as scrypt mining transitioned from GPU rigs to ASICs like bitcoin.
When asked about the appeals and drawbacks of bitcoin crowdfunding, Wu said the positive is that bitcoin is a "free currency" allowing transactions directly between any two individuals – the verifiability of any transactions on the block chain to some extent removing the necessity of a third-party platform like Kickstarter.
The downside, Wu said, is lack of protection for investors:
In addition, bitcoin's unregulated nature is a double-edged sword. While it removes some legal hurdles, it also makes it difficult (if not impossible) for investors to seek legal redress when disputes arise – this also leads to a higher number of scams in the space.Culture of risk taking
All of its problems notwithstanding, bitcoin crowdfunding in China is becoming its own vibrant subculture. Wu pointed out that a culture of risk taking is very strong among bitcoin investors there. Financial gain is not necessarily 100% of the motivation, he added: a sense of camaraderie in a small close-knit community is also a factor.
For Bikeji.com specifically, Wu believes that bitcoin crowdfunding has certain marketing value, especially by helping 'high-quality' users; the forum's crowdsale has attracted notable investors in the Chinese bitcoin space.
Wu expects that being a formal shareholder in Bikeji will give these BTC 'dignitaries' more incentive to post actively, thus attracting more users.Fledgling business model
One month after its launch, Bikeji show all signs of being a robust forum. The number of registered users has exceeded 400, and new posts are frequently published.
Some of the project’s idiosyncrasies, however, may prevent it from becoming a replicable business model.
Its success has as much to do with Wu’s personal reputation, which, one may argue, is a bigger factor than the profitability prospect of the project itself.
Since Wu guaranteed investors full refunds if they opt to exit, the only downside risk is the possibility he will renege on that promise – but this risk, given the relative small investment amounts (and the fact that Wu is a well-recognized bitcoin entrepreneur) is likely low.
In addition, the project is a forum, meaning its success or lack thereof is relatively easy to ascertain. Regardless, Bikeji is just one example of the many types of use cases that startups in China and beyond could explore by tapping into the growing popularity of bitcoin crowdfunding.
Even from the North Pole, Santa knows the importance of diaspora investing. Thus we are pleased to inform you that Santa has a deal for you this festive season. Santa is giving you a $100 bonus on investments made through Homestrings in the following investments:
A Macedonian-focused fund is the latest exciting investment opportunity now offered on Homestrings.com to the global diaspora community and investors interested in dynamic and fast growing markets. Investors will be able to take advantage of a 50% capital guarantee program sponsored by United States Agency for International Development (USAID).
Risk is an integral part of investing. Generally speaking, it is the counterbalance to return. Although we hear many money managers and advisors talk about “risk management,” it is a rather ambiguous phrase. Today, risk and volatility are often used interchangeably, which is an overly simplistic definition promoted by academia. However, a recent memo published by Howard Marks, the Chairman of Oaktree Capital Management, does a fantastic job at providing a more accurate description.
Marks may not be familiar to the average investor but he is highly respected among the world’s best money managers, including Warren Buffett. In short, risk carries many different forms and cannot be completely quantified. Here are a few key points I took from his memo, titled, “Risk Revisited.”
1. Volatility is not risk. Academia has defined risk as volatility because it can be measured. It is a foundational concept underlying the majority of financial models. Stocks are often assessed using their betas, or their fluctuations, in relationship to the market. In fact, beta has become perversely ubiquitous with risk.
This fallacy often lulls investors into a false sense of security and is usually coupled with a woeful lack of understanding of risk. For example, the utility sector’s beta is about half that of the Standard & Poor's 500 index (depending on the time frame measured). It would be a grave mistake to assume that by purchasing a utility, one is exposed to half of the risk of the market.
2. Risk is the potential to lose money permanently. Continuing with the utility company example, there are a plethora of risks associated with stocks. Volatility may provide a modicum of insight into the overall risks. However, it dupes the investor by failing to account for anything company specific. If the market were to drop 10 percent because of a geopolitical conflict, volatility or beta might do an admirable job of forecasting the utility company to decline roughly 5 percent.
Yet, it fails to predict the impact falling natural gas prices or a change in legislation may have on any particular company. Additionally, if the entire market declines from a global macro event, capital is not permanently lost. A patient investor can usually wait for a recovery. Only when you sell the investment do you realize an actual loss. When something fundamentally alters a company’s business, the risk has the potential to be permanent.
Think about what the iPhone did to BlackBerry or what the iPad has done to personal computers, or PCs. Beta, volatility and even crystal balls failed to predict these fundamental shifts.
3. Risk is necessary. Attempts to predict the future will most often lead to failure. However, an investor can understand how the risks relate to each company without necessarily predicting the exact outcome. Great investors are astute at thinking of a range of possible outcomes and selecting investments that have more ways to win than lose.
If I own a company that sells natural gas, I have to consider the range of outcomes if gas prices will rise, fall, or remain flat over coming years. Clearly, there is risk should prices fall or even stay flat. However, if I feel the stock is appropriately accounting for this risk, and I can envision a number of paths toward higher prices in the future, my downside could be limited and potential reward attractive. As the popular adage goes, “There is no such thing as a free lunch.” Smart investors take on a measured amount of risks, which cannot be captured by a stock’s historical volatility.
4. Nobody knows the unknown, but some investors don’t know this. If beta is a reasonable indication of market risk, then one can reasonably estimate performance given a forecast of the overall market. However, most investors realize this is a loser’s game, as nobody knows where the market will be in the near and long term. Unlike the earlier gas price example, there are an infinite number of interconnected and complex unknowns or “black swans” that could impact the market. These could be wars, terrorist attacks and disease epidemics, among other possibilities. None of these risks can be captured by historical volatility metrics like beta.
5. Prudent acceptance of risk is superior to shunning the unknown. Given the widespread reliance on beta as a measurement of risk, modern portfolio theorists have concluded that certain asset classes and subsets of asset classes offer higher returns, while others offer more safety. Eugene Fama and Kenneth French famously touted their three-factor model used to predict expected returns while they were both professors at the University of Chicago Booth School of Business. Small-cap stocks are considered risky and thought to offer long-term returns in excess of safer large-cap stocks. If this theory were accurate, though, shouldn’t every investor allocate a large portion of a portfolio to small caps?
Of course, the answer is "No." Return is not guaranteed. It is merely possible. A smaller company may face more risks than a larger company, none of which can be precisely known. If the smaller company successfully mitigates those risks while growing their business, the investor ought to be more handsomely rewarded. Regardless of the expected return, the risks remain immeasurable and the outcomes unknowable.
Some investors are highly conservative and often shun risk. However, this leaves an investor vulnerable to the risk of missed opportunities. Just as it would be imprudent to place all of one’s eggs in the proverbial small-cap basket, it would be a mistake to shun risk all together. A far more logical approach is to assess the returns needed by the individual and expose the portfolio to risks the investor can tolerate.
Risk must be taken or there will be no return. If an investor has a short time horizon, they should wish to avoid illiquidity risk, but they may be comfortable with leverage risk or credit risk. On the other hand, just because an investor has a high risk tolerance does not mean it is smart to take unnecessary risk. The ideal portfolio manager should have a ceaseless desire to understand the risks facing his or her investments, while simultaneously acknowledging he or she can only be sure the future is unknown.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional. No strategy assures success or protects against loss.
Brett Carson, CFA, is the director of research for Carson Institutional Alliance where, as portfolio manager, he is directly responsible for managing several strategies, including perennial growth, long-term trend and write income. Additionally, the Omaha-based research department conducts thorough analyses of companies to identify undervalued stocks that carry attractive upside potential.
Investment advice offered through CWM, LLC, a Registered Investment Advisor. Securities offered through LPL Financial, Member FINRA/SIPC. LPL Financial is a separately owned entity from all other entities.
HONG KONG • Using a combination of word-of-mouth and advertising, Alibaba Group Holding is tapping the millions of Chinese outside its homeland to accelerate global expansion.
The e-commerce company, which is preparing for what could be the largest initial public offering in U.S. history, is attracting people of Chinese heritage drawn by hard-to-find items on its Taobao Marketplace such as pineapple cakes and motorbike brake pads, as well as bargain-basement prices.
“I buy everything on the platform because it’s so cheap,” said Sam Ng, 33, a Web designer in San Francisco who shops for car gadgets and Korean fashion clothes on the website and learned about Taobao from friends.
Alibaba’s success is built on its business in China, the country of 1.35 billion people where the company dominates the fast-growing e-commerce industry. Still, Chairman Jack Ma is looking beyond his base, betting that Chinese abroad will help him reach a wider array of customers in Asia, Europe and the home turf of Amazon.com Inc. and eBay Inc.
“If Alibaba’s strategy is to follow the Chinese diaspora, it’s a smart strategy because you don’t have to build a brand from scratch,” said Niraj Dawar, a professor of marketing at the Ivey Business School in Canada. “To be a global player they eventually have to serve markets that are non-Chinese.”
To reach those new markets, Alibaba, which gets more than 85 percent of its sales from China, is making acquisitions and developing its own platforms. AliExpress, the company’s market for customers outside of China, was founded in April 2010 and is available in English, Russian and Portuguese.
In the U.S., Alibaba has acquired stakes in Fanatics, a Web retailer of officially licensed sports merchandise, as well as ShopRunner, a membership-based shopping platform for brands such as Calvin Klein, Tommy Hilfiger and Neiman Marcus.
To complement its word-of-mouth reach and tap into overseas Chinese, Alibaba uses advertising on taxis and big screen displays in Hong Kong to magazines in Taiwan and buses in Singapore.
Cui Lichuan, 30, who works for a financial firm in Tokyo, first discovered Taobao through Chinese friends. Cheaper prices and a broader selection of products, have won over Cui, who has lived in Japan for a decade.
There are nearly 50 million people of Chinese descent living outside the country, and more than 1 billion people who speak Mandarin.
“Alibaba seems to have strong connections with the immigrant population,” said David Lee, executive director of the Chinese American Voters Education Committee in San Francisco. “It makes sense to go after this market.”
Targeting this group is a strategy others are already using. Xiaomi Corp., which toppled Samsung Electronics last quarter to lead smartphone sales in China, is targeting overseas Chinese to lead its global expansion as it starts sales in Singapore, Indonesia, Thailand and India.
Hangzhou-based Alibaba said that part of its international strategy is focused on helping Chinese manufacturers and merchants to reach businesses and consumers across the world, according to its filing.Florence Shih, a spokeswoman for Alibaba, declined to comment on the company’s international plans citing restrictions ahead of its IPO.
Alibaba is seeking a valuation of as much as $162.7 billion, larger than 95 percent of the Standard & Poor’s 500 Index, based on its IPO filing. The company could raise as much as $21.1 billion, which would exceed Visa Inc.’s $19.7 billion IPO in 2008 as the biggest U.S. offering.
Founded in Ma’s Hangzhou apartment, Alibaba has ridden China’s economic liberalization to be the nation’s biggest e- commerce operator. It doesn’t sell merchandise itself, instead operating platforms including Taobao and Tmall to connect retail brands with consumers and getting most of its revenue from commissions and advertising.
Through its reach in China, where the company accounts for more than half the nation’s package deliveries, Alibaba can meet demand for products that can’t be bought elsewhere and provide direct access to manufacturers for lower costs.
Sales from outside China represent an unexploited opportunity for Alibaba, said Zia Daniell Wigder, a research director at Forrester Research that studies the e-commerce market.
“The cross-border e-commerce market is growing but many retailers have not tapped in to it yet,” she said. Alibaba “is not alone in looking to bringing in customers from around the world.”
As consumers become more comfortable buying from overseas websites, transactions are forecast to surge. Last year, eBay’s PayPal unit published a study that predicted cross-border shopping will nearly triple to $307 billion by 2018.
Despite its size, Alibaba will find taking on Amazon won’t be easy. Amazon also has set a road map to expand internationally to help U.S. retailers and Europe and Middle East suppliers sell outside of their home countries through its third-party marketplace.
For customers such as Si Shen, co-founder of application developer and marketing platform PapayaMobile, which has offices in Beijing, San Francisco and London, Alibaba still has some way to go to win over customers in the U.S. If it can, Alibaba can look forward to getting more sales.
“When I am in China I definitely use Alibaba’s Taobao to buy all kinds of things,” said Si. “When I am in the U.S., I tend to use Amazon or the commerce site of the product itself. I might start to use Alibaba’s service in the US in the future if its service and product coverage improve.”
(Reuters) - High stakes for high return, if you can stick it out for the long term - investors are buying into a boom in sub-Saharan African real estate.
Forecasts for 20 percent net annual returns from investing in shopping malls, office blocks or industrial complexes in countries from Zambia to Kenya is drawing in new investors, despite more immediate concerns in some countries about Ebola, terrorism or political stability.
Investors have already taken a liking to sub-Saharan African dollar debt, encouraging a record $10 billion in sovereign and corporate issuance last year and $5 billion so far this year, according to Thomson Reuters data.
But when even bonds from Kenya and Senegal offer yields of only five or six percent, enthusiastic risk-takers may choose to invest on the ground in Africa.
Momentum Global Investment Management is launching a $250 million sub-Saharan real estate fund later this year, focusing initially on shopping malls and office buildings in countries such as Mozambique and Rwanda.
The fund has a life of up to eight years, so it won't be a fast way to make a buck - but Momentum expects it to be lucrative.
"The number one reason (to invest) is return - 18-20 percent on an annual basis, if you are in for the full eight years," said David Lashbrook, head of Africa investment strategies at Momentum. "The investors we are looking at targeting are institutions who can be locked up for the whole eight years."
As Africa's fast-growing population gains spending power and moves into the cities, demand for real estate will grow, fund managers say. Urbanization and population growth will boost the number of people in cities globally by 2.5 billion over the next three decades, with much of that growth in Africa and Asia, a recent United Nations study said.
"The desire of the increasingly middle class to meet, socialize, shop and spend their leisuretime in facilities or retail developments that are on a par with what you find around the world is not going to abate, it is going to continue," said David Morley, head of real estate at private equity firm Actis.
Actis has raised and invested nearly $500 million in two real estate funds, with marketsincluding Nigeria, Zambia and Mozambique. Morley is also targeting annual returns of 20 percent or more, around 5 to 10 percentage points more than returns seen in similar mainstream emerging or developed funds.
WHY REAL ESTATE?
Building costs in many African countries are high, real estate specialists say, partly because many materials have to be imported. But potential rents are also high - at a monthly $25-30 per square meter for high-end office blocks in cities like Rwanda's capital Kigali or Ghana's capital Accra, compared with below $20 in Johannesburg.
There are currently eight Africa-focused unlisted real estate funds targeting $1.25 billion in capital, according to data provider Preqin.
Around 69 percent of capital raised for African real estate funds between 2009 and 2013 was focused on sub-Saharan Africa excluding South Africa, up from 40 percent from 2006 to 2009.
Private equity funds look to attract institutional investors and traditionally do offer higher returns, due to the risks of investing in unlisted companies which may be less transparent.
But Ghana and Nigeria already have real estate investment trusts (REITs) - similar to mutual funds - which can be listed on stock markets and make it easier for retail investors to access the sector. Kenyan legislation to allow REITs is expected to go through this year.
The REIT market worldwide totals more than $1 trillion, according to consultancy EY, in more than 30 countries. The market is less well-established in emerging markets, but countries such as Mexico and Brazil have REITs.
Stanlib is among fund managers looking to set up a Kenyan REIT. It already has a fund listed in Johannesburg, which focuses on listed African real estate in countries such as Botswana, Zimbabwe and Mauritius, as well as South Africa.
Keillen Ndlovu, head of listed property funds at Stanlib, said the 200 million rand ($18.71 million) fund had trebled in size this year and was accessible to retail investors.
Investors are focusing on commercial properties rather than residential due to a limited supply of private housing and the lack of mortgage markets in Africa.
"We are not at that stage, we have been shown quite a few residential projects, there might be a chance - we have seen a few mixed developments," said Lashbrook at Momentum.
"If you are building residential, in a lot of these countries there is no mortgage market."
Returns of 20 percent or more don't come without significant risks. Africa has been hitting the headlines for the Ebola outbreak in West Africa and attacks in investment favorites Nigeria and Kenya, including last year's attack by the al Shabaab Islamist group on Nairobi's Westgate shopping mall.
But real estate specialists say that while Ebola may devastate countries like Sierra Leone and Liberia, it is a short-term issue, whereas they seek long-term gains from property.
Sierra Leone, Liberia and Guinea also do not rank among the main sub-Saharan markets targeted for real-estate investment.
Terrorism may add to the building costs of shopping malls, due to security and insurance costs.
"There is a concern, that's one of the first questions that come in - you do get more political risk," Ndlovu said.
But terrorism risk is not unique to Africa, investors point out. A bigger issue is land security, with documentation varying widely from country to country, and within countries.
That adds to the risk of investing in residential property, although Stephen Bailey-Smith, head of Africa research at Standard Bank in London, who recently built a beach house in Ghana, says the residential sector will eventually open up to investors.
"If you go into any city in Africa, you can see the need for decent housing is infinite," he said.
(Editing by Susan Fenton)
The Kenyan government is launching an online platform to allow Kenyans living outside of the country to access government services.
The Daily Nation reports the platform will be ready by the end of the year and will be a one-stop point for all government services for Kenyans in the diaspora.
“There are a number of things that the diaspora wants the government to do for them – things like access to passports, national IDs, KRA PIN numbers and certificates and certificates of good conduct, among other vital documents,” said Zachary Muburi, director of the Diaspora and Consular Affairs Directorate, who was speaking at the commissioning of the Kenyans Diaspora Expo to be held in New York, United States (US).
“We are putting in place structures to ensure easier accessibility of these services. This is being done through the soon-to-be-launched diaspora web portal.”