Africa: An Investment Hub

Published on 21st November 2011

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Mauritius is small, and its major economic groups are still not open to building partnerships with other local groups, for family competition can sometimes get out of hand. It is time to evolve and build consortiums and move towards Africa together. We also need to develop partnerships in Africa.

Take Innodis. It had problems getting its Mozambique chicken plants running and breaking even, but now that this is settled, it recognizes that it must find a partner if it plans to find the money to quadruple weekly chicken production by 2016. It has also formed a partnership with a chicken chain in Nigeria, a huge market, in the form of a management contract of chicken farms. There is another country in the pipeline with a similar model in the future.

Innodis is doing the right thing and kudos to them. There are still opportunities in the region in terms of fast moving consumer goods as long as we find reliable on - the - ground partners. When you go to Africa, you need to keep your own men there to monitor things.

Bar Ciel Group’s Kibo Fund, Afrasia’s South African corporate finance arm and IPRO’s African Market Leaders Fund, no other local group has built the necessary competence and mechanism to invest into private equity and listed equity in Africa. If you missed the boat and you are too small to get African partners, you can at least invest in private equity and African mutual funds and participate in the growth story. Even there, there is room for partnerships because size does matter.

If we do wish to evolve as a financial hub beyond fund administration, maybe it is time for the government to support its local mutual fund industry. Rather than give all that money to Goldman Sachs which invests it in the US and Europe (Global Equities), put some money into Africa via your local industry and help develop it. For its part, the local mutual fund industry needs to come together and move beyond the fund of funds middlemen model. We can certainly do this together.

I have always wanted to see Mauritius become a research hub for Africa. In the coming weeks, my company will be releasing to a select few weekly research outlooks on various Sub-Sahara African countries, a first in Mauritius. This is a joint project with IPRO’s Botswana based research team and eventual inputs from Religare Global Asset Management and Ciel.

An analyst costs 5 million rupees a year in South Africa but will cost a fraction of this here. If we can form the right people locally, there is a good business opportunity. My only problem is to find analysts versus those with good qualifications on paper and good at memorizing. This is why I constantly criticize our education system. It is far from not even being good enough, especially at the tertiary level. The private sector too must do its part in trying to add value.

The positive on Africa in the budget is the move to establish double taxation avoidance treaties with various African countries. I can assure you that many African financial institutions, let alone global ones, would find this quite interesting. In fact I had a talk about this to Zenith Bank’s top management during my recent visit to Lagos, and they were beginning to learn about Mauritius. We need to establish such treaties with Nigeria, Kenya, Zambia and Ghana.

By Sameer Sharma,

A chartered alternative investment analyst and a certified financial risk manager, is the Head of International Funds at IPRO Fund Management.

Courtesy: Conjoncture.

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