06 Apr

The resurgence of Sudan: From zero to…

Sudan has for long been the skunk in Africa. The International Criminal Court issued two arrest warrants against its president, Omar Al-Bashir: five counts of crimes against humanity, two counts of war crimes and three counts of genocide. Sudan was also involved, for all practical purposes, in a civil war in Darfur. In 2011, South Sudan voted to secede from Sudan. This was an economic disaster for Sudan as the rich oil fields were in South Sudan. The country has long been struggling, given amongst others, the economic sanctions the USA imposed against it.

According to Trading Economics, Sudan has the sixth-largest GDP in Africa, in spite of US and EU sanctions and embargoes. It has a population of approximately 40 million people. While it has a somewhat subdued GDP growth rate of only 3.5% (relative to some of its neighbours), what is worrying is its inflation rate of 52.4%. It also has an unemployment rate of 13.3%. Its balance of trade is close to negative US$1bn in January 2018.

This article addresses the very recent past of the developments regarding a perceived renewal of interest in Sudan as an investment destination. It will be addressed against the backdrop of the interest shown by China and the USA.

Sudan and the USA
The United States recently lifted a number of sanctions on Sudan, motivated by the perception that Sudan had begun addressing concerns about terrorism and human rights abuses against civilians in its Darfur region. The lifting of sanctions rescinds measures imposed in 1997 related to terrorism concerns and other steps put in place in 2006 in connection with the conflict in Darfur. The sanctions were temporarily eased in January just before President Barack Obama left office, with his administration citing the same progress the Trump administration noted. In July 2017, President Trump extended the review for three months, angering the Sudanese, who stopped some lower-level meetings with USA officials in retaliation, but maintained contacts between senior officials (Morello, 2017).

Lifting the sanctions and ending an economic embargo came after the Trump administration removed Sudan from the list of countries whose citizens are subject to travel restrictions. Other sanctions, however, are still in place for the time being, including those against individuals with arrest warrants related to atrocities committed during the conflict in Darfur. Sudan is also still on the list of state sponsors of terrorism (Morello, 2017).

Read more at How We Made It in Africa

29 Aug

eBay opens U.S. platform to Africa with MallforAfrica.com partnership

allforafrica.com

Americans can now buy African goods on eBay through the company’s partnership with MallforAfrica.com.

Starting this week, products from select vendors in six African countries are available on eBay’s U.S. shopping site. The collaboration starts in style, with opening merchandise categories of fashion, art, jewelry, and clothing.

For the new program, MallforAfrica selects the sellers and handles payments on its proprietary platform. DHL is the shipping partner. Online shoppers can browse the entire collection on eBay’s Mall for Africa Store.

The new online channel expands an existing relationship between the two e-commerce companies. In  2016, they launched the eBay Powered by MallforAfrica platform allowing U.S. vendors to sell in Africa.

“A year ago our focus was about how we could work with a partner to overcome shipping, payment, and trade barriers to offer eBay’s selection in Africa,” Sylvie de Wever, eBay’s General Manager of Latin America and US exports, told TechCrunch.

“If you think about our purpose, which is connecting millions of buyers and sellers around the world and creating economic opportunity, it makes sense to open up the American market to sellers in Africa,” she said.

To start, the program taps goods from merchants in Nigeria, Kenya, Ghana, South Africa, and Burundi, according to de Wever. “We’ll be adding more sellers and more countries,” she said.

On the selection of African vendors, “The main criteria are that the products be made in Africa and quality―making sure it’s a quality product that we can ship within the categories selected,” said MallforAfrica CEO Chris Folayan.

To ensure both, MallforAfrica created a new association, the Africa Made Product Standards(AMPS), to verify made in Africa status and merchandise standards. Initial vendors include African art and craft site Qeturahand accessory brand Eclectic Chique.

Both MallforAfrica’s Folayan and eBay’s de Wever underscored the partnership to sell select African products on eBay is not charity. “This is very much about expanding the reach of African sellers, enabling their platforms, and allowing them to earn and compete globally,” said de Wever.

Folayan sees value for the continent in connecting African sellers to the global digital market. “We’re going to help Africans get on the e-commerce roadmap and make sure people see there are amazing products coming out of Africa,” he said.

“The end result is not just artisans getting known, it’s about giving them a platform expand their businesses, to make money, to send their kids to school, to impact their families,” he added.

MallforAfrica was founded in 2011 to solve challenges global consumer goods companies face when entering African markets. With a unique payment and delivery system, it serves as a digital broker and logistics manager between U.S. retailers and African consumers. The venture has backing from UK private equity firm Helios Investment Partners and alliances with companies such as clothier Hawes and Curtis and department store Macy’s.

While digital sales revenue in Africa is expected to exceed $75 billion by 2025, there’s no reliable estimate of the potential marketplace for online African goods in the U.S., according to Chris Folayan.

Still, he’s optimistic. “We know this will be a pretty big market,” he said, noting demand at two levels. “There’s this wave of interest in African centric designs in mainstream fashion. You’ve seen brands such as Chanel and Dolce Gabbana elevate that. Then you have Africans in the U.S. who want to reconnect with their heritage.”

In addition to being one of the most educated demographics in America, Africans have become one of the fastest growing immigrant populations, according to data from Pew and the U.S. Census Bureau.

eBay’s new partnership has another interesting tech angle: the ability of e-commerce to leapfrog government trade policy.

The last major legislation expanding trade between the U.S. and Africa dates back to 2000. E-commerce partnerships don’t wait for congressional approval.

“We’ve seen people all over the world want to trade, regardless of regulation” said eBay’s Sylvie de Wever.

 

via techcrunch 

17 Aug

Value investing in Nigeria

Active managers in Africa and frontier markets have to counter the perceived higher risk of investing in volatile markets prone to political and economic uncertainty. In response, most investors gravitate to growth strategies, pursuing markets or sectors with attractive GDP growth prospects and predictable policy makers. Inevitably, when investors flock to the preferred country or sector, the top-rated companies command a premium valuation, often justified as buying ‘growth at a reasonable price’.

In contrast, value investors hardly have compelling narratives to justify why they are seeking out the least popular markets and acting with conviction when loading up on beaten-down value stocks. The risk of appearing stupid increases as market prices are trending downwards and there is no shortage of ‘cheap for a reason’ arguments. Despite the rigorous analysis, a value manager’s judgment and conviction is tested when the strategy underperforms. The prospect of client withdrawals is a reality check.

The price you pay counts

Empirical data over long time periods and across multiple markets suggests that stock market returns aren’t correlated to economic growth prospects. What matters is the price you pay, or starting valuations. This is no different in Nigeria, currently the largest country weighting in the Allan Gray Africa ex-SA Equity and Bond Funds, which comprise together about 2% of the Allan Gray Balanced Fund.

President Olusegun Obasanjo’s election in 1999 marked a fundamental transition from military rule to democracy. Nigeria had experienced only 10 years of civilian rule from independence in 1960 to 1999. Since then, Nigeria’s relative political stability, combined with a boom in oil prices, fuelled 9.2% growth in GDP per capita compounded annually; whereas growth in South Africa was 3.2% and in the US it was 3.0%. Over the same 17-year period to 2016, Nigeria’s stock market returned 2.8% (in US dollars), whereas South Africa and the S&P 500 delivered 6.0% and 2.5% respectively, as shown below.

But the real story is the period between the bookends. The notable high volatility in Nigeria’s stock market has offered investors greater opportunities to generate superior returns – by patiently buying stocks that thrived when political or economic prospects appeared dim; and selling the popular stocks when other investors were overly optimistic.

Read the full story: How We Made It in Africa