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Investment Guide

An African Darling For Investors

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At independence in 1966, Botswana ranked as one of the 10 poorest countries in the world. Just over half a century later, with the help of a significant diamond endowment, the richest on the planet, government has managed to elevate the country from a low-income country to one with a mid-income per capita GDP, as it invested the proceeds of its minerals rent into physical and human capital, and into institutions.

The success of this responsible management is to be seen everywhere, as the World Bank elaborates,  “at independence, Botswana had six kilometers of paved roads, three secondary schools, too few healthcare facilities to mention, and a mere 1.5% of the population had completed primary schooling. Today, it has more than 7,000 kilometers of paved roads, more than 300 secondary schools and 95% of Botswanans live within eight kilometers of a healthcare facility, and primary school education is free.”

At a time when its southern neighbor has cold shivers running through its markets, in anticipation of whether or not rating agencies will downgrade the South African sovereign rating to a non-investment grade credit, Botswana has a ranking far from a junk credit. Its upper Investment grade is the highest in Africa.

Government acknowledges, however, that among the challenges it faces, a high HIV/Aids infection rate (the second highest in the World) slows growth. It recognizes it has to diversify the economy, away from an overdependence on mining – especially diamonds – to areas that can carry GDP growth forward. For this reason, it has rolled out the National Development Plan (NDP-11) into tourism, construction, energy and transport. In short, government has assessed that doing the same is not good enough, and to use the worn cliché, diamonds will not be forever.

It has not forgotten where the roots of its humble existence began, and has not forsaken the mining sector’s contribution to the growth in its output, for beneath its soil, lies some 200 billion tons of coal – an estimated two thirds of Africa’s total – a happy co-existence with the volcanic diamond treasures its fiscus holds so dear, and which government manages proceeds from in its public-private partnership venture with Debswana. With so much focus on mineral wealth, it is easy to forget where other areas of promoting economic growth exist. A good example is Botswana’s biodiversity of resources, such as the Okavango Delta, as well as the Kalahari and Chobe, which boost eco-friendly tourism uplift socio-economic conditions of rural communities.

Timing Is Everything

While the need to diversify the economy grows urgent, there is a frank acknowledgment that government cannot do this on its own. This land-locked country faces challenges from climate change, and has a critical shortage of water and electricity, which threaten any sustainable moves to diversify the economy. Also, government will not hesitate to engage the help of the private sector.

As controversial as the decision may have been to close loss-making copper and nickel mines, the government has indicated a strong resolve to protect its hard-earned fiscal integrity, making any adjustment it deems necessary which would shield the taxpayer, despite mine closures shedding jobs.

Another indication of this responsibility was the decision taken by the Botswana Power Corporation to shed its loss-making Morupule B power station. The drive to privatize the  state-owned enterprises theoretically embraces the concept of Public-Private Partnerships, structures considered to be generally successful.

Cash is falling out of fashion – will it disappear forever?

Although 4.3% GDP growth in 2016 may not be high by historical standards, it remains a solid base against which key financial stability ratios can be monitored by credit rating agencies. A surplus of 16% of GDP on the current account of the balance of payments, and an almost negligible budget deficit of -0.7% of GDP, appear to have underpinned the decisions by the rating agencies to maintain the upper investment grade ratings by S&P (A-) and Moody’s (A2) last April.

If there is a conundrum that policymakers have to solve, it is not that GDP growth must be diversified, and that a stronger export base will drive growth in output sufficiently to alleviate poverty and income inequality, but rather that the success of economic diversification will be reflected in economic intangibles, such as better levels of education, better healthcare, better institutions to manage the rents derived during times when economic cycles are more volatile and in better regulating private enterprise. – Written by Colen Garrow

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Economy

Cryptocurrency for Africans

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George Gordon is on a quest to revolutionize the financial system. The director of Africa Master Blockchain Company talks digital currencies, blind risks and board games.


What is this new African cryptocurrency you are offering?

Where the majority of current digital currencies are based on speculative models, AfriUnion Coin (AUC) and the AfriNational Tokens (ANT)are designed for a transactional purpose allowing international payments, remittances, foreign direct investment as well as day-to-day transactions at local retail stores and other outlets. While the option for speculative trade is available with AUC, the focus is not around that.

Each African country will have a specially-designed ANT which will allow users to pay for goods and services and bills easily through completely digital means without requiring any bank account. AUC and ANT will be fully interchangeable to one another and there will be no fees for the user.

It’s the natural next step for digital finance from mobile banking which most Africans are accustomed to. The ability to freely have the power to send and receive money locally and internationally will allow the freedom of choice and spending power many Africans don’t have currently.

What is your own investment philosophy?

I am a gambler! I believe in taking risks and putting things on the line. That being said, blind risk or whimsical guesses don’t get you very far. Always acquire enough information to understand to a reasonable level what the thing you are planning on investing is or how it works and then trust your instinct and gut feel.

What advice would you give entrepreneurs wanting to invest in blockchain?

First, do some research in terms of what the blockchain technology is being applied for or created in terms of its application to an industry or project. Thereafter, check the white paper for the design of the platform as well as its functionality and applicability to what it is trying to achieve. If it aligns with your personal investment rules, then go for it,however, remember that blockchain is continuously evolving and thus you need to explore outside the usual and standard.

First cash-less, now card-less. What is the future of online banking?

If we are looking into what is currently science fiction, I would say the future is digital contact lenses that will be able to connect you to all your social media accounts, internet, news as well as make payments by just looking at QR codes or specialized barcodes to approve and accept payments.

Now, realistically we are not far off from such innovation and technology, but for the time being, I think the next step is scanning of QR codes at retailers and having the transaction automated from your wallet to the retailers digitally.

What is your most prized investment and why?

My mind. I believe that the work I have put into developing my mind, and continue to do so every day, is the number one investment that I have ever done. It allows me to look at things in a unique perspective as well as provides me with the tools to push boundaries and create new opportunities.

Money, success, fame? Which is most important to you?

I would have to say success… because it is most likely going to bring the other two as well, right? But success in the form of starting something and letting it grow and succeed and knowing that something new exists because of your efforts.

What do you spend your money on mostly?

Board games. I love board games and believe it’s a fantastic way to expand your mind as well as have fun with friends.

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Investment Guide

King Price CEO On Why He Invested On Insurance

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King Price Insurance’s CEO Gideon Galloway, who built an insurance company in South Africa worth over $226 million in six years, talks investments, industry trends and how self-driving cars will change the entire car insurance landscape.

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Economy

Offering The American Dream

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Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.

It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.

A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.

“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.

With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.

Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.

“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”

According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.

These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.

“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.

According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”

Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.

“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.

The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.

According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.

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