Connect with us

Investment Guide

Summer Bunny Money Comes On In Leaps And Bounds

mm

Published

on

In December, party fever rocked Nairobi—a city already in a festive mood, despite efforts by squabbling politicians to dampen the spirit. From nightclubs to beach parties, the revellers were loaded and speaking with a twang acquired in London or New York. In Nairobi, people call them ‘summer bunnies’, referring to Kenyans living abroad back on holiday in the motherland, flaunting the trappings of success in the West: dollars, the twang and a superiority complex.

And if recent statistics from the Central Bank of Kenya are anything to go by, the economic muscle of the Kenyan diaspora is also growing, with more and more money being sent home by them. In 2011, remittances increased by 39% to $891.1 million. In 2010, they were $642 million, which is the equivalent of 2% of Kenya’s

$31.6 billion GDP. They are the fourth-largest source of foreign currency after tea, horticulture and tourism.

Diaspora Remittances, a new report by Stanbic Investments, a subsidiary of CFC Stanbic Bank, estimated that 14% of Kenya’s 18 million adult population receives money from abroad.

With this flow of money comes opportunity. Firstly, Kenyans are paying a fortune to send home a fortune. The report by Stanbic says the cost of sending money home is 10% of the remittance. At 12.4%, the average cost among banks is higher than the average 8.8% for money transfer operators.

This cost stems the flow of money, a fact that even world leaders acknowledge but look powerless to act. At the L’Aquila 2009 G8 Summit, leaders pledged to halve the cost of remittances by 2014. But according to an analysis by Thorsten Beck, a professor of economics and chairman of the European Banking Center at Tilburg University, and Maria Soledad Martinez Peria, a senior economist in the finance and private sector development team of the Development Economics Research Group at the World Bank, governments have little say on such costs.

Instead, the duo in the analysis titled What Explains the Cost of Remittances recommend that policymakers seeking to reduce remittance costs should focus on improving competition: a private sector-led investment in cheaper ways of remitting money. Some companies are taking up the opportunity. In addition to the traditional money transfer companies like Western Union and Moneygram that dominate the market, Nation Media Group, East Africa’s largest media house, is joining the fray. It is scheduled to launch Nationhela, a visa card that will allow those living abroad to send money directly to relatives in Kenya who will need to acquire the same card.

“More competition will lower the cost of sending money and thus increase remittances,” said the Central Bank of Kenya when releasing its recent report.

Investors need to set up a vehicle that the Kenyan diaspora can use to invest in their homeland. During a Kenya Diaspora Conference in the US, held in October last year in Washington DC, they demanded such avenues. And the government took up the challenge and was rewarded. Infrastructure and savings bonds sold to the diaspora last year raised $383 million.

Investment vehicles would attract even more remittances. The data in the Stanbic report is an indicator that many would want to invest, if only there were good channels to do so. Around 52% of total remittances are used as living wages by recipients, while 44% is invested. Approximately 36% is invested in small businesses, while 8% goes to Kenya’s previously booming, but now faltering, real estate sector, and only 4% to savings. Mama Mikes, a website that allows Kenyans abroad to buy various things for their relatives in Kenya, has recorded phenomenal growth.

Kenya’s dependence on remittances is expected to grow, thus providing more numbers, a fact that drafters of the country’s Vision 2030 economic master plan acknowledged. The plan, which is expected to catapult the country into a middle income nation by 2030, is targeting the diaspora to raise remittances from the current 2% to 5% of GDP by 2030.

The diaspora’s muscle is growing, not just in Kenya but also the continent. More than 3% of Africa’s population has migrated to other countries, including within the continent. Remittances to Africa reached $40 billion in 2010 and are the continent’s second-largest source of money inflows after foreign direct investment. Their impact on the population is also staggering. More than 120 million people receive money from 30 million migrants, with Nigeria, Egypt and Morocco being the top three remittance-receiving countries on the continent.

Summer bunnies are not only changing their voices when they leave their country, but our economies too.

Continue Reading
Advertisement
Comments

Economy

Cryptocurrency for Africans

Published

on

By

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.

Continue Reading

Investment Guide

King Price CEO On Why He Invested On Insurance

Published

on

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.

(more…)

Continue Reading

Economy

Offering The American Dream

mm

Published

on

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.

Continue Reading

Trending