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Investment Guide

The Problem With Sharing is Glaring

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The annual Mining Idaba in Cape Town attracted more than 7,000 delegates to South Africa’s mother city. Many were positive about the prospect for growth and investment in mining across the African continent, but concerns remain when it comes to investing in South Africa’s troubled sector.

Perceptions were not helped in early February, with a number of strikes across South Africa’s major platinum companies. The labor unrest and above-inflation wage increases seem to be a major turn off for both investors in company stocks and companies, and investors looking to put their money into exploration and mine development.

Mining’s contribution to South Africa’s economy has been falling. The South African Chamber of Mines said that the industry has shrunk by about 1% each year, in the period from 2001 to 2008. This decline came at a time when there was a global commodities boom. In the same period, the top 20 mining economies recorded average growth of 5% a year. Still, mining continues to play an important role in South Africa’s economy.

In addition to labor concerns, worries about the availability of adequate power and an uncertain policy environment persist.

Susan Shabangu, the minister of the department of minerals and energy (DMR), has said that amendments to the 2002 Minerals and Petroleum Resources Development Act (MPRDA) should be finalized in the first half of the year.

Concerns among business remain, in particular, with regard to a plan to identify some minerals mined in the country as strategic. Other proposals that caused much angst last year is one which would have companies seek permission from the minister to change ownership of controlling stakes in companies.

It is also proposed that the downstream processing of some of the minerals mined in South Africa would become obligatory. Government too, if the proposal remains unchanged, would be entitled to appoint two directors to the board of any company engaging in the development of a new energy project in South Africa.

“Uncertainty must be removed in order for us to set a starting foundation for new investment. The free market basis of our founding constitution is of paramount importance. While we understand the need for legislation to evolve and improve over time, certain proposed amendments to the MPRDA create significant challenges for long-term investment in the mining sector,” says the former president of The Chamber of Mines and CEO of Anglo American, Mark Cutifani in the Chamber’s annual report.

He went on to say that companies and government have to work together to find solutions—solutions which support further investment, rather than deter it.

The South African government, like many across a number of resource-rich African countries, wants a greater say in the mining sector. Already the MPRDA obliges mining companies to have transferred 26% of their equity, or output, to black investors by this year.

Asked if he believes mining companies will have been successful in this regard, the deputy director general responsible for mineral policy and promotion, Mosa Mabuza said: “The Department has no reason to believe that any mining company is not working towards this objective. We have commissioned an evaluation of transformation progress broadly and the outcome will indicate the extent of this progress.”

The results of an audit of companies’ BBE status and their fulfilment of the Mining Charter is expected by the end of this year.

Some companies still fall short on the equity and output aspects of the Charter, but many have been successful in sourcing goods and services from empowered companies.

There have been a number of empowerment deals among engineering and project management companies, often involving black-managed private equity funds. This is perhaps a better way of funding deals. In the past, some stakes had been bought through share transfers and in instances where stock prices fell and dividends disappeared, empowerment partners were left with debt rather than equity.

Investors may be wary of putting their money into costly mine developments but there are multinational engineering and project management companies coming into the mining space. They want a foothold in supply services and engineering. In addition to business in South Africa, they have their eyes on the developing mining, and oil and gas sectors in Mozambique, the Democratic Republic of Congo, Zambia and Namibia.

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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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