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Investment Guide

Double or quit?

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Will the announced nuclear program energize South Africa’s manufacturing and construction?

My background is power engineering. Building power plants across Africa generates as many stories as they do electricity. It is ironic that, in Africa’s most electrified economy, there are tales of powerless people and an economy running out of juice.

Eskom, South Africa’s national power generator, is cooking with gas (turbines) – at the cost of around $78 million a month – while grinding away at the late completion of the new 9,000MW Kusile and Medupi coal power plants. Medupi’s first 800MW unit is generating power and will be on commercial load in September, with up to 1,600MW coming onto the grid each year for the next five years.

Keep your gas cylinders full and your camping lights charged – there’s more to this story!

South Africa has a 40GW-headache to cure in the next 20 years. The first 10GW is merely to match current demand. Generation capacity is 40GW with only about 30GW available due to the UCLF (unplanned capacity loss factor) being high. The national demand is over 40GW as mines and smelters have shut down to help Eskom. Medupi and Kusile will merely tick this box.

The second 10GW is needed to replace the old coal plants before 2025. They have been run hard well beyond their time. The third 10GW is needed to attract investment for growth and the fourth 10GW is for reserve capacity to allow for maintenance.

Coal may be easier and cheaper, but it’s dirty stuff and our economy has to be environmentally attractive to foreign investment. Few investors will stump up if it will worsen their carbon footprint.

So, 40GW in the next 20 years! Simply put, double Eskom. It has to be greener than ever before too – no dirty coal. That means nuclear topped up with clean coal IPPs. Wind and solar may be very sexy but they don’t deliver the big base load power that we need.

Like it or not, nuclear is the leading renewable energy source and South Africa is in play on the global nuclear stage to procure 9,600MW of nuclear power.

Contrary to the naysayers, nuclear energy’s lifetime cost is lower than most technologies, it’s expensive at the start, but cheaper to run.

South Africa’s nuclear regulatory body has defined that only the safest technology will meet the environmental and safety specifications for any new build program.

Russia, France and China are likely frontrunners, but who has the better and safest kit and who can offer a compelling financial deal? That’s where technology, money, politics and common sense meet in a witches brew.

The International Atomic Energy Authority (IAEA) Integrated Nuclear Infrastructure Review (INIR) sets the readiness criteria for building nuclear plants. A nuclear power plant is split into three main sections: The Nuclear Island, The Conventional Island (Turbine) and the Balance of Plant. South Africa is ready to manufacture and construct on the last two sections, which are similar to the local content on Medupi and Kusile, with some nuclear safety alignment.

The nuclear codes and quality standards take a quantum leap in the Nuclear Island and that is where the nuclear certified contractors like Group Five, Lesedi Nuclear Services and the South African Nuclear Energy Corporation (NECSA) are qualified. The country’s industry will have to partner with the successful vendors to hone those skills, train a workforce and learn from the build program in Europe, China and Russia.

There’s a buzz again. Nuclear vendors expected a request for proposals in August with a preferred Nuclear Vendor Country announced by March. Next year will see tendering for the local manufacturing and construction sector, with contracts signed in 2017 and construction starting in 2018.

The capital expenditure for 9,600MW will be approximately $40 to $50 billion, plus government costs and interest on capital. All this leads to trillions being spent over 15 years. That’s a big number that will reignite local industry and a knowledge economy after the last seven years of misery.

Perhaps it will be “boom” again?

 

Additional reporting from Des Muller, head of Group Five Nuclear Construction Services.

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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