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Investment Guide

Entrepreneurs Move From Debt To Equity

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The Dar es Salaam Stock Exchange (DSE) PLC was set to list on its own main board on July 12 after raising TZS10.1 billion ($4.6 million) in an IPO. It received bids totalling TZS35.8 billion, or 4.8 times oversubscription, for its TZS7.5 billion offer of 15 million shares at TZS500 each which closed on June 3. The DSE had a “green shoe” option to take up to 10% extra and applied to Tanzania’s Capital Markets and Securities Authority to boost this to 35% with the result that it was able to take an additional TZS2.6 billion. Staff took up their full allocation of 3% of the shares.

The Tanzanian bourse is set for a boost in activity after telecoms firms were ordered to list up to 25% of their shares within six months from July 1, in terms of the government’s Finance Bill 2016 and an amended Electronic and Postal Communications Act in June. DSE CEO, Moremi Marwa, said there would be enough liquidity: “The combined 25% of all telecommunications companies’ balance sheets is about $1 billion… Our current market capitalization is TZS22 trillion and annual market turnover is exceeding TZS750 billion. Treasury bonds and bills issued per annum at DSE normally exceeds TZS2.5 trillion and they are normally oversubscribed, meaning there is more liquidity to invest in less risky assets than instruments available.”

The DSE plans to use IPO proceeds to enhance its core operating system, introduce new products and services and for “strategic and operational purposes”. One in two Tanzanians have learned to use mobile financial services, according to a FinScope survey, and investors can use phones to apply for some DSE share offers.

In May, the Botswana Stock Exchange issued a tender for its valuation as it becomes demutualized, for-profit company, BSE Ltd, and works out how to convert the proprietary rights owned by stockbrokers and its government subvention. The Casablanca Stock Exchange is also demutualizing and mulling an IPO – its shareholders include banks 39%, brokers 20% and the Caisse de dépôt et de gestion (CDG) 25%. Johannesburg and Nairobi were Africa’s first securities exchanges to complete the steps through demutualization, IPO and self-listing.

Enko Capital runs the $83-million Enko Africa Private Equity Fund, which focuses on pre-IPO investments, and says Kenyan IT company, The Copy Cat, which operates in four East African countries, and Nigerian interior design company DO.II Designs are considering IPOs. Nigeria’s government is working on privatization of eight state-owned companies: Port Harcourt Refining Company, Peugeot Automobile Nigeria, Nigerian Ports Authority, Nigerian Telecommunications, Nigerian Railway Corporation, Bank of Agriculture, Federal Airports Authority of Nigeria and the Bank of Industry.

Innscor Africa Holdings spun off and listed Axia Corporation on the Zimbabwe Stock Exchange (ZSE) in May. Axia has three operating subsidiaries – logistics and warehousing Distribution Group Africa, furniture and appliance retailer TV Sales & Home, and auto spares retailer Transerv – and $40.6 million market capitalization. Innscor’s previous unbundlings and listings were Simbisa Brands in November and Padenga Holdings in 2010 as the conglomerate focuses on light manufacturing. It was the ZSE’s second listing in 2016 after GetBucks in January.

West African utility group, Eranove, postponed its IPO and listing on the Paris-based Euronext exchange. Its owners include private equity firm Emerging Capital Partners (56%) and insurer AXA (19%) and its four core subsidiaries which supply water and generate and distribute power in Côte d’Ivoire, and distribute water in Senegal.

Miguel Azevedo, Citigroup’s Head of Investment Banking Africa, says the IPO drive will continue in 2017 as capital-raising moves from debt to equity. Bond sales have been hit by rising yields and declining local currencies.

“Sometimes entrepreneurs, all they want is debt, no equity, just debt. This crisis showed them that this can be very expensive. It makes sense to bring in some more equity,” says Azevedo.

His tips for exciting industries include consumer goods, banking, power and infrastructure.

“I see the growth profile of the continent, and in the blocs, is still there. The opportunity in Africa is still there.”

He forecast that multinationals expanding in Africa would aim to take significant positions in companies, rather than outright purchases.

“The base case is buying around 50% with an agreement to buy the remainder.”

Private equity will remain very active and there could be more consolidation among leading firms.

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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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