It was a strange and unsettling experience on a Thursday night; easier to shrink from than describe.
It was Walter Magaya’s first South African crusade at the Pretoria Showgrounds; 54 kilometers from Johannesburg. The crowd sang and danced as the Zimbabwean founder of Prophetic, Healing and Deliverance (PHD) Ministries took the stage.
As we sat, there was a sudden, soul-rattling chill; accompanied by shrieks. A woman ran through the congregation. Speaking in a strange language no one could understand. She sounded like two different people; one male, one female. She lost control.
“Leave me, Leave me!” she screams, as Magaya’s ushers shepherded her to the front of the stage; closer to the charismatic preacher.
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In a green shirt and jeans, the woman squirmed on the ground; tearing her hair. Her eyebrows knit as she appeared consumed by rage.
“Leave me alone!” she shrieked; trying to bite the ushers’ gripping hands.
From the stage above booms the voice of Magaya.
“Come out, come out,” he says, attempting to command the demons he believes are in the frantic woman. The woman vomits.
There are 50 more people; screaming, rolling on the ground and vomiting.
This is the theater of the faithful on which the curtain went up with the arrival of Magaya, at OR Tambo, two nights before. Hundreds filled the Johannesburg airport to welcome him. They sang, danced and carried large posters like he was a rock star or politician.
This is more than worship. It’s also a thriving business that’s turning over millions every year. People risk their lives to get close to Magaya. Last year, 11 people died in a stampede during a crusade in Kwekwe in Zimbabwe.
“We have put measures in place to make sure something like that never happens again,” says Magaya.
On this night in Pretoria, people ran to the stage to offer cash for the answer of prayers.
This frantic scene is being played out across Africa. The commercialization of churches is arguably one of the fastest growing businesses in the continent.
Magaya claims to pull 200,000 people every week to his Harare church. Many of the faithful dig deep into torn pockets. Most earn about $350 a month; yet they pay handsomely for this spectacular display of power from above.
Money is scarce in Zimbabwe right now. According to independent Harare-based economist, John Robertson, the total workforce in the formal sector is about 700,000 people; out of a population of 14 million.
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“We employed that number in 1968 when the population was one third of its present size. So employment has gone backwards at an alarming rate,” he says.
“Part of our problem is that production workers’ wages are making many of our goods uncompetitive. Wages are lower in China and many other countries, but productivity is higher elsewhere because businesses have been able to keep up with changing technology. Zimbabwean factories have not. So, wages plus productivity are working against us as all imports are now cheaper than local products.”
No matter how hard times are, still they come. Thousands offer money in hope of riches and health. They call it partnerships; giving to receive.
Magaya claims he is a trillionaire in spirit; but is unable to calculate his worth, that could be frowned upon by the scriptures.
“Again I tell you, it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God,” so says Matthew 19, verse 23, in the Bible. Magaya believes people should also live comfortably on earth.
“We all want to go to heaven but we all want to stay on earth. No one wants to die now. Before you go to heaven, what about now? [Jesus] was rich yet he became poor for our riches and we should not only focus on one part. We are underutilizing Jesus. He wants you to go to heaven, but he also wants you healthy on earth. He wants you to be happy, married,” he says.
“I don’t see anything wrong with people in ministry living a good life because they represent the largest corporation (Kingdom of God) on the earth.”
It is wealth that began with 45 followers and now has hundreds of thousands who give. His ministry has no board or clear means of regulation. Many, outside the church, question how he maintains his alleged lavish lifestyle. Word is, Magaya makes around $2 million a month.
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Critics say churches like Magaya’s exist to boost wallets and egos; without transparency, nor accountability. Magaya counters he is accountable to his financial director.
“I created a team which governs me. My wife has a salary and I have a salary. If I go to [the financial director] and ask for $20,000 to give to someone, they know how God speaks, I have trained them, they will give me that money,” he says.
Magaya says his ministry does not depend on offerings and tithes. It is bankrolled by a multitude that understands, have been healed, or merely want to support – the churches call these donations seed.
“The finance team has pushed a lot for me to have nice things. The people that give money actually think my living standards are low and I should upgrade them. Whenever the church and my financial directors decide to get me things; that’s the only time I get them,” he says.
The Financial Director of PHD Ministries, Nelson Marimo, every inch the accountant, says he makes sure every penny given to the church is banked and accounted for.
“Three people in the ministry, including myself, have access to the account. The prophet has no access to it. He doesn’t have anything to do with the money. It’s our decision what he gets. If he needs anything we advise him correctly about the funds available,” says Marimo.
“We cannot put a price on what he is worth or what he should have. He has done so many things for us and the people.”
Brendon Strauss, the Food Distribution Co-ordinator for the Bryanston Methodist Church in South Africa, says prosperity churches give a bad name to other churches. He says the church is not meant to be run as a business.
“The bible says people should give 10% of whatever God blesses them with to say thank you and that’s all God asks for,” Strauss says.
He says his church helps people in the community without demanding money from the congregation.
“We for example get food from shops and give to the needy in shelters and HIV support groups. We don’t subscribe to selling things in the church. Pastors get stipends for their role and it is enough for them to survive.”
Father Xolani Dlwati of St Monnica’s Anglican Church in Midrand, South Africa, says the most import thing is to help people understand that healing comes from God and churches are just vehicles of healing.
“The challenge is our ignorance where we don’t study the bible and see what the bible says. People need knowledge so they can see if they are being taken for a ride. The grace of God is sufficient for all. You cannot be paying back the priest for blessings God has given you. If you want to give, you can do so voluntarily through giving thanks and not because you are being forced to,” says Dlwathi.
Prosperity preachers sometimes find themselves between a rock and a hard place. Many followers give money for results. A problem arises when the promises are not kept. In Magaya’s words, “When people give money, they partner with the vision [of the ministry]”.
It’s not always that simple. Earlier this year, Magaya was hit with a nearly $2-million lawsuit by a Harare couple who allegedly gave him money and cars to fulfil a prophecy that they would own an airline. The Zimbabwean entrepreneurs, Upenyu and Blessing Mashangwa, behind the lawsuit, allegedly also “seeded” $15,000 towards this prophecy.
Blessing says they came into contact with Magaya when they were selling their eight-bedroom house in the Harare suburbs.
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“Magaya requested to see us… about an airline vision he claims he had received from God when he visited the property we were selling. We worship in (UFIC Prophet Emmanuel Makandiwa’s church) and we felt if there was any airline deal then Prophet Makandiwa would tell us, therefore there was no need to meet him and we denied meeting him,” she says.
They eventually sold the house for $450,000 to Magaya.
“At the time we had three offers ranging between $500,000 to $550,000. We sold the house for a lower offer because we felt we were supporting the work of God,” she says.
According to her, Magaya asked them to “seed” for the airline prophecy to come to fruition. The couple seeded a 2014 Land Rover Discovery 4 Limited Edition. Magaya denies this.
So, does Magaya accept gifts from the poor?
“I accept gifts because whoever gives is blessed. If I don’t accept, I will be blocking someone else’s blessings,” he says.
Magaya says that he educates more than 5,000 children each year and passes on 90% of all he receives.
PHD Ministries is not the only church accepting gifts and it can turn ugly.
Zimbabwean single mother, Amanda Tshuma, says she left the Roman Catholic Church in search of miracles. She went to a Pentecostal church in Bulawayo.
“The situation in Zimbabwe is very hard. I was starting a business because I had lost my job. Every Sunday, the pastor would tell us to give money in tithe and offerings and also seed so that God can bless us,” she says.
Because of her search for economic emancipation, Tshuma did what she was told.
“I seeded almost everything I had. I even took the little money I had to start my business and gave to the church.”
After two years of waiting for a miracle, life became unbearable.
“I had debt and couldn’t afford food or a place to stay and I got kicked out,” says Tshuma.
The church, the one place she expected help from, didn’t help.
“The pastor wouldn’t even let me and my children sleep in the church while I thought of a plan. That’s when I saw that he doesn’t care. I left the church and I no longer attend any church because I don’t know who is after my money and who wants to help me go to heaven.”
Tshuma refuses to name the church for fear of retribution.
Like Magaya, many of these preachers are seen to be as much about profit as prophecies. Nigeria’s TB Joshua, Chris Okotie, Matthew Ashimolowo and Chris Oyakhilome live like rock stars and pull large congregations. In South Africa, some pastors have been known to make people eat grass, hair, snakes and drink petrol, all in the name of Jesus.
In the Christian Bible, Jesus turned the money changers out of the temple.
“It is written,” Jesus said to the traders, “My house will be called a house of prayer, but you are making it a den of robbers”.
In the 21st century, money has a home in many churches which sell copies of the sermons, gospel music videos and anointing oil. During Magaya’s crusade in Pretoria, worshippers bought both a DVD and anointing oil for R100 ($7.5).
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Like in any business, style and reputation are huge marketing and selling points. This is not just an African thing. In Los Angeles in the United States (US), some pastors flaunt their wealth through a television reality show called Preachers of L.A. These pastors live in mansions, drive expensive cars and wear the latest fashion.
“P. Diddy, JZ, they are not the only ones that should be driving Ferraris and living in large houses,” says Bishop Ron Gibson on the show’s 2013 trailer.
Pastor Jay Haizlip says “the Bible says that those who sow among us should reap from us, that’s implying that preachers should be taken care of.”
“The Bible says I wish above all things that you would prosper and be in health, even as your soul prospers. I believe that,” declares Bishop Clarence McClendon, one of the stars of the show.
Most of those who believe in these charismatic pastors don’t mind coughing up.
“It is our will as congregants to make sure they [pastors] are safe and all their needs are met. The only problem comes when they get richer and forget the poor. The media is only focusing on one side of the story. A lot of good things are happening in the church but no one is reporting about it. Most of them are rich but they take care of the poor. No one sees that,” says one of Magaya’s followers, Panashe Mandebvu.
These fundraising schemes make religion more emotive and controversial. Governments and religious groups in Africa are taking notice. The State is wading into the realm of prayer.
The government-backed Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities, in South Africa, recently launched an investigation into the commercialization of religion.
“We are launching an investigative study on the commercialization of religion and the abuse of people’s belief systems in terms of when these institutions are being run, how are they being run, where is their funding going into, who collects how much and what do they do with the money, where does the money eventually go to, what are the governing principles that are there,” says chairperson Thoko Mkhwanazi-Xaluva.
Findings will be released in April.
Magaya’s advice?
“If you feel like someone is eating your money, the best thing is not to give them.”
According to Statistics South Africa, based on their 2001 study, almost 80% of South Africa’s population follows the Christian faith. This means about 80% of the population are inclined to give money towards the Christian churches, steering the debate towards church taxation.
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In South Africa, churches are classified under Section 15(1) of the Constitution, one of the most liberal in the world. This means they are registered to provide services without intent to make a profit.
According to the South African Revenue Services (SARS), non-profit organizations take a shared responsibility with government for the social and developmental needs of the country. Preferential tax treatment is designed to nurture non-profit organizations.
“The preferential tax treatment for not for profit organizations is however not automatic and organizations that meet the requirements set out in the Income Tax Act, 1962, must apply for this exemption. If the exemption application has been approved by SARS, the organization is registered as a Public Benefit Organisation (PBO) and allocated a unique PBO reference number,” says SARS on their website.
A 2012 report by The Economist estimated the annual spending by the Vatican and church-owned entities in the US to be around $170 billion. According to FORBES, Catholic Charities USA has annual revenue of $4.39 billion. According to a 2012 University of Tampa study, not taxing churches is costing US government coffers an estimated $71 billion each year.
Steven Friedman, a University of Johannesburg political scientist, who has specialized in the study of democracy, says governments need to be careful when they come up with ways to curb the rise of churches making money.
“Some churches are exploitative but it’s simply not clever people preying on the poor. We need to be careful with the interventions we put in place. Everybody should pay tax but where do you draw the line? How do you put it into law when there are so many different churches,” he says.
“I am not sure there is a solution beyond encouraging people that are being exploited to stop being exploited.”
Magaya counters that churches are neither businesses nor exploiters.
“It is very wrong to tax churches because churches are not being celebrated enough for the job they are doing. They [authorities] must actually look at areas where they can make sure that they celebrate churches,” he says.
In Kenya, the government has had enough of fly-by-night churches. Last year, it issued a ban on the registration of new churches; following a television exposé of a Salvation Healing Ministries pastor, Victor Kanyari, tricking his followers into donating seed money.
Kenya’s Attorney General, Githu Muigai, said in a press conference early this year, it is not the policy of the government of the Republic of Kenya to interfere with the freedom of religion and worship. The government also called for fresh registration of existing churches. The religious bodies were also required to file details of their financial returns with the registrar of societies.
“Dear friends, do not believe every spirit, but test the spirits to see whether they are from God, because many false prophets have gone out into the world,” so says the Bible. Maybe words worth thinking about if you go to church this Sunday.
<h3>The Day I Was Attacked By Demons</h3>
“If I could hit her with my camera, I would have,” I remember thinking.
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In the midst of Walter Magaya’s service, it was drama. One by one, men and women were flocking to the stage claiming they were possessed by demons. I clicked away.
Suddenly, like a rugby tackle, I felt someone grab me around my thighs; it was a woman. She grabbed me, lifted me, and the next thing I was on the ground fighting. My one hand was in the air to protect my camera and the other was pushing her away to protect the sensitive parts of my body. She was mumbling loudly and crying. It took three ushers to make her let go.
I got up, ran away from the demon zone to where I was seated, checked for vomit, I was clean but felt dirty nonetheless. An usher who saw the attack ran to me and asked if I was okay. I was fine, but I looked back and thought “what the f**k did I just go through?”
For a split second during my ordeal, I thought the demons were coming for me. Had I known the day was going to be dramatic, I would have taken a long lens, worn a pair of work boots and a helmet.
Despite the ‘demonized’ woman, the hospitality shown by one of the members, Jerome Galiao, was great.
All I have now is a cut on my finger as a reminder.

Prophets Of Profit

Before money was invented, before the word entrepreneurship was formulated, people in ancient times traded by offering value. As far back as the Stone Age, people had to transact by exchanging goods that were of equivalent value to what was  to be received.
Today, this concept can be described by two words: value proposition. This has gained currency over time, but some entrepreneurs still miss the mark.
Business is based on the following basic principles; you are either saving your clients time and money, or making them more money. In supply and demand, distribution comes as a value-added product.
Geographic proximity to a product does not mean others have the same advantage. Cocoa is a good example. The product is largely found in West Africa. Any entrepreneur setting up a distribution channel to Singapore will be adding value on two fronts; firstly that area of Asia doesn’t have in the same abundance of cocoa as West Africa, and secondly from the logistics front.
In the knowledge economy, access to rare information elevates the value of those who have it. This is why companies call in consultants and advisors at an inflated cost. It is also why we keep going to conferences, paying international speakers large amounts of money to speak for 30 minutes. It’s all about the value one can bring to the table, and that comes from experience or study.
Scarce skills, like firewall experts, are rewarded handsomely, as cyber security threats rise. A shortage of something increases its value; art collectors can attest to that.
Marketers use this strategy to create a craving for a product and service. You are unlikely to see a Bugatti advertised on billboards and in newspapers. People who can afford the supercar know where to find it.
Entrepreneurs need to reprogram themselves to create value, rather than looking for money. Money chases value. No one holds a monopoly on cash; if you offer customers value, they will gladly give you their money.
Even Albert Einstein, a man of science rather than business, said, “Try not to become a man of success. Rather become a man of value.”
There are survivalist entrepreneurs who keep complaining as if money repels them. We need to be innovative in how we sell our products and services. The market will pay for the value you provide.
Jannie Mouton is well known for creating value. He did something unique through Capitec Bank. They entered a market which had gigantic financial institutions; they added value through two things in particular. They lowered bank charges and demystified the banking system. This related to the general population, most of whom were clients of other banks. Today, Capitec is one of the largest retail banks with four million clients, and they claim to be registering around 100,000 new clients every month.
Adding value is reliant on the industry that the entrepreneurs find themselves in. You need to make promises to clients that differentiate yourself from your competitors. You have to appeal to what they want. The successful execution of this can convert prospects into new customers.
While you are trying to make millions, never forget that at some point almost everyone in Zimbabwe was once a billionaire. It’s not really about the money, it’s about the value that you add through your company. Align yourself with a sense of value, then all these others things will fall in place

Forget Money  Create Value

Every day, African entrepreneurs are faced with the same problem. On the one side we have a financier looking for ventures to invest his money in; on the other we have a business owner unable to push their products at the pace they would like.
It is not that business owners don’t ask for financial assistance and it is not that funders don’t receive proposals; but a fundamental problem exists. You can have two companies that both sell the same electronic gadgets, but money flows to one business and not the other. Often, it come down to packaging.
Entrepreneurs haven’t come to terms with packaging their businesses for far too long. A bank’s main product is money, but why do we choose one over the other? Again, it is the packaging. Our choices are made around the value added services the banks have around their product, such as technological advancements or insurance services.
I have sat in many meetings and listened to investors saying, “we have money, but we just don’t come across the best investment opportunities”. At the same time, they acknowledge there are many entrepreneurs with brilliant products and services. These entrepreneurs have pitched their ideas, only to have them declined. It is likely that their proposal was not correctly packaged.
Legendary venture capitalist, Tom Perkins, knew about the two Steves (Steve Wozniak and Steve Jobs) in the early 1980s, but did not invest in Apple. It was not that the concept lacked substance, it was how the idea was put across.
The South African government established the Small Enterprise Finance Agency (Sefa) in 2012. It has a Youth Fund worth $145.71 million which was supposed to be spent within five years, but two years later, there is still $119.9 million in the fund’s coffers. Less than a quarter of the money, meant to kickstart small businesses, has been spent. Are they struggling to find bankable business cases because the new ventures are not packaged in a way that will attract investment? I suspect so.
This is a matter that needs urgent attention!
A product’s packaging needs style and a unique design. It needs to evoke emotion and needs to appeal to the relevant niche market.
Companies need to package an experience in their products and services. People are emotional beings driven by feelings; often our spending power is propelled by sentiments rather than reason.
In order to connect to a customer, you need to tap into their emotions by creating an experience through your product. At the end of the day, what matters is your unique selling point.
Functionality is a key factor beyond packaging a product. For example, the software inside a tablet matters more than the design. Reviews for this type of product will focus more on functionality than what it looks like.
Although I have emphasized how packaging your business’ products and services will determine the appeal they have on the market, the approach will vary for different companies. It is important to know what your market expects in the segment you operate in; however Henry Ford and Steve Jobs have a different view to this.
“Customers don’t know what they want until you show them,” said Jobs.
“If I asked the people what they want, they would have said a faster horse,” said Ford.
Great entrepreneurs dictate what the market wants and then improve their products as they receive feedback.

YOUR PACKAGE could be worth millions

The FORBES AFRICA Person of the Year for 1324 could very well have been a certain flamboyantly wealthy King of Mali, says Martin Meredith, the celebrated British historian of Africa.
“The richest man, that the world has ever seen, was Mansa Musa. [He] makes a Hajj to Mecca, arrives in Cairo and literally hands out gold bars to the waiters. He wrecks the money market for ten years or more&#8230; that story of his arrival eventually finds its way to Europe&#8230; the first European map, the Catalan map of 1376, has a portrait of [him] with a caption that says, ‘this is the richest man that the world has ever known.’”
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His gold-dishing arrival in Cairo inspired the first Spanish expedition to the continent, hunting Musa’s gold. The expedition set out for West Africa, searching for the fabled ‘River of Gold’, but the crew got lost and all were presumed dead.
At his death, Musa was worth around $400 billion, which make’s Bill Gate’s $81.8 billion look paltry.
As his empire fell, so did Africa.
“I discovered the extraordinary parallel themes of African history, compared to what is going on now. It has always been that Africa has been this enormously wealthy continent and yet it is the poorest continent. There’s a paradox about it,” says Meredith, who examines this 5,000-year paradox in his latest release, The Fortunes of Africa.
Meredith has had two careers in Africa, far from gold bars; first as a journalist, then as a historian. After fulfilling his boyhood dream of navigating the Nile, when 21, he moved to Lusaka and became a journalist.
“The first president I ever interviewed was Julius Nyerere of Tanzania, at the age of 22. He was a sort of giant intellect. We were sitting out in the State Palace in Dar es Salaam, looking out across the sea and there was Nyerere, hoping for real intellectual debate. Instead, he was faced with a green, inexperienced reporter who wasn’t giving him any argument!”
After 15 years reporting on the continent, he left to become a research fellow at Oxford University which spawned a shelf of books.
“I am essentially a story-teller, which is what journalists are, but the stories I tell have a very large dimension,” he says.
His first book, 1979’s The Past is Another Country, was a story of a soon-to-be independent Zimbabwe. Since then, he has written on everything; from elephants to Nelson Mandela. His most successful was The State of Africa, a contemporary history.
His latest title came after a year’s research. He calls it a standard history of Africa, which picks apart the economic roots of conflict and poverty on the continent, drawing on years as a foreign correspondent.
“This extraordinary World Bank figure [says that] 40% of Africa’s private wealth [is] held outside Africa which [contrasts] with the Asian experience. They have levels of corruption which are pretty high too but what happens there is that wealth is ploughed back into businesses, they might be mafia-type organizations, but they build factories and industries so the money is ploughed back.”
On the other side of the gold coin, Africa has a penchant for vanity projects like the Pyramids of Giza right to Mobutu Sese Seko’s ruined Gbadolite Palace, which had a private concord airstrip so he could fly off shopping.
“The money in Africa is taken out by the ruling elite and the growing middle class, so it’s safe and secure and they can enjoy buying properties in Europe. London is awash with Nigerian millionaires! Corruption happens everywhere, you expect a certain level of it. Where the focus of ambition lies in making as much money as possible, regardless of the circumstances, that is when it becomes dangerous. It affects so many African countries.”
The greed-inspired accidents of history are at the root of Africa’s woes. The Spanish expedition, inspired by Mansa Musa’s riches, led to centuries of extraction of African wealth for foreign gain. Hence, the birth of the infamous resource ‘curse’.
If in the last 5,000 years of this continent, the past has become our country, then, as the old adage goes, those who do not learn, or remember, their history are condemned to repeat it.
Meredith is certain to write it.

Person Of The Year For 1324

It is so easy to lose sight of the true meaning of Christmas. What can you do this year that epitomizes the true spirit of Christmas?
A definition of a philanthropist is someone who makes charitable donations intended to increase human well-being. This could include giving your time, money, or reputation to charitable causes. By giving back to your community or missionary organizations you give yourself the opportunity, and the privilege, of making a positive impact on other people’s lives. Material possessions will ultimately lose their shine, but through philanthropy, one can make an impact and shape or even save lives.
Is there a particular cause that you have considered supporting? This might be a good time to crystallize your strategy for this. Review your finances to decide how much you can afford to give. Will it be a one-off donation or is it something you can continue to commit to year on year. Narrow your choices down to a few charities or initiatives that you can identify with and do some research on them to ensure that their ethos and mission aligns with your core values; then choose one or two to support. Follow up to see the impact your action is having.
While we all love to see the excitement on children’s faces on Christmas morning as they open their presents, try to emphasize the non-material aspects of the season, such as family, fellowship and thoughtfulness. It is not enough to just tell them to be charitable and kind, our own actions in supporting others or changing lives will speak louder than anything we can say. We must guide them through a program of action so that it becomes ingrained in their psyche.
The high cost of living and unemployment means that many people face a dreary holiday season and cannot afford much this Christmas. If you are fortunate enough to have an overflowing basket or trolley, why not shop for another family that is facing difficult times and then have it delivered to their doorstep.
There are so many people in need of the simple things that so many of us may take for granted. Get together with a few friends, put some money together and take some gifts to the elderly who have found themselves in retirement homes. Cheer them up; the gift of happiness and good stimulating company for an elderly person, who might be lonely during the holiday season, would make a huge difference.
Do you often reminisce and complain about how things used to be at your old school and how standards have now fallen? Why not do something about it? With an endowed gift you can provide permanent support for the educational institution. Your contributions will be invested and each year a distribution made to fund the program or area that matches your particular interest. Once it is officially established, you or anyone else may continue to add to the fund at any time.
Gifts do not only have to be of a financial nature. There are several other ways to give meaningfully. The possibilities of giving of your time, experience, talent and intellect are endless and by sharing your knowledge with others you can add sustained value to your community.
As we get caught up in the whirlwind of festivity, socializing and shopping, it is little wonder that we often forget the true meaning of Christmas. How can you make a difference? If you haven’t been doing much for others before now, this is a good time to start. As you prepare for Christmas, remember to be a blessing to others. Merry Christmas!
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For more personal finance tips, please follow Money Matters With Nimi on Twitter: @MMWITHNIMI and Facebook: MoneyMattersWithNimi

What Impact  Will You Have?

In the high-rise office overlooking one of the largest man-made urban forests, against the silhouette of Johannesburg’s central business district in the distance, sits Nicky Newton-King. The unassuming chief executive looks relaxed in handling one of the biggest jobs in finance.
It’s just over a year since Newton-King took over the helm of Africa’s biggest bourse and it hasn’t been easy running an exchange voted the best regulated in the world for three consecutive years. The JSE beat 141 exchanges rated by the World Economic Forum’s Global Competitiveness Report.
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“It’s not the nature of the award per se, it’s the fact that we’re keeping the standards up and that builds confidence. It’s important for South Africa’s financial markets, banking system, corporate governance and accounting standards to be all rated in the top five in the world alongside the best regulated exchange recognition,” she says.
Aside from the award, the bourse has broken numerous records in the last year and recorded its best annual returns at 22%, for the first time in three years, despite a difficult, challenging and unpredictable year.
But this year will not be easy for the exchange, in Africa’s biggest economy, as the mining sector is likely to be hurt by another wave of wildcat strikes, especially if Anglo American Platinum goes ahead with its plans to lay-off 14,000 employees and mothball shafts. This could damage investor interest in the country and may persuade them to invest their money elsewhere.
Amid a struggling world economy and labor unrest, two of the biggest issues for the exchange are to address the failure of the African Board and to secure the lion’s share of primary listings. The Africa Board—an attempt to have a separate listing platform for certain countries on the continent outside South Africa—was scrapped last year after three years of struggle. It was met with lackluster demand from African firms who were more interested in listing in London. Newton-King admits many were confused as to what the board was about.
<img loading="lazy" decoding="async" class="size-medium wp-image-1630" src="/wp-content/uploads/2013/03/CTX6441-199x300.jpg" alt="" width="199" height="300" />
“We didn’t hit the mark on what we wanted to do, because we ended up confusing people. Is the Africa Board something less than the main board? And clearly once you realize that you are not hitting the mark, it’s better to address that right up front,” says Newton-King.
The plan for 2013 is to work closely with 24 exchanges in Africa, without buying strategic stakes.
“If we can find a way to partner with African exchanges, so that we use what we do well and what they do well. What we do well is deep markets, lots of capital, lots of clients committed to us. What they do well is access to the clients in their home market etc. If we can partner together to provide investors through us, access to capital and that would be a win. That’s what we want to do.”
On the primary listing front, Newton-King says the JSE expects to close deals for a number of good listings this year, even though she admits the listing environment is quite slow.
Currently the exchange has 12 listed companies from elsewhere on the continent, as well as the Namibian government bond issue listed in November, which is traded in South African rands. It is the first time a sovereign bond outside South Africa is raising money on the exchange and Newton-King says she expects more from it this year.
The commodities market was recently granted approval to trade contracts on Zambian grain in dollars on the JSE. This is the first time the exchange has traded a product in US dollars.
“We can see the opportunity that opens up for us, the opportunity to potentially trade a whole lot of our other products in foreign currency. This is interesting because our clients are looking for diversification, it’s a new asset class,” added Newton-King.
With a weakening rand against the dollar and labor unrest, it’s certainly going to be a challenging year for the JSE.

The Power Behind  Africa’s Biggest Stock Exchange

You know times are tough when a star player exits the game. Those who play stocks agree that a move like this is not a good omen.
So when Centum, a listed investment company, announced in November last year that it had reduced its holdings at the Nairobi Securities Exchange (NSE), everyone stopped to listen.
In March 2011, Centum Investments, which invests in both listed and unlisted companies in the East African region, cut its exposure at the NSE from 23.6% to 9.1% of its total portfolio of $170 million and expanded its property investments by $11.8 million.
The move was to cushion its $170 million asset base as the stock market suffers from the jitters over a gloomy economic outlook in East Africa’s biggest economy and fears of political instability ahead of a general election later this year.
Centum’s investments at the NSE were punished with a 6.6% drop in half-year net profit for the six months, ending September 2011. In January this year, British American Investment Company began reallocating its assets to real estate to cut its reliance on the NSE.
2011 was a bad year for stock investors in Kenya, with the NSE dropping 31.4% by end of December, sending both institutional and retail investors scampering for safety. High inflation—which peaked at 19.72% in November but eased to 18.3% in January—along with severe drought, a weak shilling and turmoil in Western economies, resulted in the panic selling of stocks, which depressed the market.
Prices have remained low for the most part, while some have fallen to historic lows. The NSE was rated the second worst stock exchange performer in 2011, second only to the Egyptian bourse, which was down 47.2% due to political upheaval that toppled Hosni Mubarak.
“Institutional shareholders have been trashed in the bond market. The spike in the inflation rate, the excessive volatility of the Kenya shilling and a behind-the-curve Central Bank [of Kenya] have impaired the bourse,” says Aly Khan Satchu, CEO of Rich Management, an investment company based in Nairobi.
Kenyan billionaires in shilling terms, with huge stakes in the stock market, have seen their fortunes mauled by the bears. Investors lost an estimated $4.5 billion in the 12 months to December 31, 2011, as market capitalization shrank from $14.5 billion on January 1, 2011, to $10.1 billion at the end of the year.
But the six months between February and August suffered the deepest dip. Within the period, Chris Kirubi, one of the top investors at the NSE with 26.8% of Centum, lost about $7.7 million on the counter after the firm’s share fell 20% in the six months to August. Equity Bank CEO James Mwangi lost $20 million in the six months that saw the bank’s stock shrink by 30%.
Naushad Merali, the chairman of Sameer Group of Companies and ranked one of the wealthiest at the NSE, lost $6.2 million from his three listed companies—Sameer Africa, Sasini and Eveready East Africa—which fell 24%, 5% and 25% respectively, during the six months.
Most investors are shifting to less risky and now lucrative Treasury bills and bonds, as government increases borrowing to finance its budget. A sharp rise in interest rates, after the Central Bank of Kenya (CBK) raised its policy lending rate to an unprecedented 18% to tame inflation and buoy the weak shilling, is also squeezing money out of investors and limiting cash flow to the stock market.
Commercial banks have raised lending rates to above 22% in recent weeks, while CBK has steadily raised the coupon rates on Treasury bill and bond issues to attract investors. The coupon rate on the two-year bond, for instance, jumped to 22.8% in November from 16.5% in October, as investors bid for higher returns to hedge against rising inflation that touched a new high of 19.7% in November.
If the impact of two new listings at the NSE in the third quarter—Transcentury Limited and British American Insurance Kenya Limited (BRITAK)—is any guide, the chill at the Nairobi Stock Exchange is deep-seated. The BRITAK initial public offering (IPO) attracted a subscription of 60%. Analysts say this is an indication that investors are still skittish about stocks. Both Transcentury and BRITAK closed the year down 50% and 67.2% lower than their offer prices.
With an election year in 2012, there’s every reason for investors to be pessimistic. Most investment analysts project a sustained market recovery in 2013 after the elections.

Bourse Black Hole

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.

Summer Bunny Money Comes On  In Leaps And Bounds

Record breaking albums; sold out concerts; endorsement deals worth millions and screaming fans. This is the stuff dreams are made of, but in this day and age Africans are finding it elusive.
<div id="attachment_183" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-183" class="size-large wp-image-183" src="/wp-content/uploads/2017/04/39_Asa-680x1024.jpg" alt="" width="474" height="714" />Asa at Arts Alive, Johannesburg</div>
Many young hopefuls fall for the allure of the music industry. They want to be the next Lady Gaga, 30 Seconds To Mars or Lil Wayne. Unfortunately, very few will make it and even those who do will find the cold reality that Africa’s mighty music market, South Africa, is not as lucrative as its American counterpart.
The reason? It is a small market, plagued by lagging technology and mismanagement.
The global economic downturn has hit industry sales. According to the Recording Industry of South Africa (RiSA), sales dropped by 6.9% between 2009 and 2010 and 14.7% between 2008 and 2010.
An artist who appears to have bucked this trend is newcomer, Zahara, a guitarist and vocalist from a small town near East London in South Africa’s Eastern Cape. She made news when it was reported that her debut album, Loliwe, sold more than 100,000 copies in just 19 days.
With the market where it is, the sceptics scoffed and there were whispers of cooked numbers. Zahara is managed by TS Records and distribution is handled by EMI Music.
Tyson Mqomo, a manager at EMI, refutes these allegations.
“We were also taken by surprise, but this has happened before, we did not make this up,” he says.
No matter how many Zahara sells, album sales alone will not sustain a music career or pay for lavish lifestyles, according to Clive Hardwick of Bula Music.
Hardwick has simplified the maths. If you have a compact disc (CD) that retails for $10, the retailer keeps 35% and pays the remaining 65% to the distributor. This wholesale price of $6.50 is divided up even further. Six per cent is for the manufacturing, 10-20% is kept by the distributor, and an artist could earn anywhere around 15%, depending on their contract. Five per cent pays for the producer and 6.76% is allocated for copyright. In the end the record label receives anywhere between 25% and 30%.
The average recording cost is $7, 269 and making a music video, marketing and CD sleeves pushes up expenses further.
There are currently around 1,500 record companies registered with RiSA, these include the big boys; Sony Music, Universal Music, EMI and Gallo Records. An estimated 50% of South African music releases come from these major recording companies. Across all recording mediums, 2010 sales in South Africa reached $43,770,901 for homegrown music; against $51,178,161 for international music.
The numbers don’t lie. It’s clear that there isn’t enough money going around. However, there are alternative sources of income. It just takes selling power, but unfortunately that does not come with star power.
John Langford, CEO of Big Concerts, says live performances are “the bread and butter”. FORBES AFRICA investigated how much. A certain hip-hop group asks anywhere between $3,632 and $9,685 for South African performances and $15,000 internationally. A South African male RnB singer earns $4,843 per performance and a songstress recently charged $11,637 for performing at an awards show.
To make matters worse, a good recording artist does not necessarily make a bankable performer. If you thought that local artists rake it in as supporting acts for visiting big shots, think again. The worldwide industry norm is that the locals sing for free, or even pay promoters for the privilege. This is known as “tour support” in Europe and it is the price you pay for a link with a big name.
Endorsements, sponsorships and merchandising can help boost profiles and bank accounts, only if managers are busy and sell their artists. Look at Lira, The Parlotones and HHP in South Africa.
Unimaginative management is not the only problem hampering the growth of the industry. Digitally, Africa is behind the rest of the world. Most people do not have broadband and South Africa is yet to establish an iTunes equivalent. The continent’s studios are also technically not on par with the international ones, which is one reason one why African artists fly to the States and Europe to record an album. The recording fees fly with them.
Everyone in the industry that FORBES AFRICA spoke to feels that government has failed them in ensuring effective laws to fight piracy.
From Johannesburg to Lagos you will see them at the traffic lights. Ten dollars can get you 10 CDs on the street before they even hit the shelves. Every now and again the police will round up the traffic light buccaneers and confiscate the copies—in the time it takes to memorize a Chris Brown song, the guys are back selling on the streets.
The South African Copyright Act of 1978 states that; “You may not make a copy of a sound recording without the permission of the author.” The onus is on the author to prove that such permission was never given and that is the problem for artists.
FORBES AFRICA has contacted South Africa’s Department of Trade and Industry for comment, several times, but so far has had no response.
There is so much talent among African artists, surely a celebration of home grown music would help add scarce money to the pot. Hardwick says there are boundless opportunities for African musicians to collaborate and conquer continental markets.
“Africa has a very unique sound. What Africa needs is a focal point for the African music industry,” he says.
For now, there are two lessons to be learnt. First, do not get into the music industry for the money. Second, an artist worth a buck needs a big hit and a hardworking team around them. If it were that simple everyone would be making money.

Tag: Money

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