An explanation is in order.
The rules of the game are quite different in Africa.
It is possible to find about ~20 near-monopoly companies in African continent. Many of those companies are growing circa 20%.
However, it is NOT possible to find an African country which has a currency that does not depreciate against USD (thus lowering returns without hedging).
In fact, many companies in Africa are better than Asian Paints footing (45% market share in India), with near 80-90% market share, yet not growing @ 30%, this is a cause of disappointment for me.
Africa has yet to reach the tipping point with more than 40% middle class and explosive growth of corporations.
Being resource rich continent and cursed by corruption, lack of strong institutions, absence of accountability, the continent is extremely capital starved and does not have infrastructure, without roads, realizing human potential and eventual prosperity is hard.
Super bulls like Mark Mobius or Barings Fund have only bet ~15% of their assets in Africa with their emerging/frontier market funds.
When I said, rules of game are different, to provide an example, major source of revenue for Governments are commodities, Oil, Copper, Cocoa etc.
Commodities are cyclical.
Government Revenues are cyclical.
Even equities and indices behave cyclically, or have behaved so far.
Thus, my disappointment springs from inability to find 35% compounders despite finding more attractive companies than anywhere else.
There are two listed stock exchanges, one of them is the only equity/commodity exchange in the region (not just the country), that is 100% monopoly for many many years to come. You can’t lose money. But I do not envisage to make 40% CAGR on that opportunity either.
It is early days in Africa for mega-multibaggers.
However, there will always be a narrow set of market that will perform exceptionally well in cycles (a different story whether we are able to spot them or not). For example the company that I mentioned here, CROWN BERGER KENYA in 2013 has continued to compound at 104%, 78% and 50% in the past three years, (10% less in USD terms) http://multibaggersindia.blogspot.com/2013/10/long-term-overseas-investing-idea.html
I see no reason, why CROWN may not continue to deliver 20% CAGR for the next decade.
Let me be clear we do not need 100x to change our lives, mine and so many other investors’ lives have changed and so has others with just a series of 2x, 3x, 4x. Only an occasional 10x or 20x.
It is good to aim for stars but not only focus all energies on conceiving a space-time bending gravitational propulsion system. We need our daily bread 🙂 (steady compounders). To that effect I am also buying HDFC Bank in small quantities with expectation of 20% CAGR. In the 90s and Naughties HDFC compounded @ 30%, going forward 20% can be expected (absence of any major financial seize up).
One can enter at the bottom of the cycle in MNCs (or companies that are not MNCs for Large Funds but actually are by virtue of their technology transfer or licensing affiliations) and get a doubler in 3 years ( that is 25% compounding excluding currency depreciation), but as yet one has not seen it steadily continuing for 15-20 years which is what I am also after. No work, just laze on the couch. Perhaps not a viable dream as yet in Africa.
India, Pakistan, Sri Lanka and Bangladesh equities have had a habit of returning more consistent returns despite countries’ own set of problems.
While South Africa may be most advanced economy and expensive for value investors (160%, MCAP/ GDP ratio) it can present more steady opportunities from companies that are hungry for growth outside South Africa.
An example that comes to mind is Famous Brands that runs over 20 brands of restaurants http://www.famousbrands.co.za
Over the past 20 years, everything about the company is 20% CAGR in EPS, Share price, Revenues, Dividends.