Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Africa Revisited

with 2 comments

After the previous post here more than a couple of folks asked me whether I am no longer bullish on Africa.

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)

 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.

South Asia

India, Pakistan, Sri Lanka and Bangladesh equities have had a habit of returning more consistent returns despite countries’ own set of problems.

South Africa

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
Over the past 20 years, everything about the company is 20% CAGR in EPS, Share price, Revenues, Dividends. 

Conclusion: We are a few years early for the J curve to kick in. I continue to be a calculated chary bull on Africa. Africa has yet to reach the inflexion/tipping point
Disclosure: Invested in stocks discussed. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Written by amitdipsite

January 3, 2015 at 9:21 pm

Posted in Uncategorized

2 Responses

Subscribe to comments with RSS.

  1. Hello amit happy new year sorry to post this query in this board nowadays you are not interested in indian stocks it seems I came across ASSOCIATED ALCHOLOL & brewery ltd and found the numbers pretty good 35% CAGR profit gr and 45% rev gr gagr in 3 yrs promoter holding 58% no pledge this company is in all verticals like IMFL, IMIL, ENA, BOTTLING only supplier of grain based triple distelled ENA to vodka brands like SMIRNOFF, GREY GOOSE, ABOSULTE only bottler of single malt for mason and summers scoth bottling agreement with HAIG FY 15 rev seen at 300 cr EBITA of 36 cr np 15 cr eps of 15/16 book value of 75 and the promoter anand kumar kedia is a decent guy unlike other liquor barons increased stake by 6% recently debt as per sept qtr at 50 cr has a modern factory in Khargone, Madhya Pradesh has both grain and molasses based option own IMFL brands like REDWHITE jamesmcgill, London bridge only the sector is a worry for me do you think it worth to have a look if so please post your esteemed opinion thanking you with warm regards kumaresh


    January 4, 2015 at 1:58 pm

  2. Dear Amit,
    Again Oil effect, Year end selling by FII and Election causing Nigeria on deep Bottom. All are going backwards except Unilever which took foot at 34 naira.
    GSK Nigeria @ 40 Naira
    Cadbury Nigeria @ 37 Naira
    Lafarge Africa (Now , Nigeria+ south Africa ) @ 80

    Still on the sidelines…not yet infused….
    Chevron Lanka is rocking….Their new Plant is operational from Q3 2014. Falling Crude is very good for their Margin expansion. New Govt also become trigger for rise.
    300 to 445 in 7 months with 16 as dividend on hand.

    Karthikraja K

    January 13, 2015 at 6:31 am

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: