Investing in Africa is becoming easier, with two Africa-specific unit trusts and one exchange traded note (ETN) now available on the JSE. However, for the individual, accessing this market alone would be impossible.
Excluding South Africa, the aggregate market capitalisation of African markets is about $250 billion, or about 20% of gross domestic product (GDP). In contrast, companies listed on South Africa’s JSE have a capitalisation of about 270% to GDP, which drops to about 150% if you exclude companies with primary listings in Europe. Africa still has a long way to go in this and other respects.
The pros and cons
The challenge in Africa is poor liquidity (annual value traded/market capitalisation). Often, there are a few stocks which account for a disproportionate share of the country’s total market capitalisation. Further, the free float of shares available for trading is reduced by the large fraction of strategic stakes held by multinationals, or the buy-and-hold-forever stakes held by local pension funds with limited investment alternatives in listed equities.
Nick Ndiritu, a member of the Allan Gray investment team, says: “As value-oriented investors, we view Africa’s growing credibility as an investment destination with both optimism and caution.
“Reasons for the current optimism have been well documented and include: a population close to one billion underpinning a large and growing consumer class, rapid urbanisation trends and recent productivity gains; resources-led trade and infrastructure investment flows; and improving political governance, competitiveness and macro-economic stability. On balance we believe Africa presents an attractive set of opportunities for long-term investors,” says Ndiritu.
“Changing perceptions about the continent and developments in developed markets are fuelling a sharp rise in private capital seeking a home in Africa. Net inflows into African regional funds investing in public markets totalled $660 million for the 12 months to September 2010, close to four times the prior best year in 2007,” says Ndiritu.
Few advisers are coming out and saying Africa is for the retail investor yet, but typically the high net worth individual (HNWI) follows the institutional market with a similarly long-term investment horizon.
Only way in is via a fund
One way of investing in Africa is through traditional unit trusts: the Investec Africa Fund or the Stanlib Africa Fund. In addition, Standard Bank recently launched the first listed passive exchange traded note (ETN), the Africa Equity ETN which tracks the performance of the Standard Bank Africa Equity Total Return Index. The ETN has a broader exposure to Africa than either of the two funds, and as an index tracking note its fees are substantially lower with liquidity guaranteed by Standard Bank.
However, as the ETN was launched only a month ago, it remains small with a market capitalisation of only R2 million. To have an index tracking ETN, you first need an index, and Standard Bank leveraged its position as having one of the widest footprints in Africa to establish the Standard Bank Africa Total Return Index. It is a first in the market that Standard Bank hopes will become the market standard as a pure Africa (excluding South Africa) diversified index.
Compared to the much more restrictive S&P Africa index series which is heavily weighted to the liquid markets of South Africa, Mali, Nigeria and Egypt, Standard Bank’s index covers a much broader 29 countries and 178 stocks, all of which are “investible,” explains Standard Bank’s Johann Erasmus, a Standard Bank director: global structuring group. The index diversification is important due to the already mentioned constraints of African exchanges, such as poor liquidity, and it provides investors with a broad investment base exposure of North and Sub-Saharan Africa.
“We wanted broader access and sufficient diversification that no single geography, company or sector would represent an overweight exposure and introduce massive influence or volatility.
Diversification the central theme
“For someone who wants to invest in Africa — and retail investors who believe in the investment case ought to be looking at it considering Africa’s success – the question is where to start? In our ETN, the index rules require that no single country can represent more than 20% of the index, and no single company more than 5% of the index (and of course South Africa has none).”
Making up the major part of the index representation are the major economies: Nigeria, Egypt, Kenya and Morocco; with the rest split fairly equally among all the other economies, which include some oddities like Burkina Faso and Sierra Leone.
“As to themes, the index current sector allocation represents 34,7% in basic materials; 34,2% financial sector; 9,2% consumer sector; 8,1% telecoms; 7,9% oil & gas; and 5,1% industrials. The index is rebalanced twice a year in April and October, and what we’re seeing with each rebalancing is that resources and financials have lost share in the index representation each time in favour of the other sectors — this reflects the growing maturity of the continent’s economy into other sectors,” explains Erasmus.
(Infographic) The 10 Things You Should Cover In Every Investment Pitch
If you want to wow potential investors, you need to cover your bases.
If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.
Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.
You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.
This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:
- The vision, where you concisely explain your idea.
- The problem. Why is your vision necessary or helpful?
- The opportunity. What is the market size, and how can you position yourself to earn a share of it?
This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.
This article was originally posted here on Entrepreneur.com.
‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous
Is your business worthy of fame? If so, pay attention to what the Sharks have to say …
Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.
The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.
I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:
- Charles Barkley, Hall of Fame NBA star and TV analyst
- Alex Rodriguez, legendary baseball player and businessman
- Rohan Oza, an iconic brand builder and marketing expert
- Sara Blakely, founder and owner of SPANX brand
- Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
- Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
- Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.
My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.
I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.
1. Create an ingenious product
When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”
Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.
2. Leverage social media marketing
During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”
Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”
Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”
No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.
3. Build a community
Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”
John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.
If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.
4. Devise a publicity hook to win earned media coverage
Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”
Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.
Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.
5. Know your strengths and stay focused
When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”
These are wise words from one of the world’s few billionaires.
This article was originally posted here on Entrepreneur.com.
The Best Way To Get Your Teenager To Start Investing Right Now
Jeff Rose advises a young fan on where to start his investment journey.
In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.
Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.
In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.
As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.
Click on the video to hear more tips for a younger investor.
This article was originally posted here on Entrepreneur.com.