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Ryan Hoover
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My interest in Africa stems from a three-year volunteer term spent in the Southern African nation of Lesotho in the late 1990s. Like many other visitors to the region, I returned home a card-carrying Afrophile. In the years since, I’ve sought to remain as engaged with the continent as possible.... More
My company:
Africa Capital Group
My blog:
Investing In Africa
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  • Who's Investing In Africa? Gap, Porsche, Samsung, And More
    Multinationals have finally caught on to the African growth story. Now they're almost falling over each other in a quest to capture market share along this new frontier.

    To get a sense of how broad-based the investment is, check out this list of companies investing in Africa. Each announced major African investments last week.

    BNP Paribas (BNPQY:US)

    (P/E Ratio: 7.6; P/B Ratio: 0.6; Dividend Yield: 5.7%)

    Paris-based BNP Paribas announced last week that the South African central bank said "Oui!" to its plans to set up a full commercial bank branch in Johannesburg. The move clears the way for the French banking behemoth to grow its operations in the country.

    As of the end of 2010, BNP employed 9,800 people in Africa (5% of its total workforce) and is particularly well established in the Ivory Coast, Mali, and Senegal. It also recently bought a controlling stake of a South African stockbroker in a $19 million deal.

    Gap (GPS:US)

    (P/E Ratio: 17.0; P/B Ratio: 4.7; Dividend Yield: 1.9%)

    Attention South African fans of earth-toned, natural-fiber casual wear! The Gap is coming to a shopping mall near you!

    Upon opening doors at its first store in Johannesburg last week, the clothing retailer said that it will open two more stores in the country this year - one in Cape Town and one in Pretoria. Until now, shoppers could only buy the brand's ubiquitous khakis through South Africa's Stuttaford chain.

    Gap has lengthened its global reach considerably of late. It opened stores in eight new countries last year and, in addition to South Africa, will debut in Lebanon, Georgia, and Azerbaijan in 2012. It generated roughly 15% of net sales in countries outside of the US and Canada in 2011 - that's up from 13% in 2010.

    Porsche (POAHY:US)

    (P/E Ratio: 351.0; P/B Ratio: 0.3; Dividend Yield: 1.7%)

    Where better to sell exotic cars than in the midst of the world's largest concentration of millionaires? Nigeria's Victoria Island, home to that nation's uber-rich, is now home to Africa's latest Porsche dealership.

    The company hopes to sell 100 vehicles in Nigeria this year and to eventually grow sales to 300 annually. It claims its sturdy 911s and 4x4s are better able to navigate Nigeria's potholed roads than those namby-pamby Aston Martins and Lamborghinis. Porsche already sells 800 cars per year in South Africa, and it operates dealerships in Angola and Ghana.

    Samsung (005930:KS)

    (P/E Ratio: 14.6; P/B Ratio: 2.8; Dividend Yield: 0.8%)

    iPhone, shmyPhone. In Africa, Samsung looks set to become the continent's smartphone of choice. The Korean appliance and electronics firm plans to double its share of the sub-Saharan smartphone market from 10% to 20% next year. How does it plan to do it? By rolling out a cheaper version of its popular Galaxy handset.

    Less than 8% of all African cellphone users own smartphones. That's a huge growth opportunity.

    The company already boasts a substantial presence in the appliance market, too, and runs assembly plants in six African countries. The company sold $2 billion worth of goods on the continent in 2011. It plans to increase this amount by 50% this year and to reach $10 billion in African sales by 2015.

    UTi Worldwide (UTIW:US)

    (P/E Ratio: 24.2; P/B Ratio: 1.9; Dividend Yield: 0.3%)

    UTi Worldwide provides global freight forwarding and logistics services. What does that mean? They're basically a travel agent for cargo, making sure goods get from port to destination as efficiently as possible. The company maintains 175 warehouses in 28 countries to assist in this process.

    Africa accounted for 26% of the company's net revenue ($444 million) during the 2012 fiscal year. That's up from 22% ($301 million) just two years ago. The company is a market leader in South Africa, but it's not resting on its laurels. "We are mindful of competition coming into the (South African) market," said CEO Eric Kirchner last week, "but we're more on the offense down there than being defensive." UTi plans to complete a new pharmaceutical distribution center in Johannesburg next year that will triple its South African distribution capacity.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Mar 30 6:00 PM | Link | Comment!
  • How to Invest in South African Stocks -- from Main Street, USA
    Setting up African brokerage accounts isn’t a whole lot of fun. In fact, it can be downright tedious.

    So I try to avoid the process as much as possible and content myself with the ever-expanding universe of South African stocks available right here at home in the form of ADRs (like SSL), ETFs (like EZA), and OTC listings.

    But the vast majority of South African equities don’t trade anywhere outside of the Johannesburg Stock Exchange (JSE). Some of these companies trade at bargain prices and conduct business across the continent - making them compelling opportunities.

    Lazy investors like me can now trade these stocks without opening a foreign brokerage account. Three US-based discount brokers - Everbank, Fidelity, and Schwab - offer their customers direct access to the South African stock market.

    Presently, none of these brokers offer online trading on the JSE, but the process of buying and selling shares is straightforward. You simply call them up, and place your trade through a live, human broker. If the JSE is open, your trade will take place in real time. If it isn’t, the order will be executed first thing on the next trading day.

    Here are the details of each broker's offering:

    • Evertrade offers the most accessible fee structure of the trio. They charge a commission of $35 per trade plus any South African taxes and settlement fees. No minimum trade amount is required.
    • Schwab charges either $100 per trade or 0.5% of the total trade amount – whichever is more. On top of this, they collect a 1.55% “mark-up fee,” which covers local taxes and pass-thru charges from their South African broker partner. Their minimum trade amount is $5000. A trade of that size will set you back a total of $127.50 in the form of commissions and fees.
    • Fidelity’s commission is $32.95 plus a $50 settlement charge. Their South African partner also charges a .71% mark-up fee to cover currency conversion and local taxes. Note, too, that Fidelity requires a hefty minimum trade amount of $50,000. So, Fidelity customers should expect to shell out at least $437.95 worth of commissions and fees per trade.

    As you can see, commissions of this size will add up in a hurry. So, unless you plan to buy and hold a small number of South African stocks, it probably makes more sense to open an account with a South African broker - a process that we’ll cover in a future post.



    Disclosure: I am long EZA.
    Tags: SSL, EZA, Africa
    Jun 30 4:29 PM | Link | Comment!
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