I’m a big fan of investing directly in African stock markets. The exchanges in Accra, Lagos, and Nairobi generally offer better bargains than what you find listed on the NYSE or Nasdaq.
That said, it’s definitely not for everyone. Opening up foreign brokerage and bank accounts can be a real hassle. It involves extra paperwork, currency conversions, dividend collection issues, and a bit of extra time when tax day rolls around.
So I’ve put together a list of 18 South African ADRs that you can easily purchase through a discount broker like TDAmeritrade or ETrade. Photo by Damien du Toit
While most of them are Pink Sheet listings, they all average trade volumes in excess of $50,000 per day. That’s plenty of liquidity for most individual investors.
Interestingly, the stocks above actually outperformed the iShares South Africa Index Fund (EZA) by a wide margin over the past 12 months. EZA lost 6.3% of its value since mid-April last year, but the ADRs averaged a 7.0% gain. That even beat the resurgent S&P 500’s 5.3% performance!
So, if you’re interested in tapping into the growth of the African middle class without excessive exposure to natural resource stocks, give these ADRs a close look.
It’s not necessary to wire money to a far-flung African locale to invest in Africa’s growing middle class. Here are three companies that are making big bets on the continent and conveniently trade on the New York Stock Exchange and the Pink Sheets.
It’s not necessary to wire money to a far-flung African locale to invest in Africa’s growing middle class. Here are three companies that are making big bets on the continent and conveniently trade on the New York Stock Exchange and the Pink Sheets.
Maybelline may be coming to Kenya, Nigeria, Angola, and Cameroon in the very near future. Parent company, L’Oreal, likes the demographic trends that it sees in the countries and believes it worthwhile to set up shop there.
Management thinks the continent’s middle class will double over the next 10 years, making it a potentially lucrative market. But the cosmetics giant has a relatively small African presence – lagging behind competitors like Unilever (see below). Therefore, it aims to grow sales between 10-20% annually until it has captured a 16% market share – a portion equivalent to its share in Asia and Europe.
L’Oreal is counting on hair products to add volume to its African sales. According to company research, African women spend 20% more on haircare than do their European counterparts.
It will also look to open some of its high-end Kiehl’s retail outlets in South Africa. L’Oreal currently manufactures skincare products and its Dark & Lovely haircare line at a plant in Midrand, South Africa. Sales from Africa and the Middle East accounted for 3% of total group revenue in 2011. That computes to roughly $825 million – up 10.5% over last year.
The potential of geothermal development in Kenya is much more than hot air. The country already produces 212 MW of electricity from steam rising from the earth’s core. And Kenyan geologists believe there’s the potential to generate eight times that amount.
Look for Ormat to capitalize on any further development in the space. It already operates other Kenyan plants. The Nevada-based company generated over $36 million worth of revenue in Kenya last year. That’s 8.3% of its total external sales.
The CEO of L’Oreal’s rival, Unilever, declared the company’s continuing commitment to Kenya’s manufacturing sector last week. Some observers had speculated that the company would relocate its Kenyan factory to a country where the cost of doing business is cheaper, but the company actually plans to invest heavily in the country to better serve fast-growing East Africa.
Unilever products are almost ubiquitous in Africa thanks to its strategy of distributing straight to the informal market. The company is among the top three consumer goods employers in South Africa, Nigeria, Kenya, and Ghana. It employs more than 30,000 people on the continent and opened new food processing plants in Nigeria and South Africa late last year.
[Disclosure: I have no position in any stock mentioned in this article, and I have no intention of taking any within the next 72 hours.]
You don’t have to open a brokerage account in Kampala or Accra to get exposure to the African growth story. Wall Street-listed companies are investing more on the continent with each passing week.
Here’s a roundup of some of the bigger deals I came across in these early days of April.
You don’t have to open a brokerage account in Kampala or Accra to get exposure to the African growth story. Wall Street-listed companies are investing more on the continent with each passing week.
Here’s a roundup of some of the bigger deals I came across in these early days of April.
Quick! Outside of Ireland and Britain, what country consumes more Guinness than any other?
If you guessed Nigeria, you’re correct. But I’m thinking you cheated!
Few places outside the Old Sod appreciate a pint of Vitamin G more than Africa. In fact, 40% of all Guinness is brewed (and consumed) on the continent. And it’s only gaining in popularity. Guiness’s parent company, Diageo, announced this month that it would accelerate its 15% African sales growth by expanding into Angola, Mozambique, and the Democratic Republic of Congo. The company expects its liquor that retails in smaller, more affordable quantities than beer will drive sales growth in these new markets. Africa already contributes 14% of Diageo’s net sales.
The company is no stranger to Nigeria. It has already supplied 100 gas turbines to the country’s energy sector and 25 locomotives to its rail network.
GE derived 6.7% of its total revenue (nearly $10 billion) from its operations in the Middle East and Africa in 2011. Revenue from the region increased 9% from its 2010 total.
Money transfer agent Moneygram serves the huge number of Africans in the diaspora who send money back to the continent to support family or local businesses.
Africa is Moneygram’s fastest growing geographic segment. The company added nearly 6000 African locations in 2011, increasing its total count on the continent by 46%. Almost 7% of the company’s 267,000 money transfer agents are now located in Africa.
They’ve become a favorite on the continent for their low fees. You can transfer money virtually anywhere in Africa in a matter of minutes for $9.99. Its main competitor, Western Union, typically charges more than double that amount.
Western Union has, however, pioneered international money transfer via mobile phone through its partnership with Kenya. This is the wave of the future and Moneygram will need to ride it in order to stay competitive in this market.
The packaged foods giant, Nestlé, announced this week that it would invest $14.5 million in Zimbabwe to improve the nation’s dairy production. A special focus would be to develop the capacity of small-scale farmers, those that own two dairy cows and produce 50 liters of milk per day. The company plans to distribute 4000 cows as part of the program.
Zimbabwe is the company’s third largest market in its Equatorial African region, but it has had a tense relationship with President Robert Mugabe and his political party ever since it refused to purchase milk from the president’s personal herd.
Sanofi has a big problem. Patents have nearly expired on many of the French pharmaceutical company’s most lucrative drugs, including Ambien, Plavix, Docetaxel, and Lovenox. Soon, generics will be pushing them off pharmacy shelves. It’s not unusual for sales of brand name drugs to plunge 50% or more in the year after patent expiration.
Africa will be a big part of this expansion plan. It will soon begin the manufacture and sale of HIV/AIDs anti-retrovirals in South Africa. In total, the company plans to invest $157 million in Africa over the next five years.
But Sanofi is no Africa newbie. It has invested $107 million on the continent since 2007 and now operates seven factories in six countries. The company sold over $1.2 billion worth of drugs in Africa last year, roughly 3% of the corporation’s net sales.
German industrial giant Siemens signed a $20.8 million deal to improve Kenya’s electricity transmission network, allowing the country to tap sources of renewable energy in the Rift Valley.
Few corporations have a longer history in Africa than Siemens. It first got down to business on the continent in 1857. In 2010, its South African sales totaled $767 million. Nigerian revenue came in at $124 million.
[Disclosure: I have no position in any stock mentioned in this article, and I have no intention of taking any within the next 72 hours.]
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 Wall Street companies investing in Africa. Each announced major African investments last week.
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.
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.
Attention South African fans of earth-toned, natural-fiber casual wear! The Gap is coming to a shopping mall near you!
Photo by Roger Gordon
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.
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.
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 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.
[Disclaimer: I have no position in any stock mentioned in this article, and I have no plans to take any within the next 72 hours.]
Tanzania’s rapidly growing economy is hungry for electricity.
Energy demand is propelled by a booming mining sector and pro-business policy reform, but a long-running drought has slashed output from the nation’s hydro dams. Consequently, blackouts in the commercial capital, Dar es Salaam, are now commonplace, dramatically increasing the cost of doing business in the country.
