October 24, 2013

How to invest in specific countries in Africa, like Somalia and Rwanda

This is part 2 in an article series on how to invest in Africa. If you haven't read the first part, you can read it here: How to invest in Africa. First of all we have to consider the ethical aspects of investing in a so-called troublesome country. Is it really a good idea to invest for profit when people are starving in the country, or will an investment in the country help the people to get jobs so they don't have to starve? I've decided to not answer that question in this article.

I got the main idea for this article series from Hans Rosling. If you don't know who Hans Rosling is, he's a Swedish medical doctor, academic, statistician and public speaker. He might be most famous for a popular speech with the title The best stats you've ever seen. The conclusion from the speech is that the so-called emerging countries are improving in terms of health. In another speech, Hans Rosling came to the conclusion that the single best country to invest in today is Somalia.

Just a few days ago, 13 people in Somalia were killed by a suicide bomber, so the country has some challenges to overcome in the near future if Hans Rosling's prediction can become a reality. His prediction consisted mainly of how the shipping of goods has moved from the Atlantic Ocean to the Indian Ocean, so he believed the best investment today is a coastal site in Somalia. Hans Rosling is not the only one who is interested in Somalia. According to an article by the Wall Street Journal, Welcome to Mogadishu, Somalia has begun to improve in several ways:
  • The economy will grow by 10 percent each year
  • 60,000 Somali refugees return each year
  • 350 new companies are registered each year
  • Rents and property prices have begun to increase. In 2012, a five-bedroom rental apartment was $500 a month, today it is $4,000

Somalia is not the only country in Africa that has already improved or will improve in the future. Google "Rwanda" and the first you will see is images from the genocide in 1994 where 500,000 to 1 million people were killed. But if you Google "Rwanda 2013" you will see images that seems far away from 1994. The current president of Rwanda, Paul Kagame, has the vision to turn the country into the Singapore of Africa:

Investing in individual countries, like Rwanda and Somalia, is today an uphill battle. Founded in 2011, the Rwanda Stock Exchange has only five companies listed: 2 banks, 1 supermarket, 1 brewery, and 1 media company. It's even worse in Somalia - the country has never had a stock exchange. The closest you come is stock exchange used to invest in pirate ventures. But there are plans from 2012 to open a Somali stock exchange in the neighboring country Kenya to "help tap investments aimed at reviving the troubled country's economy."

To invest in Somalia today, you might have to take matters into your own hands, like Michael Stock (seen in the video below) who founded Bancroft Global Investment. According to the website, they
specialize in frontier economy investments in countries afflicted by, or newly emerging from, conflict. We focus on companies that provide basic or critical services to the local marketplace, potentially transforming the economies in which they are based. In so doing, these projects provide a respectable return on our investments.

Another familiar name that appeared when I wrote this article on Somalia was Howard Buffett - Warren Buffett's son. Howard Buffett, who has been involved in philanthropy around the Horn of Africa, has teamed up with Michael Stock, saying "He was the only one who would bring me into the country." So investing in Somalia might not be such a strange idea after all.