YWR: Africa Conference Notes
Disclosure: Personal views and commentary only. These are not investment recommendations. For investment advice seek professional help.
I was sure the AFSIC investment conference would be dead. Global investors have zero interest in Africa right now. Capital is flowing out of the continent to buy US money market funds, which has put extreme pressure on the currencies and made it tough place for entrepreneurs to raise money. I expected the mood at the conference to be depressing, but I decided to go anyways. You never know.
For many years AFSIC was a struggling conference with no money and so they used to hold it a hotels in Brighton. Over the years it has grown and grown and is now held at the Park Plaza hotel. Rupert McCammon has done a great job making the conference better each year and built a really cool conference app to set up meetings. AFSIC has become the most well attended Africa conference with a great mix of investors, DFI’s, and entrepreneurs. It has always had a good buzz and to my surprise this year was no exception.
Day 1 Notes
9:00am: Ethiopia Stock Exchange Project:
My first coffee (of many) was with the team setting up Ethiopia’s first stock exchange. Ethiopia has a 100 million people and trying to transition from communism to capitalism. Because of the communist background they have lots of large government companies and no stock exchange. The plan is to launch the Ethiopian stock exchange (ESX) in 2024. They were looking for investors to purchase 70% of the exchange for $12mn. The plan was also to privatise many of the large government companies, which would create listed stocks and raise money for the government.
The gentleman I was speaking to thought there were lots of opportunities. Ethiopia not only needs an exchange it also needs stock brokers and asset managers. He said the regulations are flexible at the moment and they want partners. I said I was interested (I couldn’t believe the $12mn valuation), so he invited me to a meeting they were having later at 5:30pm at the consulate. I said it would be great if the companies could be listed in US$’s similar to what the Victoria Falls Exchange is doing in Zimbabwe. He thought that was unlikely.
10:30: Africa Public Markets Panel.
Our panel was about investing in African public markets. We discussed the challenges around the current lack of FX liquidity. I pointed out the positive that when so many investors are asking to get out at almost any price, it can be an opportunity for someone going the other way. We also agreed on the stand out resiliency of Morocco which has started to rival South Africa as the focus destination for institutional investors. Morocco has successfully grown an automotive manufacturing industry (exporting to Europe) which is branching out into aerospace as well. Moroccan companies are also taking advantage of their strong home market and comfort with French to expand into French West Africa. The Moroccans were relatively positive, the other American was super bearish.
11:15: Coffee with broker about 12% African Debt deal
After the panel a broker from Senegal grabbed me to have a quick coffee about a fixed income deal he was working on. The banks in Senegal, Benin and Cote D’Ivoire were working to packaged a bundle of $500 million of African government bonds issued in CFA (the Euro pegged West African currency) yielding 12% with a World Bank capital guarantee (or some kind of guarantee). The market for these bonds in each country was too small to appeal to foreign investors, so they were trying to create an attractive jumbo deal. He asked if 12% in Euros (effectively) with a World Bank guarantee was attractive. I thought it probably was and told him to keep me updated.
12pm: 5 minute investor pitches:
Next I wandered into a room where investors had 5 minutes to pitch their companies. It was kind of fun.
There was an Egyptian guy who had created a market place for buying fractional shares of property in Egypt. Building a property portfolio was too much money for most people so with this app you could build a portfolio of fractional shares.
Next there was a guy creating protein for chickens from bugs. He would go to the vegetable markets in Kenya at the end of the day, collect all the bio waste, and then take it back to the green house structures at his farm where he was growing bugs. He would fatten up the insects on bio waste. Finally, after the bugs were big and juicy he would sell them as protein to chicken farms. Apparently, we don’t like eating insects, but chickens love it.
Currently, the only new money coming into Africa is from the development funds, which all have a big ESG/Impact focus. As a result every business pitch is heavily about how much ‘impact’ or ‘sustainability’ a business has rather than the usually pitch about investors making profits.
The last presentation before lunch was a lady from Marin County who was creating the Amazon of Africa for the rural population. She said she was about to wrap up a small capital raise, but anyone in the room could join if they wanted. I was impressed with the presentation and how much she had built, so lingered around to speak to her afterwards.