Tag: investment

Don’t just cry as your currency plunges. Here are 6 off-the-wall investments for Africans to hide their money

Art in Fashion exhibition in Germancy, featuring Vlisco fabric in the photo and draped on the picture. (Photo: Flickr/Marcdubach).
Art in Fashion exhibition in Germancy, featuring Vlisco fabric in the photo and draped on the picture. (Photo: Flickr/Marcdubach).

African central banks are currently burning through their foreign reserves at a rate faster than any other in the region in a bid to shore up their currencies, but going by recent events in Asia, they are likely to soon throw in the towel and relinquish control of their exchange rates altogether.

Thursday’s move by Kazakhstan, central Asia’s largest crude exporter, to abandon its currency peg has intensified speculation that authorities in Africa will devalue or halt intervening in their foreign-exchange markets.

Commodity-dependent nations such as Zambia and Ghana are struggling to cope with currency declines of more than 20% against the dollar since January, as global commodity prices tank. Bloomberg’s Commodity Index tumbled to its lowest this week since 2002; South Africa’s rand touched 13 to the dollar this week for the first time in 14 years.

Gold is traditionally the investment of refuge when currencies are volatile, but this year, even gold has not been spared the commodity plunge. Still, beyond the doom and gloom, there are still some opportunities to shield your savings from being decimated.

There are some  potentially “depreciation-resistant” investments that a smart African investor can put his/ her money in:

Sari

(Photo/Sandra Cohen-Rose/Flickr).

The sari is the most recognisable traditional Indian dress for women. It’s six yards of rectangular cloth, often brightly coloured and elaborately embroidered. The sari is an important part of Indian culture, worn by grown women who have come into their own, writes Shikha Dalmia in Forbes.

Africa has a large Indian diaspora, particularly in the east and south of the continent. Increasing “westernisation” is often feared to signal the demise of traditional attire, but this is rarely the case. Instead, traditional garments actually become more elaborate and expensive, because they are now only worn on special occasions. Some saris are even embroidered with real gold thread and rough diamonds, and can retail for up to $10,000.

According to one online retailer, the margins for selling saris online can go up to 200% compared to 60% in general clothing and apparel.

“Traditional” African fabric

(Photo/Marcdubach/Flickr).

What we loosely refer to as “African fabric” goes by different names around the continent, but it is recognisable by its bright colours, bold patterns, and boxy geometrical designs.

The most successful brand in the market is Vlisco; the Dutch company was acquired by British private equity firm Actis in 2010 for $151 million, and has transitioned from a retailer of fabric to a fully-fledged fashion house, releasing 20 to 30 designs every few months to outpace the Chinese imitations that have encroached the market.

As is the case with saris, “westernisation” makes jeans, trousers, shirts and blouses everyday attire, so African fabric such as Vlisco’s  increases in status and desirability – more so the “original” wax print – used to make elaborate outfits for church on Sunday, gifts for relatives, or, simply to hoard.

Vlisco has been retailing in Africa for more than 100 years, and has survived all kinds of turbulence in Africa’s political and economic history. In 2011, Africa generated 95% of Vlisco’s $250 million in net sales that year.

Single malt whisky

Whisky for sale in Edinburgh. (Photo/Petyo Ivanov/Flickr).

If you’re willing to wait a few years for your investment to mature, whiskies are known to fetch extremely high prices at auctions across the globe – particularly rare blends from renowned distilleries.

According to the Investment Grade Scotch index that is compiled by UK-based Whisky Highland, the top 100 whiskies appreciated by an average of 440% in the last six years. By contrast, the Standard & Poor’s 500 stock index increased by 31% in the same period, and the Live-ex Fine Wine 100 Index dropped by 2%.

And it’s not only “old” whiskys that are valuable. The tip for an investor is to buy a limited edition whisky – particularly those that are a run of less than 10,000 bottles. It means that there are very few bottles of that particular blend around. That’s what makes them valuable.

For example, InsidersEdge.co.uk  highlights Tun 1401, which was a limited edition release from a distillery called The Balvenie in Scotland just a few years ago. It retailed for £150 per bottle, and can now be sold for anything up to £2,000 a bottle – a 1,233% profit margin.

The most expensive whisky in the world is known as “The Constantine” from Macallan distillery in Scotland, according to CNN Money. In January, Sotheby’s sold a six-litre decanter of Macallan M for $631,000. In May, a 50-year-old bottle of Japanese Yamazaki single malt sold for $33,000.

These transactions are becoming relatively frequent, if not commonplace. Indeed, Whisky Highland expects 30,000 rare, expensive bottles to be sold at auction this year, a 50% increase on the 20,211 that were sold in 2013.

Cement, lorries, earthmovers…

Construction site in Ethiopia. (Photo/Simon Davis/DFID/Flickr).

Africa is one of the world’s fastest urbanising regions. In 2000, one in three Africans lived in a city; by 2030, one in two will do so. It means that the construction sector and industries that support those activities are bound to be in high demand. Cement is one example.

Old Mutual Investment Group’s African Equities Manager Cavan Osborne says Lafarge, South Africa’s PPC and Nigeria’s Dangote are all cement companies that have a strong footprint on the continent and are investment options worth considering.

“Everyone in the world wants to have a house, and if they already have one they want a nicer or a bigger one. That’s what makes cement such an attractive prospect,” said Osborne.

Schools and training colleges

School laptops in Nigeria. (Photo/Carlos Gomez Monroy).

Africa is the only continent in the world that is still growing, while the rest are aging. More than half the world’s growth between now and 2050 will be in Africa. Six in every ten Africans are aged under 24 years—the youngest population of any region globally.

If the right policies are drawn up, this sets the continent up for a big “demographic dividend” windfall, as workers outstrip the number of dependents. But for that to happen, these young workers have to acquire the necessary skills, and this means that post-secondary education will be in high demand.

The gold standard of post-secondary education in Africa is usually a university, conferring an academic degree. But training and technical colleges – though marginalised in Africa – are likely to make a comeback as they are a quick win for African economies striving to take advantage of the estimated 85 million jobs in light manufacturing will be up for grabs in the next few years as wages and manufacturing costs rise in China.

Good old land

View of Kisumu, Kenya’s third largest city, from Riat Hills on the outskirts of the city. (Photo/Victor Ochieng).

If you don’t have enough money for diamond-encrusted saris and 50-year-old whisky, don’t despair. In Africa, you can’t go bad with good old land, particularly if you head out to smaller cities and towns where your initial investment is likely to be lower than in the main capital city.

Angola’s hidden crisis

What exactly constitutes development for a post-conflict African country? Is it the built environment or investment in human capital?

That’s a question I think about daily here in Luanda, Angola’s rapidly changing capital. On paper, Angola is a success story and a frequently cited example in the ‘Africa Rising’ narrative. It has enjoyed double-digit economic growth during the last decade, fueled by its plentiful crude oil deposits, and is experiencing a construction boom. It’s even attracting big-name luxury brands, such as Porsche, Gucci, Prada and Armani.

Luanda’s skyline is dotted with construction cranes and our nascent middle class is expanding. But it isn’t just (some) Angolans benefiting from the boom. Perhaps most striking of all, Angola has become a sort of El Dorado for the Portuguese, Angola’s old colonial power. In Angola, the Portuguese are finding much better livelihoods here than in Europe, where they’re one of the most prominent victims of the continent’s financial slowdown.

Luanda cityscape at dusk. (Reuters)
Luanda’s cityscape at dusk. (Reuters)

But for all the investment in the built environment, investment in human capital is severely lacking. I’d even venture to say it’s Angola’s hidden crisis. Speak to anyone in any industry and they’ll tell you about the great difficulty they have in hiring competent Angolans, let alone highly skilled ones. And the skills we’re talking about are as basic as properly reading and writing in Portuguese. A friend of mine who works for a television studio put it bluntly: “We’ll need expats here for the next 40 years. I have staff that can’t write a simple email without glaring spelling mistakes.”

Angola’s lack of investment in education isn’t exactly news. Portugal’s colonial system rigorously discouraged education among its African subjects, with its missionary schools the only exception to this rule. The long, brutal civil war that wrecked the country immediately after independence further hampered education efforts. But now, 12 years after peace has been achieved, investment in education remains depressingly low. And it shows.

In the many multinationals and large national firms that operate in Angola, Portuguese workers have a strong presence in middle management and senior roles. It’s true that Angola’s lack of skilled workers was exacerbated by the war years and foreign help is not only warranted but acutely needed. Yet, I see no evidence of any effort being done on a governmental level to change this reality. In fact, we are one of Africa’s worst investors in education, regularly spending less than 10% of our national budget on this expenditure. When compared to post-conflict countries such as Burundi and Côte d’Ivoire, who each last year spent over 20% of their budget on education, this is especially startling. Angola, in comparison, dedicated just 6.2% of its budget on education.

So how do these statistics translate to our day-to-day reality? Three of my family members are professors in both public and private universities in Luanda, and all three often complain about just how intellectually poor their students are, to the point where they cannot properly read, write or solve basic mathematical problems. We’re talking about university-level students. But the professors stress that it’s not their fault – rather, they’re the product of a seriously deficient educational system at the primarily level. Professors are required by law to pass 80% of their students onto the next grade, regardless of their skill and intelligence. By the time they get to university, many of these students are lacking even the most basic skills to succeed and learn.

And if you think that the government is addressing this important issue, think again. Just this year, they further slashed public investment in primarily level education by an outrageous 33%. Instead, and despite our 12 years of peace, the government preferred to invest its earnings in military equipment. So much so that Angola is sub-Saharan Africa’s biggest military spender. The wisdom of spending $6.1-billion on military equipment, a lot of it nearly obsolete, during peacetime, to the detriment of proper spending in education, is extremely worrying.

Although it likes to think of itself as a regional leader and enjoys flexing its financial muscle, Angola does not have a single university in Africa’s top 100. Its existing universities, with very few exceptions, are utter shambles.

Continuous and sustainable investment in education is a must if we are to have a properly functioning society and economy run by Angolans. Human development is our most pressing need because human capital is our most valuable commodity. Oil will run out one day, and the financial crisis in Portugal that brings so many Portuguese to our workforce will one day end. Who then, will run Angola, and with what education?

Claudio Silva is Angolan. He has spent time in New York, Washington DC, Lisbon, Reading (UK) and attended university in Boston. In 2009, he started Caipirinha Lounge, a music blog dedicated to Lusophone music. Claudio contributes to several other blogs including Africa is a Country and Central Angola 7311. Connect with him on Twitter.