Investing Outside the U.S.


For the first half of the year, of the top 10 performing markets in the world, six of those markets are in Africa. Ghana is No. 1; Uganda, No. 2; Nigeria is No. 3; Zambia is No. 4. In the overall ranking of 56 countries, the U.S. market is 32. It is not necessarily going to sustain at this rate. But, from the way I see it, the African capital markets will pretty much stay anchored at this level and have upside potential.

The problem is with lack of liquidity and accessibility. You need to have an exit when you enter these markets. Africa has 53 countries, and we’re only talking about 16 capital markets that are really of any significance. Therefore, are we going to talk about regionalization of African capital markets? Or are we going to talk about one trading platform for the whole continent? There are many factors that can come into play, and I believe that if just a few of them come in, we will see Africa as a place to invest.

BE: How do investors take advantage of the African markets?

MPARE: The American Depository Receipt (ADR) route makes sense for those who don’t want to venture into the complex area of investing directly in the shares in the local markets because that entails finding a broker and going through a lot of things that may be complicated for the individual. If you go to the Internet, www.LiquidAfrica.com is a Website where you can make trades on the continent.

MIMS: Of 112 ADRs out of Africa, 70 are from South Africa; 20 are from Egypt; the rest are spread around. Just call your broker, or go on the Internet to www.ADR.com and look at the African ADRs. Most of them are put out by the Bank of New York. Look at the ADR’s category, which business it’s in, read about them, and see how some of that relates to other things that are happening in the world.

MPARE: Remember, risks are there. Nobody should go into this market assuming that there are no risks because Ghana’s market is up 92% or Zimbabwe 140% since last year. One of the reasons these markets are doing well is because they have political stability. Ghana’s democratic government is fostering stability. Until you have a sustained period of democratic reforms and stability, there are risks that one has to balance against the return potential that one can get from an African country or Latin American country or even an Asian country. We saw the Asia blowup in 1998. Who could have anticipated that was going to happen? At the time, we were talking about the Asian tigers and GDP growth rates of 10%, 12%, and higher and then suddenly, something happened.

HOLT: Are there any closed-end or open-end funds that investors should look at that focus on Africa?

MPARE: There are two funds that I am aware of. The Investco Southern Africa Fund (XSOAX) invests in all types of companies in the Southern Africa


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