African Markets in July

The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese proverb.

July was  the month that Kenya hosted President Obama’s visit to the country-the first ever sitting US president to do so. He came to host the sixth edition of the Global Entrepreneurship Summit. The sentiment on the ground was very positive. Hopefully, his visit will spur entrepreneurship  and foreign direct investment in the country, especially as he came with $1 billion  worth of commitments. I think allot of us believe that the only way to succeed is by getting a job but there is another avenue called “entrepreneurship”. This can be better for some people because it makes you the master of your own destiny. You can become successful no matter what your gender, colour, religion or age is; all that matters is how hard you’re willing to work.

Part of my strategy in achieving financial independence is eventually getting into entrepreneurship. It’s a little difficult for me because I do not come from a family of business people. My dad was always extremely wary about business – he felt that it was fraught with risks and very difficult; however, I have increasingly come to believe that anyone can do it including me.

In line with emerging markets, African stocks went through a very rough patch in July with broadbased  sell offs. The USD continued to strengthen which obviously caused African currencies to suffer further.

In Kenya we saw the central bank raising the base rate by a further 1.5% to try to stop the rapid depreciation of the shilling which breached the Kshs 100/USD level. The local equity market also fell by a dramatic 9.8% making it the worst performing African market – Helios was exiting its remaining investment in Equity bank and that put pressure on that stock but at least that was completed, eliminating that large overhang of shares.

We also had a number of companies releasing their first half results. I would say that in Kenya the results coming out were fairly decent and we saw at least some earnings growth. The large banks generally grew earnings in the low teens (%). East African breweries posted a very high earnings growth as compared to revenue growth because of cost management and lower interest expenses but generally their sales are growing slowly and steadily. In Nigeria on the other hand the results were not as rosy. We had companies like Nigerian Breweries, Transcorp, Stanbic IBTC, Nestle all posting a decline in earnings. Only the cement companies posted good results. Nigerian stocks are looking very cheap now and if I had the spare cash I would make some investments there. That economy is going through some challenges because of the current low oil price given that this is the source of most governments revenues. Any investment in Nigeria should be with a long term view because things there could get worse before they get better.

I believe that if you’re invested in equities you need to maintain discipline, ie don’t just sell off because you see the markets falling rather use the current volatility as opportunities to buy good companies at cheaper prices.

Happy investing.

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