Investing in African stock markets in 2025

Jan 23, 2025 | Alternative Investments

Every year I interview Tim who runs a fund focusing on African frontier markets(Africa excluding North Africa and South Africa).

Every year almost nobody is interested.

But every year the results are pretty good.

It’s hard for things to go too bad when you invest in a basket of local blue chip companies that:

Have market dominance
Are in countries with booming demographics
Are valued extremely cheaply (sometimes PEs of 3 to 5)
Pay double digit dividend yields on a yearly basis
Have very little debt on their balance sheets
Attract the best local talent to work for them

Sure, Africa is not risk-free. I would know; I spent most of my twenties working and living there. But having exposure to Africa in one’s portfolio makes absolute sense. Just position-size reasonably.

You can contact Tim directly on his website (African Lions Fund). He also runs an Africa-focused Telegram channel.

To a World of Opportunities,

The Wandering Investor.

Other articles on Kenya:

Subscribe to the PRIVATE LIST below to not miss out on future investment posts, and follow me on Instagram, X, LinkedIn, Telegram, Youtube, Facebook, and Rumble.

My favourite brokerage to invest in international stocks is IB. To find out more about this low-fee option with access to plenty of markets, click here.

If you want to discuss your internationalization and diversification plans, book a consulting session or send me an email.

Transcript of “Investing in African stock markets in 2025”

LADISLAS MAURICE: Hello, everyone. Ladislas Maurice of The Wandering Investor. Today, we’re going to have a very interesting discussion on African stock markets and their outlook for 2025. Tim is an Australian citizen. He’s been living in Dar es Salaam for a few years now, and he’s got a fund specializing in African stock markets, excluding North Africa and South Africa. Tim, how are you?

TIM: I’m very well, Ladislas. Yourself?

LADISLAS MAURICE: Good.

TIM: It’s been a crazy time. We’re enjoying life, and it’s been, I think, five years, almost since we started these conversations.

LADISLAS MAURICE: Yeah, indeed. Tim, first, just take us through really quickly your 2024 results for your fund, and then we’ll have a conversation on all the different countries that you have allocated funds in, so Tanzania, Nigeria, Kenya, Mauritius, like, all the fun places.

2024 African Lions Fund recap

TIM: Sure thing, yeah. So we had a really good year in 2024 at African Alliance Fund. I know that’s not unique to our fund by any means. There are a lot of markets around the world that were very strong in 2024. I haven’t got the final, final numbers in from my administrator, I’m expecting those tomorrow, but based on the estimates that we’ve done, the fund was up between 26% and 27% in 2024 in US dollar terms. So handily outperforming the S&P, which is always nice. When people tell me that they just want to buy an S&P Index fund, I always like to be able to say, “Well, we’re doing a little bit better than that.” So that was very satisfying. And 2025 looks like bringing more of the same, quite frankly. I’m sure we can get into that.

LADISLAS MAURICE: Cool, Tim. So is your biggest position allocation, country wise, still Tanzania?

TIM: It is, but not by nearly as much as it has been in previous years. Kenya is now our number two exposure, and it’s almost as high as Tanzania. Tanzania is now about 35% of the fund, and Kenya is about 30% of the fund.

Investing in the stock market in Tanzania in 2025

LADISLAS MAURICE: Cool. So take us through just a general overview of the outlook for Tanzania for 2025 and give us some examples of some of the companies, or just choose one company in there and give us some numbers so that people understand the sort of companies that you invest in.

TIM: Sure. So 2025 is an election year here in Tanzania. The presidential election cycle is a five-year cycle. I was actually here already on the ground for the previous election in 2020, which was won by John Magufuli, who subsequently passed away the next year, in early 2021. And the current president, Samia, she took over the remainder of his term. She’s running again for reelection in 2025. Her style has been completely different. She’s been wooing foreign investors and seems to be on a plane visiting some country or other every single week. And it’s paid dividends, there are a lot of new foreign investors coming into the country, money is flowing freely, and the economy has really been doing quite well. And I think that continues in 2025.

I like to say Tanzania is sort of like a three-legged stool. It relies on tourism, agriculture, and minerals exports. And all of those three are firing at the moment. They had a very strong cashew nut season, coffee prices are at records, gold prices are at records. That’s the main minerals export. And then tourism is also doing very well. I’ve actually just come back from the Serengeti myself again, on about my 20th Safari. I really love going on safari. And I can tell you that those guys are charging extremely high prices, yet they’re still very busy. So there’s lots of foreign exchange coming in.

There is some uncertainty around the election, but in all, I’m very bullish that this is another strong year of economic growth for Tanzania. So that should give a tailwind to the sorts of companies that we own. We own mainly exposures to local economy. We don’t have any direct exposure to exports, but when exports are doing well, the local economy also does well, people have more money in their pockets. I guess the fourth thing is that oil prices are surprisingly weak given everything that’s going on in the Middle East. And being 100% reliant on fuel imports, low oil prices is also great for this country, people have more money in their pockets to spend.

We own Tanzania Breweries, which, obviously, sells all the beers in the country. I think they have about 75% market share, so not all the beer, but they’re dominant. We have shares in a cigarette company, which is one I would actually highlight. I’m not an ESG fund, by any means. I’m a capitalist. I will invest in things like tobacco and booze. And Tanzania Cigarette is an interesting one at the moment, because there’s a foreign seller that’s actually selling blocks of shares in these off-market cross trades that we can get access to. And they’re selling this stock at extremely low multiple, like, three times EBITDA, or about five, six times earnings, depending on your estimates, double-digit dividend yield. In fact, we’re expecting, on our entry price, better than a 15% dividend yield. So we’re still buying there, and very bullish.

LADISLAS MAURICE: Yeah. And a little side note, for anyone that wants to go on a safari, if you want more affordable than Tanzania, because Tanzania is actually quite expensive for safaris–

TIM: Quite expensive.

LADISLAS MAURICE: rather go to Kenya, Uganda, or South Africa, they’re generally a lot more affordable than Tanzania. Cool.

Investing in the stock market in Kenya in 2025

LADISLAS MAURICE: So tell us about Kenya. I recently went to Kenya. I’m in the process of buying a few apartments there. I’m paying $1,000 to $1,200 a square meter for a brand new development with heated swimming pool, etc. Sure, it’s a Chinese development, I’m not expecting the quality to be the best, but at these prices and in the best neighborhood in the city, I just see very little downside. And the stock market is also very attractive, correct?

TIM: Yes, and it has been in a bull market now for almost a year, if you ask me. There was a lot of negativity around Kenya in 2023. I was buying stocks very cheaply back then. No one else wanted to buy. The currency was also relentlessly falling against the dollar. It went all the way from KES 105, when I first set up my fund back in 2020, to about KES 170, so quite a large depreciation. There was uncertainty about Kenya being able to roll over or repay its euro bonds. They managed to do so. There was political turmoil in Kenya, there was protesters on the street. But in actual fact, following the Euro bond rollover, the currency immediately started to strengthen dramatically, and it went all the way back to below KES 130.

I was just telling you, before we started recording, how it’s nice to actually have got some foreign exchange gains in our portfolio, both in Tanzania, which also saw a 4% appreciation in the shilling, but Kenya much more so. Not only did the stocks that we bought cheaply in 2023 go up dramatically in price in Kenyan shilling terms, they also saw an added tailwind because of about a 30% appreciation in the Kenyan shilling against the US dollar during the year. The economy there, much as people like to complain about the government, and the high levels of taxation, and how hard it is for the average guy in the street, most of the indicators are pointing in the right direction, and going from bad to a lot less bad. And that’s often how you make money in emerging and frontier markets.

Inflation has come right back down to low single digits. I think it’s just over 3%. Government bond yields are now falling as well. They’re below 10% on the latest government bond auctions. So you got interest rates falling, inflation under control, oil prices under control, food prices are under control. Everything is really looking quite good, except the mood of certain people about the political climate. And it’s understandable. It’s not an easy place for a young person to get a nice, well-paying job and make progress. And the last thing you want is government over-regulation and over-taxation. And, I respect the protesters’ voice, and hopefully, they can convince the government to make things easier.

But for the most part, the economy has turned around, and the stock market, as often happens, is a discounting mechanism, so it moved first and started to discount these improvements. And now the average Joe is actually realizing that, hey, there’s money to be made in stocks. I’ll highlight one that we don’t own, but it’ll give your listeners the idea. Kenya Power and Light Company, the leading utility electricity transmission company or distribution company in the country was perennially an underperforming dog of a stock, and went as low as KES 150 a share. It’s quadrupled or quintupled in the last six months, they reported excellent earnings. They’re paying a KES 0.7 dividend.

So imagine, you had a stock that was trading for under KES 2, and it announces EPS of KES 3, and pays a dividend of KES 0.7. Obviously, it had to go up, right? But it tells you just how bad the sentiment was in the stock market and just how deep a bear market it was. I used to tell people that Kenya reminded me a lot of the Philippines, where I used to live many moons ago. Back after the Asian crisis, sort of in 2001 to 2003, the Philippines was in this horrible bear market, bottoming out after the Asian crisis in ’98, and Kenya had a lot of parallels with that. And turns out that my gray hairs came in handy, [laughs] and I’d seen this kind of stuff before, and I thought on the probabilities that I was seeing that Kenya would come good. And thankfully it has, so my investors have reaped the rewards.

LADISLAS MAURICE: Yeah, you see it in construction activity as well, there’s a lot of construction going on in Nairobi. After all the infrastructure development as well, I mean, there’s a lot happening in Kenya. And people have to understand as well that in most cases, in most African countries, when you go there, everyone’s negative. You rarely find a country in Africa where the locals are very optimistic, apart from the top 2%. And most people are pessimistic, and even more so than before, because now they’re, all day, they have cheap data, they’re on TikTok, they’re on Instagram, they’re on YouTube, and they just see how everyone else in the world is living, and it just reminds them, on a daily basis, of how poor their conditions are. It just makes them, generally speaking, negative.

TIM: Yeah, life is still very tough.

LADISLAS MAURICE: Still tough.

TIM: Even though it’s going from being bad to less bad. It is the bottom line.

LADISLAS MAURICE: It is.

TIM: That’s how it is, yeah. East Africa, we’ve discussed Tanzania, Kenya, this region is actually the fastest growing region in the world economically now, ahead of Southeast Asia, and not a lot of people actually realize that either.

LADISLAS MAURICE: Yeah, things are moving forward.

TIM: So Kenya is off in a lot of ways. And it needs to grow, and it needs to grow a lot faster for per capita incomes to get up to decent levels, but we’re moving in the right direction.

Government spending and debt in Kenya

LADISLAS MAURICE: Yeah. But one thing that’s not really under control in Kenya is government spending. So about 32% of government revenue is spent on interest payments. How do you feel about this? How do you feel this will impact Kenya? Personally, the way I’m playing it with real estate is I’m making sure I’m locking in the payment plan in Kenyan shillings, so if there were some sort of devaluation, I’d be covered. If it’s too extreme, then, yeah, it could also impact the developer. So what are your thoughts?

TIM: Yeah, it’s a delicate balancing act. I think at KES 129 where it is now, the Kenyan shilling is relatively strong. And I think if you do take a five-year view, it’s probably going to start to depreciate again, maybe not back towards KES 170 where it was, but depending on how they go with meeting these interest payments and bond repayments and so on. Positive thing is interest rates are now coming down. A lot of the spending was also on local debt. And local government bonds hit 18%, 19% last year, which is quite extraordinary. So they will save a little bit of money on their interest bill this year relative to last year, but it’s still unacceptably high, and the country needs to start generating more foreign exchange so that it can repay some of these euro bonds and not have to just roll them over. I’m hopeful that they will be able to achieve that.

Tanzania seems to be in a slightly stronger position when it comes to exports, given that they have surplus food, and also they’re endowed with more minerals, and they charge more for safaris, [laughs] so they’re seeing quite a good current account balance relative to Kenya. Kenya is not food self-sufficient, which is another misconception that a lot of people have. Kenya is actually quite an arid country when you go outside of the certain fertile belts, it’s more like Somalia. So they do have to import food, quite a lot of it from Tanzania, actually, and Uganda. That’s one of their issues.

Kenyan mining industry has been hampered by what I would term bad mismanagement. That may be changing. I’ve seen some interest in minerals projects in Kenya. Kenya does have minerals, but is not known for mining because of the way that the mining industry has been handled by the government. Oil as well. There are oil deposits in Kenya, so maybe they wisen up and they make it easier for these extractive firms to come in and help the economy along. There was one Australian company that I followed that was doing mineral sands mining in Kenya, so that was a rare success story, although their deposits depleted, and then they’ve since moved on. I think they’re focusing now on Madagascar, of all places.

So interest rates coming down, turnaround in the current account, hopefully, more hard currency coming in, and the ability to pay down some of that debt. Kenya does have a very active diaspora. Kenyans are quite well known for being reasonably well educated, in an African context, and a lot of them do go and work abroad in the Middle East, the UK, US, places like that. So a lot of money is sent back from remittances as well.

LADISLAS MAURICE: Yeah, a lot of the developments are–

TIM: They’re good at software programming, like, that sort of stuff, call centers. Again, the parallels with the Philippines, my old stomping ground, is really quite valid, the two countries do–

LADISLAS MAURICE: One of these developments are being bought up by diaspora Kenyans, UK, Canada, US, mostly, a little bit UAE, to your point. Cool. So what’s your third country in terms of allocation?

Investing in the stock market in Nigeria in 2025

TIM: Our third largest exposure now, surprisingly, is, drum roll, Nigeria. And that’s not one that anyone in bullish on. [laughs]

LADISLAS MAURICE: Yeah. Can you even take the money out?

TIM: Yeah, yeah. Nigeria, when I started the fund, was a no go zone, because you can’t get your money up, or you couldn’t, at that time, get your money out. Basically, they were running a giant foreign exchange scam where the central bank was doling out the FX to their cronies, and they were then selling it at the black market for double the rate. And that suited the people controlling things. And foreign investors were in a queue. You sell your Nigerian shares, you get your Nigerian Naira, and you’re trying to get them out at the official rate, which was held out officially low, and you could.

But Tinubu, the new president, came in, and he’s not the most popular guy by any means, but he certainly shook things up. He devalued the exchange rate, fired the old central bank governor, threw him in jail. A lot of shake-ups. A lot of changes in Nigeria over the last 12, 18 months, and it has had the result that you can actually now get your money out. But it meant that the exchange rate lost about 70% of its value to find the fair level. So where it was sort of unofficially pegged at ₦450 to the dollar, it initially fell to ₦1,100, ₦1,200, and then subsequent to that, it fell all the way to as low as ₦1,600. It’s settled now in the ₦1,500 to ₦1,550 range.

I actually visited Lagos twice last year. I’ve been there three times in the last 18 months. I don’t think there are a lot of foreign fund managers who can say that.

LADISLAS MAURICE: God bless you.

TIM: And I actually found a gem of a company that was trading at very nice valuations, and I went large. We bought a million dollars’ worth of shares when it was trading at about 15, 16 naira a share, and it’s doubled for us. So we made decent returns in Nigeria last year in spite of the foreign exchange devaluation. And as a result, Nigeria has climbed in terms of the fund’s exposure to being, just having a look here at my numbers, it’s just over 7%. So still a lot smaller than Tanzania and Kenya, the two East African giants that we’re very bullish on, but Nigeria is now the third largest. Not by much. We also have 6.5% in Rwanda and about 6% in Senegal, so it’s third.

And I’m looking to add. I will add constructively to Nigerian companies that I think have what it takes to deliver returns long-term.

LADISLAS MAURICE: Can you really?

TIM: There’s not a lot of them.

LADISLAS MAURICE: Can you really take money out freely? Is there a queue? Does it take a few months, or is it just within a week, your money’s out? Are there enough dollars?

TIM: The problem now is the exchange rate fluctuates a lot, but the dollars are there, and you can repatriate money. You just need to watch your custodian like a hawk and make sure you’re not getting ripped off on the exchange rate, is the way I would put it.

Outlook for Nigeria in 2025

LADISLAS MAURICE: Okay, cool. And what about just the outlook for the country? Because, I mean, it’s still a very troubled place.

TIM: It’s still very precarious. Yeah, it’s very precarious. Although I see news across the wires earlier today, something that we’ve been waiting for quite a while, that the government finally allowed the two big mobile phone carriers to adjust their tariffs upwards. They haven’t had a tariff increase in more than 10 years. And given that a lot of their expenses are in dollars, and their dollar earnings were basically cut by two-thirds because of the foreign currency devaluation, that there’s a positive thing that the government realizes they have to let these guys raise prices in order to be able to survive.

LADISLAS MAURICE: But there’s still price fixing.

TIM: But inflation is still high–

LADISLAS MAURICE: But the government is still price fixing. I mean–

TIM: Well, the government has to approve any price change, essentially, is the way I understand it. It’s not a free market for the telecom companies to adjust their rates as they see fit. They had to lobby hard to be allowed to raise prices. But it’s not going to help inflation, and that’s one of the big problems. Inflation is still running in the low 30% range in Nigeria. They’ve got all sorts of trouble with food security, not only because they were an oil economy that basically focused only on that and didn’t really focus much on agriculture and other forms of development for the last many decades. So they import food.

They also have a problem with security out in the countryside. There’s bandits, and terrorists, and so on that actually prevent farmers from going about their work. It’s still very problematic in terms of the long-term future of the country, but things got so bombed out and so cheap that, as a value investor, there was a case to go in. I’m watching Nigeria very closely. I think that the government’s trying to do things that will help in the long term, but it’s not easy, like, there’s a whole big tax reform debate, and the last thing that people want when they’re struggling with 32% inflation and high fuel costs and so on is higher taxes. It’s a little bit like Kenya.

But the government’s tax take as a percentage of GDP in Nigeria is extremely low, and they have relied mostly on oil industry taxation to fund the budget. With oil prices staying stubbornly low and the Nigerian situation not really being conducive to foreign investment in the oil industry, they’re not getting their production up, there’s still theft that goes on and this kind of thing. So they still have a lot of challenges, if we speak frankly. We pick our spots very carefully as investors.

LADISLAS MAURICE: Yeah. Right, because, I mean, many times, as you’ve mentioned before, in frontier markets, you make your money when valuations are totally bombed out, everyone thinks, like, the country’s finished, and then it moves to, “Oh, it’s bad.” It goes from bombed out to bad in terms of valuations. It would appear that that’s what’s happened in Nigeria, it’s bad.

TIM: Yes, it is.

LADISLAS MAURICE: Sounds like it is fairly valued at this point.

TIM: Well, ironically, in local currency terms, the Nigerian market was one of the best performing in the world last year. It’s just that in dollar terms, it lost two-thirds of that. So, it more than doubled in local currency terms.

LADISLAS MAURICE: But yeah, no one cares about local currency terms.

TIM: But that meant it was still down 35% in dollar terms, right. [laughs]

LADISLAS MAURICE: None of your investors care about naira results?

TIM: We actually made money. We actually made money by careful stock selection. We do own, actually, your old shop, Nestlé Nigeria. That’s been a problem for us, because although is a very good company, and they have very popular products, so whenever the imported landing cost of these products goes up, they just pass on all the costs, and people will still buy them because they’re so popular. The operating level, the gross profit level is still doing well, but below that, it’s a total mess because of the intercompany loans and the FX debts that they had and various things. That one’s been treading water for us, but thankfully, as I said, we found this other company that really brought things home for us by more than doubling.

LADISLAS MAURICE: Cool. It does better than my former employer. Good to hear. [laughs] And is the market liquid enough? Because Nigeria is one of those markets where things could turn bad for a very long time again. Can you get out?

TIM: Yes, it’s a market that’s characterized more by local trading these days, and they are actually pretty active. There’s a big pension system in Nigeria, so there is quite a lot of trading that goes on, not necessarily in the second line and third line stocks, but the larger ones. There’s probably 50 stocks in Lagos that do trade properly from an institutional standpoint.

Investing in the stock market in Rwanda in 2025

LADISLAS MAURICE: Okay, cool. So fourth country is tiny, not-so-free Rwanda. Can you tell us about your allocation there?

TIM: [laughs] The so-called Singapore of Africa. Yes, very simple. We own only one stock there, one company. And it’s a fantastic company. It’s the Heineken subsidiary. Heineken actually owns 80% of it, and 20% of it is free float. They totally dominate the beer market. Tiny country, but Rwanda does have, I think, 11 million people, if I’m not mistaken, or maybe it’s even 16 million nowadays. And a lot of them are young and becoming of drinking age and so on, so it’s a popular product. And in addition to that, it’s also the company that has the Coca Cola Bottling license for Rwanda, so they also totally dominate in the soft drink industry. That’s a good one, and it’s done very well for us. I think the shares are up from RWF 120-odd to RWF 260 in the time that we’ve owned it in local currency terms.

The currency there, unlike the Tanzanian Shilling and Kenyan Shilling and Ugandan shilling, which have all appreciated over the last 12 months, the Rwandan franc has actually lost ground. It’s a weak currency, and continues to be. But this company has also paid us huge dividends along the way.

LADISLAS MAURICE: How much per year, roughly, percentage wise?

TIM: The dividend has gone up a lot over the years, but it’s still on a 10% yield currently.

LADISLAS MAURICE: Nice. Do they export into Eastern DRC as well? Because, I mean–

TIM: To be honest, they probably do, but it wouldn’t show up in official statistics. But I actually circulated something on my Telegram channel yesterday, I think it was. There was an article Beer Is Difficult to Find in Burundi. I thought, well, that’s an obvious market for these guys to also be sending exports into neighboring country. But the two countries don’t always get on, like, they close their borders and funny that way.

LADISLAS MAURICE: Burundi doesn’t have any dollars half the time, [laughs] that’s probably why they don’t have beer.

TIM: [laughs] That’s probably right. I think Burundi is actually officially the poorest country in the world, which is not a good rap.

LADISLAS MAURICE: Cool.

TIM: One of the other companies, just while we are on it, one of the other companies that we own does export cement into Burundi. So, there is some money in Burundi, but not a lot.

Investing in the stock market in Senegal in 2025

LADISLAS MAURICE: There’s something happening there, okay. [laughs] Let’s move on to number five. So you said in Senegal.

TIM: Senegal.

LADISLAS MAURICE: So, they had an interesting elections in 2024.

TIM: Yeah, they actually did.

LADISLAS MAURICE: Protests, blah, blah, anti-France speeches, oil is flowing big time. How’s Senegal? How’s your position there? What’s your outlook for the country?

TIM: I have had a position in Sonatel, which is the biggest mobile phone company in Senegal and several other West African countries, including Mali, Guinea, Guinea Bissau, and Sierra Leone. Fantastic company. Was way oversold coming out of COVID. There was a large investor exiting. And I think we bought initially at about CFA 11,000, CFA 12,000 a share. It’s doubled since, it’s now CFA 24,000. We’re still buying at CFA 24,000, because earnings have also grown just as much as the share price has appreciated.

It’s a pretty broad play on the economy. As you say, there is an oil industry that started up there. There are some foreign-listed companies in the oil sector that operate in Senegal that we look at from time to time, but we’ve never pulled the trigger on anything. In terms of the outlook, I mean, I remain very positive. The country seems much more politically mature than a lot of other African countries. I mean, I think Faye, when he came in, the new president, even called a second set of elections because he was having trouble getting stuff through Parliament. He said, “Okay, let’s dissolve parliament, and the people can have their say, and either vote my party in more strongly, or they can vote the other guys in, and then I’ll take my foot off the gas pedal.”

Anyway, he won, in a manner of speaking, also the parliamentary election. So now he’s consolidated his power. The one thing that worries me a little bit is his sort of anti-France, anti-Western rhetoric. He wants to renegotiate some of the oil deals, which is not a great recipe for long-term stability and investment in your country. If you just started producing oil, and Woodside, the Australian majors, is the one, I think, that’s the biggest player there, and now the government wants to change the deal. That’s one of the problems here in Africa, that there’s no continuity of deals and contracts when new governments come in and political winds shift and so on.

But I think a lot of it is populism, he’s playing to the gallery. I think he’s actually more savvy than that, so I’m not particularly concerned. And we get the same message when we speak with the senior management of Sonatel, the company that we own. They always tell us, “Look, you’ve got to understand what politicians say and what they actually do are different things in Senegal, just as they are in other parts of the world.” I mean, you know a little bit about Senegal, too, I guess, with your French background and so on. So correct me if I’m wrong on that.

Anti-French sentiment in West Africa

LADISLAS MAURICE: Yeah, yeah. No, I completely agree with you. And look, to be fair, there’s a big anti-French sentiment throughout West Africa, even more so in countries that are Muslim, because there, it’s not just what the French did to West Africa, but it’s also what the French are thought to be linked to in the Middle East, etc. It’s hard to be in politics in West Africa in the mostly Muslim countries and to be pro French. I mean, no one would vote for you. It just doesn’t work anymore. I mean, we’re even seeing in, just this week, I think, in Cote d’Ivoire, which is not particularly anti-French, the very pro French president just asked the last French troops to, they have a base in Abidjan, actually, and they’re going to be leaving within a few months, so.

TIM: And the rumor they’re going to Nigeria, that’s what I heard. [laughs]

LADISLAS MAURICE: Yeah? To northern Nigeria or something? [laughs]

TIM: Well, who knows, but apparently, the Nigerian President is not too popular with his own people, because he’s actually cozying up to the French. He goes to Paris all the time, and I think he’s invited them to come and put a base there. So let’s see, interesting times.

Investing in African telecoms as financial companies

LADISLAS MAURICE: Yeah. Gosh. What investors need to realize as well is that when they invest in African telcos, they don’t just invest in a normal telco that sells data, and cell phone plans, and all of that, but also in a financial company that’s involved in e-money. Safaricom in Kenya is the one that was the innovator. They have a massive market share of all transfers within Kenya, even compared to banks. And every single telco in Africa is trying to develop their e-money services, because they’re very, very profitable. What’s the situation like for Sonatel in Senegal? Are they making a breakthrough with this?

TIM: Yeah. As you said correctly, African telecom companies are not just voice and data plays, they’re also fintechs and payments providers in East Africa, especially quite advanced. Sonatel has also a big part of its business involved in peer-to-peer transfers and what they call cash out, which means that anyone with a Sonatel SIM card can store cash in a wallet, send that to other people both on its network and other networks. But they can also go to what’s called an agent, which are spread all throughout the country, and by sending, function as bank tellers spread throughout the country. And these services are more advanced in places like Kenya, it’s quite common for people to pay directly to businesses. Rather than paying with a credit card, when they go and buy their groceries, they don’t swipe a card, they pay directly to the establishment’s till number, as it’s called.

And those kinds of more advanced mobile money products are also going to be developing Western Africa. They’re a little bit on the curve. From that, we see more growth ahead for a company like Sonatel in this e-money space, which is quite exciting. In Kenya, Safaricom gets nearly 50% of revenue now from the mobile money space. For Sonatel, it’s still the low 30%, so there’s room for expansion and growth.

LADISLAS MAURICE: And it’s also changed the way people do remittances back home. Before, they either had to send bank transfers, and can get quite expensive, or use Western Union. And now what a lot of people do is just peer-to-peer with crypto and e-money. Sometimes, I have to make payments in Ivory Coast and Cameroon for some stuff, and I literally just peer-to-peer it. I send money through crypto and then through e-money with an escrow service, boom, it lands on someone’s phone, essentially.

TIM: Makes total sense, yeah, yeah.

LADISLAS MAURICE: It’s way better than Western Union, for sure. Tell us about the–

TIM: And then the phone companies, they encourage keeping that money in the ecosystem. Like, your counterparty who’s receiving that money could go and cash, but it costs them a fee to do so, whereas, if you move it around within the system, then the velocity picks up, the fees and charges on that are a lot lower. So they’re moving things in the right direction.

Investing in West African stocks on the BRVM

LADISLAS MAURICE: Yeah, yeah, it’s an interesting system, I mean, financially speaking, to get to own all of this. Tell us about the West African Exchange based in Ivory Coast in Abidjan. Do you have any exposure there?

TIM: Present time, we don’t. I was in Abidjan again back in September for called a Regional [inaudible 37:17] Conference. There’s a broker there that sponsors an annual event for all of the companies to come up to the Sofitel Hotel, and then investors come and meet them. You can meet them all over the two days, rather than having to go around and visit companies separately and drive all over town. There are a couple of companies there that caught our eye and our interest. We were doing a little bit more work on them, but at this point, we haven’t found anything that’s grabbed us enough that we have significantly allocated money. But it’s definitely one that we always [option 37:53].

There’s a couple of new listings there. Orange Côte d’Ivoire also listed as a sister company of Sonatel. We could never quite get comfortable with the valuation. It was listed at a reasonably expensive price, and it’s gone up since. There’s a lot of captive pension fund money that has to go into local stocks, so they tend to bid them up and whatever. But there’s one interesting company we looked at that actually it imports heavy crude from Colombia and Venezuela, and then it has a refinery that turns that into bitumen for road-making all over Africa, which seems like a business that’s going to do well long-term for a very long time. That’s one that we’ve been in some more.

LADISLAS MAURICE: Yeah, especially because there are discussions to make a new highway between Abidjan in Ivory Coast up to Lagos in Nigeria. I mean, they’ve been talking about it for years, but.

TIM: Yeah, I was in Ghana after being in Côte d’Ivoire, and I actually saw part of this [laughs] road being, well, was it really being constructed or were some guys just pushing some dirt around. It was hard to tell. But it is happening slowly. [laughs]

MTN Ghana stock

LADISLAS MAURICE: [laughs] And Ghana, you have exposure?

TIM: We also own MTN Ghana, the dominant mobile phone company there, again, because they are really whizzes at the mobile money business. They make a lot of money from that particular [inaudible 39:28] in Ghana. Ghanaians also seem to consume more data than most other African countries. Actually met with [Steven Dio 39:39] there, a South African chap who’s just taken over the role. And he said, “Look, we optimize our networks, we upgrade, and immediately any more data that we can provide, it gets sucked up by the market.” There’s so much demand that it all gets taken as soon as they can provide it, which is, obviously, a big growth driver as well for them.

Other stocks in Uganda, Zambia and Mauritius

LADISLAS MAURICE: Any exposure to smaller markets like Zambia, or Mauritius, Malawi?

TIM: At the moment, we’ve sold out of Uganda. We did own MTN Uganda briefly, they had a secondary follow on, a sister company of MTN Ghana, also a dominant mobile phone company. But we did very well. I think we rode that from UGX 140 to UGX 240 [inaudible 40:32]. It was a risk position for us, so rather than keeping it and having to do all the work following the company so closely, we decided to take profit. So we don’t have exposure in Uganda, but we do have something in Zambia, a sister company of Tanzania Brewing Limited, partly AB InBev Group Zambia Breweries. It was actually run by the lady who’s now the CEO of Tanzania. Her prior post was at Zambia Breweries.

It has not done particularly well for us. Zambia was hit by sort of an epic wave of calamities. They rely a lot on hydropower. They had a drought. [laughs] Copper prices don’t seem to be doing much. They can’t seem to roll over or get an agreement on their debt rescheduling. Their harvests, obviously, didn’t [inaudible 41:29] the drought either. So things have been low. They’ve actually been importing food from Tanzania, which is quite extraordinary, given that Zambia is usually a bread basket. It’s the only one that has not done well for us because of macro events more than anything else, but we still own it, still a well-managed company [inaudible 41:51] in its industry does turn around, and whether we’ll be in some gains.

Mauritius, we don’t have anything at the moment. Mauritius seems to have been hit by a lot of scandals recently, so I’m quite happy, actually, that I’m out for the moment. And I’ve been looking at a few things that have been falling in price just to see. I tend to be the kind of guy that steps into a burning building to salvage stuff, which may be the case in Mauritius this year.

LADISLAS MAURICE: Cool. All right, fantastic. Look, if you’re interested in finding out more about Tim’s fund, there’s a link below. He also has a newsletter link below, as well as a Telegram channel where he documents his travels all across Africa. So interesting stuff, the links are all below in the description. Tim, thank you very much for your time today. It was really insightful.

TIM: Welcome as always. Nice chatting to you.

Submit a Comment Cancel reply