Africa driving secular economic change

Here are some extracts from the keynote speech by US stockbroker Jonathan Auerbach at a joint conference between his company, Auerbach-Grayson & Company (, Nedgroup Securities ( and Nedbank Capital ( on 5-6 October in Johannesburg.

“They call us Frontier Markets.. we are reaching for the Final Frontier, the edge of our world. We are out there accessing the world’s investment pools, asset managers, pension funds, insurance companies, sovereign wealth funds, some passive and some not so passive, convincing them both internally and externally to make larger investments outside their home markets and into Africa. We are providing capital where it’s needed most and the returns are impressive.

“We are the agents of development. When the public sector alone ran Africa, with the legacy of Cold-War great powers and post-colonial anointed kleptocrats.. capital and assets fled from Africa. Today, 50 years later, many African nations’ growth rates are greater than 7%, savings rates are increasing, cell phone and internet usage doubles yearly. African leaders, like Kikwete of Tanzania and Khama of Botswana, who visit the developed world now meet investors and businesses. This is the true Africa; hungry for trade and investment, not handouts.

“Mainstream press tells us we are in a global economic slow down. Well, excuse me, but the slowdown of consumer spending in the developed world even with central banks spiking their punch bowls is not the case in Africa. Africa is echoing the success of China, Singapore, Korea, India, Brazil – need I name more? And this successful model is more about business missions establishing new multi and bilateral trade arrangements (South Africa’s Shoprite has just announced they will open 14 new supermarkets in Nigeria. Currently they only have one). It’s about educational growth. It’s about capital markets combined with technology (Safaricom raised $800 million in a domestic IPO last year. Today 800,000 Kenyans are shareholders). It’s about taking the governments out of the realm of the economic domination business and into the realm of producing supportive business services and catalyzing business investment.

“Let’s understand why we in Africa have a clear advantage in this generational secular event we call the leveling of the global economic playing field.

1. Labor force growth will be at least 2% higher than the developed world with significant surpluses that will seek to redeploy as they rush to participate in growth.
2. Investment rates in the frontier/emerging world run 27% on average (China is 45%) compared to barely 20% in the developed world.
3. Productivity growth is running on average twice the developed world.
4. Local businesses now with access to indigenous capital markets no longer are captives of global banks or suppliers to multi-nationals.
5. Ownership of public companies is organically expanding to employees, local shareholders and local institutions, and global institutions as government ownership and plodding multinational corporate ownership is minimized.
6. Transactional efficiency – Electronic trading platforms and book entry custody have made many markets in Africa as efficient as the developed world. In Kenya, this development has quadrupled daily volume from four years ago. Our firm has never had a fail in Africa and I speak with 15 years experience having had share turnover of $1 billion in Africa last year. Your word is your bond here and a firm handshake works as well here as anywhere else in the world.
7. While the developed world is feverishly dealing with de facto nationalization and stimulating reluctant consumers, Africa basks in privatization and organic middle class growth of close to 20% unencumbered with debt or car clunker deals.
8. The remarkable growth of local banking within countries and cross-border is astounding… Among the new African bank leaders are Mauritius Commercial Bank; Equity Bank in Kenya; DFCU Bank in Uganda; National Microfinance in Tanzania; Zanaco in Zambia; UBA in Nigeria (beginning to appear everywhere else); and Guaranty Bank in Nigeria (a classic corporate banker).
9. Education – Almost all of my partners in Africa have at least one employee as a CFA candidate rapidly homogenizing African analysts with their global counterparts.

“We must convey to Sir Bob, and the always well-meaning donors to Africa, that they must grasp that here in Africa private initiatives and pan-Africanism are rocketing along and the legacies of colonialism, kleptocracy, and tribalism are crumbling as a fresh information–empowered generation gets it. For me, and I hope for you, Africa has never looked better and it’s all about the burgeoning presence of empowered people and institutions.

“On Saturday I made my annual pilgrimage to the Hector Pieterson Memorial and Museum in Soweto. If you haven’t been there just know that it’s integral to your African awareness. One of the videos that plays at the museum is a passionate reading by the late South African poet Ingoapele Madingoane of his iconic poem, Africa, My beginning, Africa My Ending- and I quote the last lines, “…Africa my beginning/ And Africa my ending/ Lets do something.”


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