Investing Overseas: Opportunities abound in Africa and the Caribbean

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Too often, Africa is seen through the lens of suffering, be it drought, famine, the H.I.V./AIDS epidemic or political instability. Neither are the 15 countries of the Caribbean Community (Caricom) immune to this narrow worldview. What is not common knowledge, however, is that despite their respective challenges, these regions are fast becoming financial powerhouses of a sort, offering double-digit returns on investment.

For example, in mid-August, the Uganda All Share Index had year-to-date returns of 86.90 percent, while the Nairobi Stock Exchange 20 Index listed returns of 36.65 percent. Compare these with the numbers for the New York Stock Exchange Composite Index as of Aug. 23, the Standard & Poor’s 500 Index as of Aug. 22, and the Dow Jones industrial average as of Aug. 23, which were 3.3 percent, 0.81 percent, and -2.40 percent, respectively. In the Caribbean, the Jamaica Stock Exchange Index had a market capitalization of a whopping $879 billion in 2004.

“Pan-African business is booming,” says Jonathan Auerbach, managing director of Auerbach Grayson & Co. Inc., a brokerage firm that invests in 94 foreign markets for institutional clients. Many attribute the boom in Africa largely to increased political stability (with the exception of a few countries) and a tremendous amount of infrastructure building across the continent.

Although currently there is no unified stock exchange system in Africa, several countries have individual exchanges with local brokers that can be found on the Web at www.liquidAfrica.com or www.firstglobalselect.com. Potential investors may want to consider country or regional mutual funds, such as the funds offered by the Africa Mutual Funds Co. in Dallas, or the Herzfeld Caribbean Basin Fund.

Investing in hot industries, such as satellite communications in Africa and the Caribbean, is yet another alternative. “There’s not enough fiber optic and cable wiring within the infrastructure of many African countries, so cellular phones are selling very well,” says Fritz-Earle McLymont, managing partner at McLymont, Kunda & Co., an international business development strategy firm with offices in Valley Cottage, N.Y. (McLymont, Kunda functions in an advisory capacity to TNJ.)

A few determined entrepreneurs have invested overseas by launching local ventures. Several years ago, Ronald D. Brown, president of Simba Holdings LLC in New York City, took his law degree and moved to South Africa, where he hung out his shingle and engaged in anti-apartheid work. He returned to the States for a 10-year stint on Wall Street and, in 2001, launched Simba Holdings (formerly BKM Management) with a number of U.S. investors and South African partners. “I always wanted to come full circle and combine my financial experience with my love of South Africa,” he says.

Simba sources duty-free manufactured apparel and footwear from southern and eastern Africa. “Africa is very well poised for some incredible economic development and the thought of being a part of that is extremely compelling,” Brown says.

Whether you hang out your shingle in Africa or in the Caribbean, here are a few tips to keep in mind:

-Find local partners and know their customs. The years Brown lived in the townships of South Africa helped him form friendships and meet those who would eventually partner with him in his venture: “Try to find the best local partners as much as you can. You’re only as strong as your local partners.”
-Do your homework. McLymont advises entrepreneurs to check with a country’s embassy in the United States and research its updated investment policies. The U.S. State Department can provide additional information. Web sites such as www.allAfrica.com provide news about Africa; the Corporate Council on Africa (www.africacncl.org) promotes trade opportunities between Africa and the United States and www.caricom.org offers information about Caricom countries, with links to the various stock exchanges.

-Have a solid business plan. “From the African perspective, [entrepreneurs] must come with a serious plan and with respect,” advises journalist and filmmaker Carol Pineau, director of the documentary Africa: Open for Business. The film profiles the ingenuity and tenacity of 10 native African and non-African entrepreneurs who established successful business ventures. “They will have no time for you if you don’t have a serious plan,” Pineau says.