AfribizTalk re-visited the conversation on managing investments in Africa with Joseph Wambia, CEO of Wambia Capital. Mr Wambia has over thirty years of experience in private equity and investments, including work at the World Bank.  This conversation focused on the investment decision side of managing investments.

Investing in Africa is quite different from investing in other markets, and in some respects, is similar to investing in the United States indicated Wambia. The similarities include completing due diligence, managing risk, and understanding the market.  If these fundamental facets are properly taken care of, the rewards are most profitable.

Africa is finally becoming more mainstream for investment.  The Asian market, especially China, and Brazil have already peaked.  So, Africa is logically the next frontier.  But Africa has actually been the most profitable market in the world for the past 20 years, according to Wambia.  This is no accident since Africa has the biggest oil and natural resource companies based there. 

There are approximately 13 liquid markets in Africa, e.g., South Africa, Kenya, Nigeria, Ghana, and Egypt.  These markets have well over 250 companies with annual revenues of more than $200 million.  A $200 million company in the United States is considered a small.  But Africa also has over 100 large cap companies in Africa, meaning each has a market capitalization of at least $5 billion.  There are about 2,000 actively traded African companies.  When you look at the U.S. exchanges with 17,000 listed companies but only about 3,500 being actively traded, Africa is not as small of a market as people think.

Wambia’s says that if an investor attempts to invest in Africa with the typical hurried American mindset, the investor is working against him or herself.  It can push the price of the potential investment higher and lead to more risk.  Also, investors should follow the principle of buy low and sell high.  Don’t enter the market when already saturated or leave when everyone else is leaving.  Finally, investors need to have a long-term versus short-term strategy to make the most of the African opportunity.

For smaller investors or newer investors, Wambia Capital is introducing the first mutual funds focused on Africa in the United States. People will be able to begin investing in Africa through a portfolio of diversified companies. Like other mutual funds, the Wambia mutual funds will be regulated and work according to U.S. laws.  A few benefits to investors starting off in Africa are the ability to invest with smaller amounts of money and being able to buy and sell shares more cost effectively and immediately than with overseas offerings.

To hear the entire conversation, go to our radio page.  To contact Joseph Wambia, go to www.wambiacapital.com.

For more information on business in Africa, visit our information-sharing portal – www.afribiz.info. 

Practical Tips for Managing Investments in Africa originally appeared on Afribiz.fm on July 6, 2011.

Related posts:

1. Handling Tax Issues in Cross-Border and International Trade with Africa
2. Tapping the Wealth of the African Stock Markets as an Individual Investor – Afribiz.fm
3. The State of ICT Markets: The South African Picture 2010
4. CleanTech Investments and Africa: A Natural Fit
5. African Specialty Food Market: A Business Proposition

Related posts:

1. Handling Tax Issues in Cross-Border and International Trade with Africa
2. Tapping the Wealth of the African Stock Markets as an Individual Investor – Afribiz.fm
3. The State of ICT Markets: The South African Picture 2010
4. CleanTech Investments and Africa: A Natural Fit
5. African Specialty Food Market: A Business Proposition