Monday, July 30, 2012

How to reach 200 million people by bicycle?

We have a special preference for the African food and beverage industry. The reason is very intuitive: this is where most of the African household budget goes. If you are an investor that believes in the rise of African mass consumption, the food industry is probably one of the best ways to capture the long term opportunity.

A good example is Fan Milk, Ghana’s leading manufacturer of ice cream and yoghurt. Their story began in 1960 when a Danish entrepreneur created one of the first dairy businesses in Ghana. During the 1980s, the West African region was thriving after gaining independence.

Ghana, with its strong sense of national pride, a developing industry, and a well balanced infrastructure; presented the ideal climate to build a successful business.

After gaining independence, the region faced many political and economic challenges. Fan Milk’s resilience coupled with brand loyalty fuelled their success story and cemented their place in West African culture.
Initially the company only produced pasteurized milk, which they distributed through a unique system of bicycle vendors, pushcarts and kiosks. Today, Fan Milk have expanded and supply products to over 200 million people over 7 West African countries. Innovative distribution techniques have been developed to keep up with the changing economic climate, adding motor bikes and solar powered kiosks to the network.
Although the company has already developed a strong presence, their strategic position in Ghana will further enhance their potential for growth and expansion.They have built a strong brand and a way to ensure capacity so their boat can float on the rising tide of mass consumption.

Gold and cocoa are the main export items from the country and have helped contribute to Ghana’s economic activity. With the onset of oil production, GDP is expected to move into double digits. The benefits of a growing economy will increase the disposable income available to Ghanaian consumers, who will increasingly seek more high end branded food products.

Studies by the US department of Agriculture show that as income grows, consumers shift their food purchases from basic staple foods, to more expensive food products. Subsequently, under-developed countries facing periods of significant growth, will change their spending habits to reflect this trend.
As a result of changing trends, Fan Milk have widened their product portfolio to include ice cream, yoghurt, ice lollies and fruit juice. Fan Milk is , in our opinion, a unique opportunity to tap into Ghana’s successful growth story.

Investors are afraid of the unknown with challenges and issues that are sometimes not easy to understand. To be successful in these relatively new markets, we need to approach them with a fresh perspective, preferably a local one that has room for creativity.

After all, these are frontier markets, they require frontier thinking.

Source: Silk Invest

Friday, July 27, 2012

Monday, July 9, 2012

Namibia: Windhoek announces a major oil find

Namibia has discovered a major offshore oilfield in its southern territorial water – possibly giving it access to 11-billion barrels in oil reserves.

Production could begin in four years, Mines and Energy Minister Isak Katali announced to Namibia’s parliament on Wednesday (7 July 2011).

The find could put Namibia on par with neighbouring Angola, whose reserves are estimated at around 13-billion barrels and whose production rivals Africa’s top producer, Nigeria. Most of the oil is thought to be concentrated just off the country’s south coast. 

If the estimated 11-billion barrels is confirmed, the development could change the geopolitics of the Southern African region forever, for better or worse. At current prices, 11-billion barrels translates to US$1, 2-trillion in oil revenue, equal to the annual GDP of the entire African continent. That amount of energy could also power Southern African economies for decades, helping to pay for investments in economic infrastructure, education and skills, health, and other pressing developmental areas. More immediately, fuel prices could be reduced across the region, particularly if the oil is refined locally.

However, oil has proved to be a mixed blessing for most African countries. It has tended to lead to a rise in state corruption, and to the growth of often armed cessationist movements in oil-rich regions. Angola and Nigeria provide examples of both developments. 

Katali said that Enigma Oil & Gas, owned by London-listed Chariot Oil & Gas, has identified 11 prospects along the southern coast, adding that first production could begin as early as 2015. Enigma holds 50% equity in the offshore Southern Block, together with Brazil's Petrobras.

According to Katali, another Brazilian company, HRT Oil & Gas Ltd, has raised US$1,3-billion on the Brazilian stock market, with US$300-million earmarked for oil and gas exploration in Namibia. He said that HRT has certified about 5.2-billion barrels of potential reserves.

In his statement to parliament, Katali added that HRT would drill three to four wells in that area as early as next year.

Another find off Namibia’s central coast called Delta Prospect contained recoverable resources of up to 2-billion barrels of oil, by Arcadia Expro (AEN) Namibia and British firm Tower Resources, he said.
Namibia has long been seen as a potential new source of oil, hampered by a lack of exploration to determine the extent of its reserves. Its offshore geology is similar to Brazil, which is seeing a boom in oil.

Source: Southern Africa Report