Mark Mobius on the money in Africa

In­vestor says SA among coun­tries get­ting their act to­gether

Weekend Argus (Saturday Edition) - - BUSINESS - BLAKE HOUN­SHELL

WASH­ING­TON: Mark Mobius is the kind of guru to whom other gu­rus turn for ad­vice. With his sig­na­ture white suits and gleam­ing, clean- shaven pate, he very much looks the part too.

Ex­ec­u­tive chair­man of Tem­ple­ton Emerg­ing Mar­kets Group, man­ag­ing some $45 bil­lion and 18 over­seas of­fices, the half- Ger­man, half- Puerto Ri­can Mobius is a far­sighted in­vestor who sees op­por­tu­ni­ties around ev­ery cor­ner, of­ten in places that aren’t for the squea­mish.

Af­ter four decades at the top of his field, his name is on pretty much ev­ery list of peo­ple who mat­ter in global fi­nance. There’s even a comic book on his life that has been trans­lated into six lan­guages: Mark Mobius: An Il­lus­trated Bi­og­ra­phy of the Fa­ther of Emerg­ing Mar­kets Funds.

We spoke with him about China’s for­ays into Africa, how to make money in failed states, and why no coun­try is too hope­less. Here is an edited ex­cerpt:

Is Africa a bas­ket case or an op­por­tu­nity?

I would say it’s both. In many cases it’s the bas­ket case and it’s the next best thing, so what’s hap­pened is the change in at­ti­tudes, the change in per­cep­tion. But on the ground, of course, things are still not hunky-dory.

Prob­a­bly the defin­ing vari- able is what is hap­pen­ing in other emerg­ing mar­kets. China, Brazil, Rus­sia, In­dia – th­ese coun­tries now are get­ting to a point where they have ex­cess re­serves. They have money to put into other parts of the world. And of course they have been putting money into Amer­ica, into Europe, but they also are now go­ing into Africa. On the one side they need the nat­u­ral re­sources – China. On the other side they see an op­por­tu­nity to make money and make bet­ter re­turns.

The range of what’s pos­si­ble in th­ese coun­tries is quite tremen­dous sim­ply be­cause they are build­ing from such a low base. In the last 10 years, for ex­am­ple, six of the fastest­grow­ing na­tions of the world were in Africa.

But also it’s the fact that the print­ing presses are work­ing over­time in Amer­ica, in Ja­pan, and even in Europe.

There’s a lot of money to be in­vested, and a lot of that is be­cause of the fears of in­fla­tion find­ing its way into eq­ui­ties. So you have a very un­usual sit­u­a­tion where pen­sion funds are re­ally buffer­ing be­cause in­vest­ments like US Trea­sury bills are pay­ing such a low in­ter­est rate – which leads them into emerg­ing mar­kets and fron­tier mar­kets, with fron­tier mean­ing Africa, Cen­tral Asia, far Eastern Europe.

The African coun­tries most on my mind right now are South Africa, Nige­ria and Egypt. They’re im­por­tant mar- kets, and they’re get­ting their act to­gether. I know many peo­ple don’t have nice things to say about Egypt th­ese days, but they will get their act to­gether and they will con­tinue to work.

We were in Rwanda about six months ago, and we were all re­ally shocked at all of the in­fra­struc­ture, at least in the cap­i­tal, and the de­gree of gov­er­nance, the way law and or­der was in that coun­try. There are such huge dif­fer­ences in Africa from one coun­try to an­other: dif­fer­ences in tem­per­a­ment, dif­fer­ences in be­hav­iour and so forth. And Rwanda is a great ex­am­ple of a coun­try that’s re­ally got it­self in or­der and is a re­minder that, again it has this back­ground, this im­age of the geno­cide and all the rest of it.

If you take So­ma­lia, they have nat­u­ral re­sources. Large com­pa­nies want to go in there and drill and look for those re­sources. And that means money goes into the coun­try, peo­ple be­gin to raise their liv­ing stan­dards and then you have a mar­ket. We’re not writ­ing off any of th­ese coun­tries. In my opin­ion, there’s no such thing as a failed state. It may be in trou­ble, but it hasn’t failed. The mere fact that it is a state means that it’s alive.

An­other good ex­am­ple would be Zimbabwe. You men­tion the name and peo­ple just think, “God, what a bas­ket case,” but we are in­vest­ing in Zimbabwe. And again, it’s an ex­am­ple where you have to pick and choose the right com­pa­nies with the right man­age­ment. Then you can do pretty well.

China is a very pos­i­tive el­e­ment to this whole pic­ture, and there are two sides to this: there’s the Chi­nese govern­ment and the Chi­nese en­tre­pre­neur. The Chi­nese govern­ment goes in and they say to a coun­try, “Look, we want to be friends.” And then they say, “Look, we know you’ve got this coal, and we need this coal. We can do a deal with you to ex­port the coal into China, but in or­der to get it out of the coun­try we’ve got to build a rail­road. If you’ll do a long-term deal with us, we’ll build the rail­road.”

Once that be­gins, then you have Chi­nese con­trac­tors, Chi­nese work­ers com­ing in and es­tab­lish­ing small busi­nesses and trad­ing. And their rel­a­tives come in and they see the op­por­tu­ni­ties. So you be­gin to get a pri­vate mar­ket in Chi­nese prod­ucts and to ex­pand and at­tract other peo­ple, and you be­gin to have more of a mar­ket econ­omy.

Then you have peo­ple like re­tail out­lets in South Africa wake up and say, “Hey, they’re in the mar­ket here. The Chi­nese are sell­ing this and that. Why don’t we go in and set up a busi­ness?”

I would say that gen­er­ally speak­ing, the in­flu­ence of the Chi­nese has been very pos­i­tive for th­ese coun­tries. Of course there are some down­sides. Some coun­tries say that the Chi­nese are do­ing all the work and we don’t have any jobs and so forth and so on, but th­ese are things that can be ironed out. – Wash­ing­ton Post

GURU: Dr Mark Mobius has been at the top of his field for four decades.

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