Building a De-Americanized World

A friend of mine, and a senior lecturer in the University of Nairobi commented that it is failure when some Kenyan governors go benchmarking to the United States while the real thing is happening in Machakos County.

One R. Alai, a blogger and critic posed that some Kenyan media houses and personalities brag of winning CNN (an American TV channel) awards as if CNN was Jesus Christ!

I recently read through the Kenyan Public Debt Management Report of 2005/2006 and realized that Japan was the leading bilateral creditor to Kenya at the end of June 2006 (18.4 percent of total debt) followed by France (4.3 percent) and Germany (3.2 percent). To be more credible, I also checked some current data. China is currently the leading bilateral creditor, followed by Japan, France then Germany.

America is not even classed among our lenders! Yet all the above figures are given in US dollars.

It is perhaps a good time for the befuddled world to start considering building a de-Americanized world or brace harder times!

China is setting the pace. Her emergence as a leading economic powerhouse is on the offing. During the US government shutdown, China called for ‘Building a de-Americanized World’, and went ahead to sign a $57Bn currency swap deal with the European Union Bank _ a Chinese focus on being world leaders. Key among her strategies is the creation of a new international reserve currency to replace the present reliance on U.S. dollars, a necessary step to prevent American bumbling from further afflicting the world.

China’s entry into emerging markets with a strong Yuan will favour her balance of payments and exponentially grow her economy. We should not be surprised therefore, next time you buy a ticket; you may not use the dollar but Yuan. It may not be soon, but the worlds’ dynamics are fast changing.

The self-serving US has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

Remember recently when the Kenyan shilling depreciated against the dollar and hit around Kshs.114/US$ mark? A situation not hitherto imagined! Many argued that the price of the dollar is a function of its supply and demand, but that ksh114 was beyond the market mechanism. There must have been something else to that! The rest of the world needs independence, and a currency that is disconnected from individual nations and is able to remain stable in the long run.

Toppling the dollar alone isn’t enough, but it is a bold first step.  Several cornerstones should be laid to underpin a de-Americanized world. Kenya has a role to play, and so is Uganda and other nations. USAid alone won’t build our nation, we need more productive structures. Thanks to the Kenyattas’ presidency that does not tolerate the US!

The world needs some independence from US reliance, but this is ultimately not the American problem, as the effects of the bubble may ultimately be seen when the bubble bursts: global recession which will make life bite, especially with the already biting Kenyan VAT Law.

The Wealth of Nations

I didn’t attend any of the Ivy League institutions but am proud to have passed through the hands of Dr. Baraza, a public finance guru. Most of the class time sessions were spent watching video clips, and there I got a different view to wealth.

 

Forget everything else I might write down here, but don’t forget this one thing: If you want Kenya to be rich, you must have great productivity. The value you produce in return for the inputs you consume is the only thing that matters. It doesn’t matter how many people, machines or resources you have.

All that matters is the equation connecting inputs and outputs. Talk of a positive value; a positive net present value.

The former president beat this particular drum for more than ten years: ‘’fanyeni kazi’’. I’ll keep beating it even louder until someone listens and we fix Kenya’s productivity problem. The inefficiency with which we use our human resources, incidentally, is not just about manual workers. The problem of meaningless, valueless jobs starts very high up.

Let’s shift to the Kenyan government and public offices.

Koigi wa Wamwere once allowed journalists to spend an entire morning in his office. There, they recorded his TYPICAL DAY:……”he reads the newspapers, checks the post and e-mail, he surfs the net, he speaks to his secretary, he calls home,………. many hours of barely worth activity. Later, the journalists leave, amazed by the sheer tedium of it all.

Inactivity in government and public offices.

One might ask: do people especially public servants, go into office and wait to be given work to do?

I ask this because with all the resources at their disposal I would think that these servants should be able to come with plans to better their ministries and offices. It is easy enough to blame the government for appointing these people and not making use of them, but I think it would be better to ask why they do not seem to have any personal initiative to work.

And the joke’s on us. Most of these servants carry off hundreds of thousands or more of our money (tax revenue) every month in salaries and allowances. They have staff joining them in doing nothing; they have guards guarding their inactive serenity; they have well-appointed offices in which to do nothing, well, doing nothing in style. Some, it is alleged, have up to four cars given to them by the state to ferry them around in supreme comfort so that they can do nothing in different places.

This problem begins from the top. We could sack all unnecessary/inactive officers and the only reverberations we would feel in the economy would be that of money being saved and available for investment. Allow me to call this The Wealth of Nations.

Bad work and jobs keep us poor and unskilled. We are poor because we do things badly. That’s all there is to it. Good work the otherwise. Every time I travel via Thika road I usually tweet/facebook that Vision 2030 is possible_(confirm from my tweets). Every time Dr. Alfred Mutua speaks on media: productivity, work well done

Jobs should be measured by the work done. More jobs are created when work is done well. Wages go up when work is done well. Companies prosper when work is done well. Standards of living rise when companies prosper and workers are paid more. Good jobs equal prosperity for all.

This is the Wealth of a Nation, but it’s quite a job to explain it.

Let’s keep tweeting @fredbursar

AN ACCOUNTING/FINANCIAL INTERNSHIP EXPERIENCE

Whether you're a budding analyst for a biiiiiiig accounting firm or dipping your toes into the commercial or investment banking world with a small Kenyan bank, a college internship (preferably with an internship stipend) can be a wide-open gateway into your dream accounting/finance industry post - if you handle it right.

 A good percentage of college/university graduates who participate in internships while still in school receive at least one job offer after their stint if over. Salary-wise, paid interns fare significantly better that other entry-level job applicants; such students have a decided advantage in the job market over those who did an unpaid internship or didn't do an internship at all. 

Internships usually have college students and graduates working in environments where their skills are put to beneficial use by firms that really need the help. There's no fetching coffee for optimal internships – it's real work companies want done. Paid interns spend much of their time engaged in 'real' work; employers prize that kind of hands-on experience. Conversely, unpaid interns spend more time on clerical tasks and less on the type of duties that employers value (I once tried an unpaid one which I quitted after a week).

What makes a successful internship for college accounting and finance major? Let's take a look:

Doing the Work You Were Trained to Do

A great internship depends on what field you enter, such as internal auditing, investment banking etc.. But by and large, being busy using skills you've learned and developed in the classroom define the best internship experiences. So if you're spending almost half your time doing challenging, rewarding work, your internship is on the right track.

How Many Hours?

College interns working in banks, brokerages and other accounting and financial services firms should aim for between 200 and 400 hours during their internship. Why? Because that's what hiring firms look for in terms of on-the-job interning experience.

What Pay Can You Expect?

On average, a paid internship means being compensated for about a third- half the salary (and no benefits) of an entry-level salary for a similar job. In addition, factor in what you're doing and where you are doing it. However, you shouldn't necessarily judge an internship on the size of the paycheck.

Signs of a Good Internship Program

College grads and students wondering what other elements comprise a good and beneficial intern experience should look for the following elements:

• A direct internship coordinator, whose full-time job is managing interns

• A written blueprint from the company explaining its policy toward interns and its goals in its internship program - you shouldn't have to ask, the firm should give you one

• An emphasis on challenging - and not menial - work.

• Opportunities to mingle with, and learn from, staffers and management at meetings, seminars, company dinners and training sessions on a regular basis

• An opportunity to speak with former interns at the financial services company, to get their perspective on the internship experience

What steps should you take to secure a good financial internship? Getting a decent internship at a bank, insurance company, or other financial services firm is all about preparation. In that regard, cross these items off your checklist first:

Check Your Status

The unemployment line is littered with the resumes of college graduates who didn't take care of business in vetting their online reputations. Money management firms are, above all, extremely cautious about whom they bring aboard to help manage client's money.

That's why it's a good idea to scrub your online persona swiftly and thoroughly. Watch out for risky pictures on Facebook or inappropriate Twitter comments. Some companies will be on the lookout for what they deem to be risky behavior; avoid it and remove any examples of such behavior online before you interview with a money management outfit. 

Start Your Networking File

Once you gain an internship, begin filing away the names and contact data for the professionals you meet along the way in your internship. It could be the contact who helped you win the internship, the broker or analyst who you've been assigned to help or the specific internship coordinator at your company. All can come in handy when push comes to shove and you’re looking for a job offer.

Above all, make sure to write personalized thank you notes to all the professionals who've helped you along the way. Civility and good manners count for a lot and in the accounting and finance industry and may even mean the difference between leveraging an internship for professional gain or not.

The Bottom Line

Most internships are generally more rewarding in terms of experience, and can get you further in your career. In the end you're better off if you can get any internship after all. The value of networking and experience goes far, whether you're earning a paycheck or not.

Where to Invest Now: The Most Promising African Stock Markets

African stock markets have put together an incredible run of late. This has prompted several readers to ask which one looks like the biggest bargain now.

So, I thought it would be a good time to look back at a post that attempted to answer this question 13 months ago to see how well my forecast panned out.
In that article, I predicted that Ghana, Zambia, and Cote d’Ivoire would be the best-performing African stock markets. I hadn’t specified a time frame, but with over a year past, I think it’s a fair time to evaluate my accuracy (or lack thereof).
The chart below shows how I predicted the markets would rank on the left and the exchanges’ actual performances on the right.

Market Performance: Forecast vs. Actual

Exchange	Forecast Rank (May 2, 2012)	Actual Performance Rank (as of May 31, 2013)	Dollar-Adjusted Performance (May 1, 2012 - May 31, 2013)
Ghana Stock Exchange	1	2	+65.6%
Lusaka Stock Exchange	2	6	+10.5%
BRVM (Côte d'Ivoire Stocks Only)	3	5	+39.8%
Nairobi Securities Exchange	4	3	+61.0%
Uganda Securities Exchange	5	4	+57.2%
Namibian Stock Exchange	6	9	-2.6%
Nigerian Stock Exchange	7	1	+70.5%
Botswana Stock Exchange	8	7	+5.2%
Stock Exchange of Mauritius	9	8	-1.2%
Johannesburg Stock Exchange	10	10	-14.1%

As you can see I was a bit too enthusiastic about Zambia and Namibia, and I didn’t anticipate the Nigerian Stock Exchange’s tremendous performance. Overall, however, I felt the ranking did pretty well at picking winners and losers. It got four out of the top five right, and was right on the money by singling out the Johannesburg Stock Exchange as the least attractive market.

Where to Invest in Africa Now

Now let’s see what my crystal ball is telling me will happen over the next 12 months.
There’s actually no magic here. We simply want to identify the markets with the best combination of growth and value. The logic being that a fast-growing economy offers companies an environment with ample opportunity to increase earnings. This is counterbalanced by a measure of stock market valuation to get a sense of how much of the growth story has already been factored into stock prices.
To get a handle on the growth part of the equation, I consult the IMF’s latest World Economic Outlook. This is where I find GDP growth forecasts from the present day to 2018. I then calculate a composite growth rate by giving the shorter-term forecasts higher weights and the more speculative long-term forecasts lower ones. The chart below shows these composite growth rates.

IMF Forecast of African Economic Growth

Country	Projected GDP Growth (2013 - 2018)
Côte d'Ivoire	7.86%
Zambia	7.85%
Nigeria	7.05%
Ghana	6.51%
Uganda	6.19%
Kenya	6.15%
Zimbabwe	5.41%
Mauritius	4.28%
Botswana	4.27%
Namibia	4.19%
South Africa	3.18%

So, the IMF believes Cote d’Ivoire, Zambia, and Nigeria will each grow their economies at an annual rate of seven percent or more between now and 2018. It stands to reason, therefore, that certain businesses are going to do quite well. But, as prospective investors, we can’t stop our analysis there. We want to find the stocks in fast-growing economies, but we don’t want to pay much for them.
Thus, we now turn our attention to stock valuations in these countries. To get a sense of relative value, we’ll compile the price/earnings ratios of the ten largest stocks on each exchange. Then, we’ll eliminate the outliers – the lowest and highest P/E ratio. Finally, we average the P/E ratios of the eight or so remaining stocks. You can see the results of all this number-crunching below:

P/E Ratios of African Stock Markets

Exchange	Price/Earnings Ratio (Avg 10 Largest Stocks)
Uganda Securities Exchange	8.39
Namibian Stock Exchange	9.40
BRVM (Côte d'Ivoire Stocks Only)	10.63
Botswana Stock Exchange	11.08
Lusaka Stock Exchange	13.27
Nairobi Securities Exchange	14.33
Zimbabwe Stock Exchange	14.35
Stock Exchange of Mauritius	15.08
Ghana Stock Exchange	17.51
Johannesburg Stock Exchange	17.85
Nigerian Stock Exchange	20.64

In terms of earnings multiples, Ugandan and Namibian stocks look darn cheap. But I’d much rather own a Ugandan stock sporting an 8 P/E than a Namibian one with the same ratio. Why? Because Uganda’s economy is forecast to grow so much faster.
To assess the best combination of growth and value, we divide each market’s P/E ratio by its home economy’s forecast growth rate. This market PEG ratio is shown in the table below.

Balancing Growth and Value

Exchange	Price/Earnings/Growth Ratio
BRVM (Côte d'Ivoire Stocks Only)	1.35
Uganda Securities Exchange	1.36
Lusaka Stock Exchange	1.69
Namibian Stock Exchange	2.25
Nairobi Securities Exchange	2.33
Botswana Stock Exchange	2.59
Zimbabwe Stock Exchange	2.65
Ghana Stock Exchange	2.69
Nigerian Stock Exchange	2.93
Stock Exchange of Mauritius	3.52
Johannesburg Stock Exchange	5.62

So, our model suggests Cote d’Ivoire, Uganda, and Zambia are attractive markets at the moment, while stock bargains will be more scarce on the Johannesburg Stock Exchange and Stock Exchange of Mauritius.
It’s interesting to note that most African markets are more expensive now than they were 13 months ago. So, we probably won’t enjoy the eye-popping performance from African indexes that we’ve enjoyed over the past couple years.

Over to You

Does the forecast sound plausible? Which African market looks the cheapest and/or dearest to you? Let us know in the comments!