Dialectic Africa Analyst

Dear Professionals:                                A little over a year and a half ago, I wrote two articles in two days about my concerns with companies audited by Deloitte based on my numerous experiences as an independent investment analyst. I will post both articles below.  In response to this article, some partner from Deloitte South Africa started chasing me around the internet with threats; he was obviously not thrilled with my truth telling which he deemed misleading lies. I always tell you readers, "posterity is never prejudiced."  Just as light and darkness will always reveal themselves, so also will the truth no matter how obfuscated it may initially appear.   Over the past month, Deloitte has been sanctioned by regulatory bodies in two different countries over poor audit oversight of its clients.   1. Deloitte has been hit with a record four million pounds fine by the Financial Reporting Council (FRC) after a five-year investigation into Deloitte'

Dear Africa interested individuals:                                                         On Monday, April 25, 2016, I wrote an article on this blog titled:  "Nigeria All-Share Index: Retail investors will determine how it moves."   I have been a vocal proponent of retail investors being given the necessary support to return in droves to the Nigerian stock market and for their outstanding grievances to be addressed e.g. the dividends not yet paid out for banks that were taken over by the Central Bank (Bank PHB, Afribank etc) during the tenure of Sanusi.  Where is the money?   No one is talking.  The Nigeria Stock Exchange (NSE) leadership has a different opinion.  Retail investors should be pushed to invest indirectly in the marketplace by investing in mutual funds instead of directly purchasing equities into their own accounts.  Some mutual fund companies were even engaged by the NSE to do investor education (of course marketing their funds) to retail investo

Dear Readers:                        The most disturbing business relationship in the world is one where one party compensates another party that is supposed to to be loyal to the society at large and uphold certain fiduciary principles.  You are paid by one party but, your allegiance is to a larger group that has not compensated you in cash and/or kind but expects your human values to trump monetary value.     Auditors get paid by the client but, the general public is expected to believe the audited financial statements meet certain standards and do not serve the selfish interests of the paying client. Equity, fixed income and alternative investments analysts get paid by companies and the public is expected to believe the published reports reflect the honest, selfless view of the analysts and not the business and personal interests of his/her employer who pays the analysts' wages and bonus.  A boss of mine once upon a time called equity research a 'game.'  Lying to

Dear Africa interested individuals:                                                                   Kenya has been in the nose in recent years with one accounting scandal after the other.  The scandals came into the public domain through aggrieved parties, Institute of Certified Public Accountants of Kenya (ICPAK) or foreign parent companies.  Investigations into the "cooking of the books" exposed corrupt dealings and outright looting in some cases.  These are definitely worrying developments as is the recent case of Tesco in the UK and Toshiba in Japan where profits were overstated. In Kenya, accounting scandals of note over the years are: 1. Uchumi Supermarkets 2. Mumias Sugar 3. Haco Tiger Brands 4. CMC Motors 5. Kenya Airways The only acknowledged accounting scandal in Nigeria till date is that involving Cadbury Nigeria.  On paper, corporate governance and cooking of the books is more prevalent in Kenya, than in Nigeria. I am of the strong opin

Dear Africa interested individuals:                                                                 Over the past one year under the leadership of Patrick Njoroge, three Kenya banks have gone into receivership and the National Bank of Kenya has had its CEO & CFO removed along with four others.  A net profit of 2.25B Ks by September 2015 turned into a net loss of 1.15B Ks by December 2015 for National Bank of Kenya.  Patrick Njoroge, has stated that " never again will fuzzy numbers and creative accounting be used to deceive investors in banks."  The system is rotten and he has decided to openly acknowledge it and resolved to clean up the system.  Kenya is in tune with the rot within its banking system and is putting in place a better structure and closer surveillance and reporting to restore investor confidence in its banking system. Let's take a five hour flight to Nigeria, the most visible frontier market in Africa.  Skye Bank reported a pretax profit of N1

Dear Africa interested individuals:                                                         On June 20, 2016, I published an article titled: "Nigerian Naira: The misfortune of its people is the glee of foreign investors."  This article turned out to have the most one day views of any article ever written since the inception of this blog about fourteen months ago. Two months later, let us concisely review my major short-term expectations as stated in the article against present economic and market reality In Nigeria.    1. Expectation: The stock market will have a transient positive bump and then tank as the reality of pain sets in.  The naira free float policy commenced on June 20, 2016.   Reality:  The Nigeria All Share Index rose by 1.12% from June 20 to June 30.  The NGSE index declined by 4.42% in July and has declined by 2.25% as at August 25, 2016.  The market had a transient boost during the last nine trading days of June and then has been on a persisten

Dear Africa interested individuals:                                                                  Gradually it is becoming more evident that human prejudices that have existed since time immemorial are also impacting the way fund managers make decisions in Africa. The first angle I will look at is the demographic composition of staff of hedge funds that invest in Africa.  I have looked at Brazilian, Chinese, Eastern Europe, Asian, South East Asia, Latin American, American, Middle East and African funds.  The funds whose investment staffing is least similar in makeup to the region of portfolio inflows is Africa. People of European and American origins dominate African and frontier market funds.  This staffing domination is not seen anywhere close to the extent it is in funds invested in non African markets. Why are funds more open to talent from regions of investment focus except when it is Sub-Saharan Africa? The matter is further laid bare when South Africa domiciled A