Africa: Cry, the beloved country

01 October 2012 - Peter Townshend

Prior to entering the world of finance, I spent almost a decade in the mining sector, working in a number of African countries. I learnt a great deal, had lots of fun and saw more than my fair share of remote places. Eventually the nomadic and spartan existence got too much for me and I made the change, but I retain many very happy memories of my time doing a real job. My fondest memories are of the almost four years I spent in the Republic of Mali, in West Africa. 

I arrived in the country in 1995 as it was undergoing a process of change as profound as that which I was leaving behind in South Africa. Following a long period of communist one-party rule that ended in 1991 with a revolution similar to what we are now witnessing in Tunisia, Egypt and Syria, Mali had a brand new constitution, a freely elected government and a newly liberalised economy. None of this I knew at the time. I knew little about the country, nothing about the job I would be doing, had no idea what my salary (quoted in the local currency) amounted to and I spoke no French. For a naïve 24 year old who had never travelled in Africa beyond the SADC countries, Mali was an assault on all the senses. 

Stepping off the plane at night and into a wall of heat, suffocating humidity and a chaotic scrum of people almost immediately knocked any sense of adventure out of me. There was no organisation, no queues and no working equipment. The few officials present either ignored the chaos as they sat slouched on chairs fanning themselves with their flip flops, or painstakingly read every page of a passport before stamping an entry visa, to the visible relief of the passport owner. The few European faces in the crowd looked at each other with panic-stricken eyes, with no-one knowing where to go or what to do. Finally all of us made it through passport control and after a further interminable wait, our luggage was dumped in the arrivals hall by hand. Inexplicably, before exiting the terminal, we were forced to push our luggage through a broken X-ray machine manned by three customs officials. The chaos and heat inside the terminal building was nothing compared to what lay beyond the terminal doors, and I almost wept with gratitude when a company representative finally found me
and led me to an air-conditioned 4x4 for the trip into the capital, Bamako. 

After an uncomfortable night sweating in le Hotel B&B (something was clearly lost in translation) I was put on the 1950’s era train bound for Kayes, the regional capital in the west of the country. Thirty six hours later I finally arrived in Kayes after a derailment and two collisions with animals on the tracks. It was only the thought of having to repeat the train journey that kept me from turning around and heading straight back to South Africa. After 48 hours in Mali, I’d had enough and was mentally and physically exhausted. 

Needless to say, things improved and my view of the country changed dramatically. Working on the southern fringes of the Sahara remained physically challenging, but the spectacular and remote landscapes we worked in made up for it. But above all, it was the openness, warmth and generosity of spirit of the Malians that I still treasure. During my time I worked with Malians who had been trained in Russia, Poland, East Germany and France. They were intelligent, articulate, spoke numerous languages and had travelled widely. They were also unfailingly polite, endlessly generous and eternally optimistic; and I miss them still. 

I have previously written about Mali as an example of how African countries should structure their mining codes. In conjunction with the International Finance Corporation and World Bank, it comprehensively re-wrote its mining laws in the early 1990s. In the decades since, it came from nowhere to be the third largest gold producer in Africa, among the top 15 gold producers in the world and one of the most favoured gold investment destinations on the continent. Attractive geology and investment laws, combined with unwavering consistency, brought enormous investment and benefit to the country. Unfortunately, in the last year, much has gone wrong. Changes were made to the mining legislation and then, out of nowhere, the government was deposed in a coup. The northern, Saharan, reaches of Mali have always posed a problem. The nomadic and fiercely independent Tuareg have for decades been waging a low-grade secessionist war. As Libya fell apart, weapons, fighters and Islamic terrorists moved into Mali and now control vast swathes of the country, imposing Sharia law and destroying priceless antiquities. With little appetite amongst Western or other African powers to get involved and no legitimate government, the situation is deteriorating. A country that was for two decades a model of democracy, stability and progress in Africa, is descending into chaos and lawlessness. 

We have limited exposure to Mali but it again illustrates how quickly things can change in Africa. Last year noone could have foreseen the revolutions in Tunisia, Egypt and Libya. We had 25% of our portfolio invested in Egypt and that market quickly fell almost 50%. Elsewhere, all the major African markets that we invest in fell anywhere from 10% to 30%. Our Africa Frontiers Fund lost only 16% during the year however, showing the benefit of holding a spread of high-quality, undervalued companies that are diversified across geography and business sector. At the end of 2011 we wrote in our fund commentary: ‘We have no particular insight as to how global or African markets may perform through 2012. What we do know is that we hold a portfolio of highquality companies on more than reasonable ratings. With value on our side, we certainly hope 2012 will deliver a better result than did 2011.’

As it happens, 2012 has, so far, been a very good year and our Africa Frontiers Fund is up 27%. But, the fact of the matter is that we are as bemused by the strong returns this year as we were by the poor returns last year. We have no more insight into how the next six months or a year will play out than we did at the beginning of this year. But, we continue to unearth interesting new investment ideas and many of our major holdings still offer more than reasonable value. In time, we are confident this value will accrue to those of our investors that stay the course.

Similarly, in time, Mali will no doubt emerge from this difficult period with the spirit of its wonderful people unchanged. My friends there were fond of saying that you only cry twice in Mali – the first time is when you arrive in the country and the second time is when you leave. I certainly cried when I left and I could weep now as I watch 20 years of progress being snuffed out.

PETER TOWNSHEND joined the Africa team in July 2008. He currently co-manages the Coronation All Africa and Africa
Frontiers Funds. Prior to joining Coronation, he worked as an analyst with an African hedge fund.

If you require any further information, please contact:

Louise Pelser

T: +27 21 680 2216

M: +27 76 282 3995



Notes to the editor:

Coronation Fund Managers Limited is one of southern Africa’s most successful third-party fund management companies. As a pure fund management business it provides individual and institutional investors with expertise across Developed Markets, Emerging Markets and Africa. Clients include some of the largest retirement funds, medical schemes and multi-manager companies in South Africa, many of the major banking and insurance groups, selected investment advisory businesses, prominent independent financial advisors, high-net worth individuals and direct unit trust accounts. We are 29% staff-owned, have offices in Cape Town, Johannesburg, Pretoria, Durban, Gaborone, Windhoek, London and Dublin and are listed on the Johannesburg Stock Exchange. As at the September 2012 quarter-end, assets under management total R339 billion.