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J#8: Where grilled lobster at a five-star hotel costs just $20 & custodian banks still have strong Capital Adequacy Ratios

I had fun writing our latest Special Report “Out of Africa – Cementing a 14.6% Yield”. If you haven’t downloaded it yet, please make sure you get your copy here.

It brought back a lot of memories from a great trip to Tanzania.  I am glad that when Tim Staermose invited me, I grabbed the opportunity. I would like to share my experience with you and give you a glimpse of this beautiful country. 

Perhaps it will even encourage some of you to visit the home of one of the tallest mountains in the world, Mount Kilimanjaro – which is also where one of the best coffees, Kilimanjaro, comes from. Below are some of my observations and experiences.

Our meeting with NMB’s Investor Relations representatives at the bank’s headquarters.NMB is one of Tanzania’s largest retail banks.  It is 49% owned by Rabobank of the Netherlands.In most developed countries, there usually is a “brick-wall” to meeting management of companies with a large market capitalisation.  The usual pre-cursor to meetings is you need to have a huge investment in their company.  It is refreshing, and a welcome change, to be able to have access to NMB’s senior people even though at the time of visiting them I had not yet invested a single Tanzanian shilling to become a shareholder.  Tanzania is investor friendly in that regard. We also met with the staff of Tanzania’s central bank, The Bank of Tanzania, where we talked about the economy and Tanzanian government bonds that yield as much as 14%.  With inflation currently around 3%, and thus a 10%+ real yield, there would almost certainly be an inflow of capital to the Tanzanian bond market from overseas investors looking for yield, were it to open up. Should that occur, the Tanzanian shilling would likely temporarily appreciate.

I am at a local super-market in Dar Es Salaam.

With its abundance of young workers there is plenty of man-power in Tanzania to the point where one of the staff carries your shopping basket whilst you traverse the malls. I don’t know of any other place in the world where you get such VIP treatment from a regular grocery store.

The staff are all fluent in English and I had a good laugh with them.  It is always good to be with people that are happy. 

Tanzania is blessed with an abundance of food.  Honey, cashew nuts and avocados are plentiful and are leading export products.

And the value you get is hard to beat. I had the pleasure of indulging in lobster, and a large one at that, for just USD20.  Beers were something like USD1 for a standard 350ml bottle.

With that kind of value, it was lobster and beer 3 nights in a row.

With Tim’s friend, David R.

David is a New Yorker and former Wall Street banker.  He is a Professor of Carnegie Mellon University and Heinz College in Africa.

He first visited Africa more than 5 years ago.  He saw the opportunities the African continent had to offer and decided to stay!

After our day’s meetings, Tim and I would take an afternoon walk along the coastline from our hotel, the Protea Hotel (a Marriott Courtyard hotel), past the Aga Khan Hospital, along Seaview Road.

During the walk, I came across the foundation stone (see picture) laid by the President of Tanzania, John Magufuli and The Ambassador of South Korea for the new Selander Bridge.

Selander bridge is a project that connects the north west of Dar es Salaam‘s city centre to the south eastern end of the upscale Oyster Bay neighbourhood.  The project’s budget is USD110 million.  83% is funded by South Korea.  https://en.wikipedia.org/wiki/Selander_Bridge

Of the Tanzanians I spoke to, I found them to be very patriotic and happy (and careful) that they are not beholden to any one source of international funding. You will see investments from Korea, Egypt, Japan and China for their infrastructure projects.  The Tanzanian government is particularly careful not to become over-reliant on any one country and thus becoming an “economic colony” as has happened in some other African states.

During my meetings, I would introduce myself as a Singapore resident.  The usual reply, from the Tanzanians who know a bit about Singapore was very positive. They spoke warmly about Singapore.  This is as a result of Singapore’s former Prime Minister, Mr Lee Kuan Yew.  He visited Tanzania in the 1960s and developed a friendship with Tanzania’s founding father, President Julius Nyerere.  A glimpse into Singapore’s relationship with African nations can be found here.

I went on a 5-star safari at Lake Manze with Tim. The picture on the left is our early morning drive to scout for animals and have breakfast over the plains.

What struck me the most, other than the wild-life, was the silence and tranquillity of the drive. It is something unique that even the locals give it a name – “bush music”.  With the rhythm of the wind, and chirping of the birdlife, it gives your mind the space to reflect and think clearly.

For those who are planning to do an African safari when the coronavirus pandemic is over, I also recall a useful tip that the safari guide told me when you do stop for breakfast.  Always drive several times around where you plan to camp to see if there are any lions. Better still, try to find a giraffe.  Lions and giraffes apparently do not get along with each other, and with a giraffe standing near-by, you know it is a safer spot to stop for breakfast.

If you would like to find out some tips for reducing your African safari tour costs, visit Tim’s Global Value Hunter post here: https://globalvaluehunter.com/insider-tips-for-your-african-safari

Setting Up The Infrastructure – Buying shares in Tanzania & Custodian Arrangements

In our Special Report we published on 8th July, we detailed how you can buy shares on the Dar Es Salaam stock exchange.  Specifically, we recommended using Orbit Securities as a broker.  The other broker we mentioned, but required further due diligence, is Momentum Securities (https://mstrade.momentum.co.za/msprs/).

Momentum Securities is based in South Africa.  It is not a member of the Dar es Salaam Stock Exchange, and executes orders through a local correspondent broker. It has such relationships in many African countries, so the advantage is if you think you will be buying shares elsewhere in Africa, and not just Tanzania, you can save yourself the hassle of setting up single-country brokerage accounts all over the place.

For an added layer of comfort, should you wish to have a bank to act as a custodian for your investments, we can recommend NMB Bank (see above picture).  NMB is one of Tanzania’s largest retail banks.  It is 49% owned by Rabobank of the Netherlands.

The contact person should you wish to enquire about NMB’s custodian services is Mr Avith Massawe.  He is NMB’s Senior Manager for their Securities Services Unit (Custodial Services).  My business partner, Tim Staermose, uses their services.  Should you require an introduction, please email me.

CRDB Bank is another possible custodian bank you can use.  It Tanzania’s largest retail bank.  Its shareholders include DANIDA, the Danish Government’s international aid and development agency (21% ownership of CRDB).

A sound method to analyse the risk profile of these banks is to compare their Tier 1 Capital Adequacy and their Total Capital Adequacy ratios.  These ratios measure a bank’s cushion to absorb losses before it becomes insolvent.

The ratios are standardised by the Basel Committee on Banking Supervision and therefore comparisons between banks is possible.  The higher the ratio number, the safer the bank.  The table below provides a comparison of NMB and CRDB to a US, European and a Singapore bank.  I know where I would be putting my cash deposits based on the ratios below.

Should you wish to do an in-depth evaluation of NMB and CRDB’s credit worthiness, their financial statements can be obtained here: 

A message for my Children:

Your Dad would be happy if you took a gap year off your studies to travel throughout Africa.  Start reading and learning about the history of Africa and better still, if possible, do a year of university in Tanzania – it usually pays to be different!

More on Africa:

My trip to Tanzania last year was certainly an eye opener.  If you would like to find out more about investing in Africa, visit Tim’s web-site at:  www.globalvaluehunter.com

Finally, feedback please!  If you found our Special Report, Out of Africa – Cementing a 14.6% Yield,  not only profitable but, educational and a fun read, I would love to hear from you.  Please send your feedback to feedback@double-digit-dividends.com.  I read all my emails.  Should you have questions about the report, same drill. I am here to be of service and love to hear from my readers.