Thursday, March 29, 2007

Kenyans Investing Offshore, Beware

NSE’s poor performance has not stopped young Kenyans from venturing into stock market investing. Some are even venturing into several developing countries’ capital markets. This new found adventure can prove to be simultaneously sweet and sour, as it has happened to me in Malawi. It all started in 2002 when I was a first year econ student in college. Investing time had never been sweeter for me: I had just started earning my own cash, NSE was starting to wake up, and a network of African brodas was opening immense investment opportunities. What else could a risk assertive college student could ask for?

I did some research on stocks in Kenya, Ghana and Malawi and immediately started to load-up. Things have worked very well since. But repatriating a slice capital gains from Malawi is nothing but head-ache. I never knew Malawi exercised an exchange rate control policy, which basically means controlling the amount of foreign currency leaving the country. Nobody can buy dollars without reserve (central) bank’s approval, plus there is a limit of $5,000, and you must give a credible reason. The experience has made me appreciate Kenya’s monetary and exchange rate framework, which many bloggers (me included) have been yap-yapping about.

Malawi’s system is so bureaucratic. First, I had to prove to the reserve bank that my capital was sourced from outside Malawi. That meant providing receipts of all money transfers I had ever wired to the South African country since 2002, including sections of my bank statements. Well, I provided the requested paperwork but Malawian bureaucrats could not understand how my “X-dollars” had accumulated to, say, “8X-dollars”. In their mind I was either cheating or stealing from poor Malawians. Other than that capital gains have been sweet, and there still exists under-priced shares in MSE.

Bottomline, know more about a country’s capital, monetary and exchange rate policies before sending your marupurupu there. Don’t let glittering stocks fool you.

Tomorrow: Economic Implications of Foreign Exchange Controls


Ssembonge said...

I almost bought a high yielding Venezuelan ADR last year only to find out that that foreign exchange controls meant that they were behind schedule in paying out dividends.

In most instances, the risk is usually priced in the share price making it look like a steal.

Kim said...

Good tips. Thanks for the heads-up on MSE. Keep blogging!

inspectordanger said...

I am still waiting for "Economic Implications of Foreign Exchange Controls" that was to be published "Tomorrow".


coldtusker said...

Where is the Forex Article???

Ama you are using Kenyan Standard Time, LOL...?

pesa tu said...

Kenya has one of the most free rorex regulations in the continent.Heard about Malawi lots of people r getting in, even resident Kenyans.
The kind of problems u r talking about existed here in the 1980s and early 90s

Neil said...

NewStar have just launched a Sub-Saharan Equity fund. Let the fund managers worry about where and when to get in or out. Sit back and watch your money grow

Neil Ribeiro
Country Manager
Winton Investment Services

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