From the April 2007 issue of Research Magazine • Subscribe!

A Bet on the Future

Imagine your African colleague. Like you, he focuses his best efforts on growing his business with seminars, cold calls, marketing and branding. Just like you, he struggles daily to build a client base and generate recurring revenue based on his total assets under management. In Senegal, a country where no one can ever be too stylishly dressed, he looks prosperous in a silk suit and Italian leather shoes. Ten years ago, there wasn't even a stock market in the exploding, peninsular metropolis of Dakar on the western edge of the African continent, but here he is, on his way to a financial planning seminar, a so-called "program of promotion," for which he has confirmed 10 excellent prospects, successful local business owners, and all of them qualified.

He leaves his apartment and steps into a street composed totally of red sandy dirt and littered with every type of urban trash imaginable. From the mosque behind his apartment, a crystal clear song in Arabic, the evening call to prayer, pierces the twilight from the crudely constructed minaret high above the neighborhood. Walking toward the taxis, he falls behind a group of beautiful, statuesque Senegalese women in brilliantly colored, form-fitting African dresses, scarf hats tied up high.

He negotiates a taxi price of CFA 11,000 ($22) for a lift downtown, and he climbs into the back seat with his briefcase and laptop and begins to double-check something in his PowerPoint presentation. The dirty, 20-year old Renault cab without shock absorbers, door knobs or air conditioning lurches into traffic. A medallion with a picture of the driver's marabout [personal Islamic spiritual leader] swings from the rearview mirror. He receives a text message on his Nokia cell phone that the BRVM (Bourse R?gionale des Valeurs Mobili?res) composite index closed down -.04 today, but the number of securities traded rose to 3,037. He certainly doesn't notice that large, broken bits of concrete jar his ride or that there are no defined lanes on this main road of Dakar as crazy blue and yellow busses, cabs, pedestrians in flowing robes, new Mercedes sedans, mopeds, and horse-drawn carts all negotiate aggressively but with astonishing patience and courtesy for an opening.

Along his route downtown, lean-to markets line the side of the road. His assistant calls him with a last minute detail, but he cannot hear her over the sounds of the city mixed with the braying of 10,000 fat, curly horned sheep tied up everywhere by their delicate ankles and waiting to be slaughtered at the upcoming feast of Tabaski. This is Africa: where the digital, the industrial, and the agricultural revolutions are all happening at the same time.

The professional life a financial advisor in Africa is in many ways something very familiar to you, but the paradox is that these new, unsophisticated and low volume capital markets are in the hands of professionals whose skill, resourcefulness and entrepreneurial courage are guaranteed to humble you on your very best day. For example, meet Gabriel Fal, CEO of CGF Bourse, the first licensed investment and brokerage firm in Senegal. After 13 years with Citibank in London and Dakar, Mr. Fal was elected to a three-person commission charged with the task of setting up a stock exchange. The commission spent 1996 through 1998 setting up the stock market "from zero." They had to establish the listings, procedures, rent office space, tie themselves into the regional market, buy the computers, select and install the software, purchase furniture and supplies, hire a staff, and flip the switch.

In fact, the African Stock Exchange Association aggressively encourages integration between stock markets in the four primary regions of Africa, including the exchanges in the West African region: the Nigerian exchange, the Ghanaian exchanges, and now the francophone regional exchange, the BRVM. With its central headquarters in Abidjan, C?te d'Ivoire, the BRVM exchange maintains trading offices in each of the eight member countries including Senegal. Traders at their workstations in each of these national branch offices can get quotes, analyze statistical information and place trades through a satellite network to the central market in Abidjan.

Following his involvement in the launch of this regional exchange, Mr. Fal decided that he wanted to set up one of the licensed investment firms now authorized to link to this new market. In Senegal there are only three such firms with 23 in the entire region. "I gathered a few friends and we collected some capital to meet the minimum requirement." In the comfortable surroundings of his Dakar office, Mr. Fal pauses with a wry smile and ads: "In fact, we didn't know if it would work or where we were going, so it was some kind of bet on the future."

The bet has paid off. CGF Bourse, which merges the concept of investment banking with the concept of a brokerage firm, now captures 30 percent of the regional market share; but this phenomenal success follows an audacious combination of fast-thinking maneuvering and pure nerve.

The original business plan anticipated that the majority of state-owned companies were programmed to privatize because the World Bank and the IMF required countries in the region to sign commitments to privatize in exchange for loans and debt forgiveness. In 1998, the entire business plan for Mr. Fal's freshly created Dakar firm relied upon these privatization programs in Senegal. "We thought, if we get one [privatization] transaction of this or that size it will meet our expense base, and we built our company on that basis." As it turned out the managers of national and local state-owned companies were ultimately reluctant to release their hold, so he had to think on his feet.

"Let me emphasize that there is no financial market culture here," continues Fal. "So we started from virtually nothing. Basically we have to convince companies to raise capital in the financial markets and get listed because there is this perception that this exchange thing is just a gadget -- it's not serious business -- and people are just playing. We discovered that while companies are reluctant to open their capital, they are not reluctant to raise their debt. To date, what has been a real success for us is the bonding activity."

Mohamed Badji, M.A., a marketing specialist and Ph.D candidate on the faculty of the business and economics department at the University Cheikh Anta Diop in Dakar observes: "The Senegalese economy is dominated by the informal sector, and most business owners have a low level of education. These people continue to invest their money in their business, or build a house, or acquire real estate to rent rather than to get into the capital markets because they really have no information about this new manner of making money. They don't believe in it, and they prefer to invest in tangible goods because they know how to evaluate the risk there."

The competition for Mr. Fal and his boutique office CGF Bourse was intimidating because most all of the other licensed investment firms in the region that were poised to take advantage of this new regional exchange were affiliates of big banks. "We were completely free standing and independent. But what, in fact, we perceived as our weakness -- our independence -- was in reality our strength because most of the investors in this new market turned out to be banks, most notably independent banks. They would say, "Why should I deal with the subsidiary of my competitor?" And they decided we should be their house brokerage firm. Thanks to that, we are the regional market leader."

CGF Bourse and its asset management entity, CGF Gestion, market their investment products and services with high quality print materials in French and English, a sophisticated, bilingual website www.cgfbourse.com/index_eng.php, a monthly newsletter (entirely staff written) full of pertinent market analysis that they perform in-house, as well as television and radio advertising. Yet even straightforward marketing poses special challenges for an investment firm in Senegal, because there is a distinct cultural distaste for anything perceived as self-promotion and an ironic preference for a kind of self-conscious modesty. Mr. Fal himself admits, "We are lucky that we tend to not make too much advertising on ourselves," but rather his firm strategically rides the waves of public moments. "Last year we arranged the bond issue for the government of Senegal so we advertised all over the place -- our signature [brand] was everywhere."

Additionally, in much the same way as his U.S. counterparts arrange seminars and workshops to attract new business, Mr. Fal and his staff combine marketing with training. They organize conferences in luxury, coastal resort towns like Saly Portugal and bring in speakers to explain mutual funds, retirement schemes, fixed-income and other issues related to finance. Recently they did a conference with the African Venture Conference Association. In 2007, CGF Bourse will launch something new called The School of Trading to which they will invite company treasurers, accountants and journalists, and provide short courses on the marketplace. "People will come to it. It's just because they don't know what a stock exchange is. I try to train people to understand. I explain what is venture capital; we define simple words and explain concepts that reveal what the whole industry is about and what we think about the future. As I tell my brokerage interns, if you train in the U.S. you will see huge volumes and lots of sophistication; but if you stay here, the activity is low, true, but you will know deeply the fundamentals and even the basics behind the fundamentals."

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R. Gina Renee is a freelance writer based in Kansas City.

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