Wednesday, March 08, 2017

Ghana is 60: An African success story with tough challenges ahead

Ghana is 60: An African success story with tough challenges ahead

A member of Ghana’s navy attends celebrations in Accra to mark the country’s 60th independence anniversary. EPA/Christian Thompson
Black Africa’s first independent nation celebrated its 60th independence anniversary this week. A pioneer in many ways, Ghana was the first country in sub Saharan Africa to secure independence from Britain on March 6, 1957.
Ghana’s post-independence experience is also in many ways the African post-colonial story. President Kwame Nkrumah was a founding member of the Organisation of African Unity, the precursor to the African Union. He was also the most influential voice in the Pan-African movement in the early years of independence.
The Pan-Africanist flame burnt brightest at the height of agitation for independence, drawing in the likes of Kenneth Kaunda of Zambia, Jomo Kenyatta of Kenya, Hastings Kamuzu Banda of Malawi and Julius Nyerere of Tanzania. But the Pan-Africanist rhetoric was soon extinguished as its leaders secured independence for their countries.
Ghana’s anniversary is well worth celebrating. Over the last six decades Ghana has transitioned from military dictatorships to a well functioning democracy while it’s economy has seen both boom and near bust. Its story offers both lessons and hope that Africa can fashion its own dignified path to peace and democracy.

The early decades

Nkrumah’s vision for Ghana was founded on the nationalist demands that drove agitation against colonialism. He sought to steer his young country to significant progress in health and education. Also on the new leader’s agenda were other social and economic issues confronting the country.
This vision was embedded in his seven-year development plan presented to parliament on March 11, 1964. In his view, the 1963-1970 plan would ultimately,
bring Ghana to the threshold of a modern state based on a highly organised and efficient agricultural and industrial programme.
Nkrumah believed he could completely obliterate the dependency-driven colonial economy he inherited which reduced Ghana to an importer of finished goods sold at exorbitant prices and exporter of raw materials bought cheaply. In its place would be an industrialised economy modelled along a socialist production and distribution system which would make Ghana self-sufficient and self-reliant.
But we will never know what all his success would have looked like. Nkrumah’s vision was cut short by a pro-western military coup in 1966. The planning of it was known to the US which considered Nkrumah a significant threat to its interests in Africa.
The acting special assistant for National Security Affairs R.W. Komer praised the coup as
…another example of a fortuitous windfall. Nkrumah was doing more to undermine our interests than any other black African.
Some 50 years after his overthrow, however, Nkrumah remains a household name in Ghana because of his investments in education, health and energy. Many of his contributions to other important sectors, such as the building of the Akosombo Dam, the Accra-Tema Motorway, the Komfo Anokye Teaching Hospital, University of Cape Coast, continue to support the economy today.
Nkrumah’s overthrow in 1966 was followed by four military takeovers in 1972, 1978, 1979 and 1981. Two democratically elected governments established in 1969 and 1979 were overthrown by the military. Eventually, the current succession of democratic elections was established in 1993.
In its early years Ghana’s flirtation with socialism dominated its politics. However, the civilian governments that followed steered the country onto a capitalist economic path in which the Bretton Woods institutions often dictated the pace.
But the country has been unable to achieve the envisioned self-reliant and self-sufficient economic policies. But it’s not all gloom and doom.

Democracy success story

Ghana has made remarkable progress as one of the success stories in Africa’s democratic project over the past 25 years. Political power has changed three times – all important milestones;
  • from the ruling National Democratic Congress (NDC) to the New Patriotic Party (NPP) in 2001;
  • from the ruling NPP to the NDC in 2009; and
  • from the ruling NDC back to the NPP in January, 2017.
With these three turnovers under the belt, Ghana’s democracy has met and exceeded Huntington’s “two turnover tests” thesis making Ghana a satisfactorily consolidated democracy.
Ghanaians have cast aside the authoritarian politics of the past. In its place is expanded political space which has helped to shape and broaden the frontiers of rights. Free speech and association is guaranteed, civil society organisations have greater influence over policy making and media is free to perform its gate-keeping.
It’s no coincidence that Ghana has emerged as one of the most peaceful nations on the globe. According to the 2016 Global Peace Index, Ghana – ranked 44th – is more peaceful than France – ranked 46th – and the United Kingdom – ranked 47th positions.

A nation in good health

Ghana has also made progress in numerous measures of well-being, especially poverty reduction and the provision of health and education is exemplary. It’s among the few countries around the world that have recorded significant reduction in poverty.
The health care scorecard is one of the most impressive in sub-Saharan Africa too. Ghana is one of the few countries with a universal health insurance scheme. And there’s a great deal to show from investments in the health sector. The country ranked 7th out of 153 countries on measles immunisation between 1990 and 2008, and while the regional average of measles vaccination rate stood at 75%, Ghana recorded 91%.
But many challenges remain.

Yo-yo economic growth

Economic growth has been swinging like a pendulum. Over a decade ago the country’s economy was growing at 7%, then roaring ahead with a growth rate of over 14% in 2011. Since then growth has declined considerably. In 2015 it expanded by just 4%.
Currently, Ghana is under an IMF bail-out programme because of its inability to contain its huge budget deficit, rising inflation and falling currency.
The jury is still out on whether the country can turn its economic fortunes around again. Unemployment rates are alarmingly high – at an estimated 48% – and the country faces a power crisis, high depreciation of the currency and high interest rates.
Nevertheless, Ghana is still very much the rising star in some spheres – just struggling in others like many of its African peers.

Monday, March 06, 2017

12 Life/Business Lessons From 12 years of Warren Buffett’s Annual Letters

12 Life/Business Lessons From 12 years of Warren Buffett’s Annual Letters

In 2015, when I sat down to read all of Warren Buffett's annual letters from the 10 years prior, the world was, shall we say, slightly less interesting. China was or was not in a slowdown, the US stock market was or was not in a bubble and the EU was or was not collapsing. The only thing you can add to those issues above, two years down the line, is that some countries are more, shall we say, nationalistic.
Warren Buffett released the most recent version of his annual letter a few days ago, and I felt it would be a good time to update my learnings by reading the 2015 and 2016 annual letters. So, here goes the (mostly) non-obvious business and life lessons from reading 12 years of Berkshire Hathaway letters to its shareholders.
  1. Enable the people around you and you’ll be amazed at how far they’ll take you (regardless of what the markets are doing): As much as the letters are about the numbers and how portfolio companies are doing, a lot of text is dedicated to the people behind the numbers. Warren Buffett (and Charlie Munger) have perfected the art of empowering the right people to achieve phenomenal outcomes. It’s unsurprising, it’s the foundation of the relationship between these long term friends. Most investors do not share anecdotes about the people who run their companies, anecdotes abound about Lorimer Davidson of GEICO, Ajit Jain, Tad Mantross, Ted Weschler, James Hambrick of Lubrizol, Frank Ptak of Marmon etc. Warren Buffett considers himself a contractor hired to help these business experts. With a mindset like this his people have no choice but to be inspired to achieve the great things they continue to achieve. The same will serve you and your teams/employee well…
  2. There is a lot to be said for instinct: this plays out again and again in the selection of the companies in the BRK portfolio. The fundamentals have to be sound, the leadership has to have integrity and the numbers have to make sense. In that order. In almost all of the letters is the statement ‘As much as Charlie and I talk about intrinsic business value, we cannot tell you precisely what that number is for Berkshire shares (nor, in fact, for any other stock).’ in talking about Intrinsic Business Value. For men who are as successful as Warren Buffet and Charlie Munger (if unconstrained by regulations) they could get away with throwing out numbers but it seems to always come back to what they believe. Sometimes numbers just can’t express what you know about value or put another way ‘you can know money but do you know value?’
  3. You cannot pay too much attention to company culture: This level of attention is obviously paid to BRK culture. When I first wrote the earlier version of this post in 2015, I wondered what Warren Buffett’s views were on Uber and the issues with company culture that the company had back then. Unfortunately, nothing much has changed. The 2010 letter quoted Churchill saying ‘You shape your houses and then they shape you.” Whether you choose to pay attention to it or not, your company has a culture.
  4. There is wisdom in strong opinions, weakly held: Until Warren Buffett met Charlie Munger he was making money (lots of it) ‘buying fair businesses at wonderful prices’ but Charlie got him to change his mind and focus on ‘buying wonderful businesses at fair prices’. Ponder that, when was the last time you changed your mind and stopped doing something that seemed to be working for you because someone gave you better advice? Might be time to change some things… Sidenote: On strong opinions I’d recommend you read the 2011 letter for why you might not want to be excited when the stock market rises.
  5. To succeed you must have conviction, be intentional and keep a firm eye on the long term. Multi-decades long. BRK made their first insurance investment, the purchase of National Indemnity for $8.6M, in 1967. Just the insurance portfolio made a whopping $2.7Bn in 2014 and National Indemnity has GAAP net worth of $111Bn. Another example; when everyone was running out away from mortgages in 2007–2008 BRK, through its Marmon investment, stuck by its blue collar mortgage owners and now owns 45% of the manufactured homes in the US with lower default rates than competitors who gave mortgages to higher income (but ‘fragile’) earners. That being said, Marmon lost money in 2016 (and will in 2017), but we’re thinking long term here. Paraphrasing Buffett ‘the fault is not in our stars, it’s in ourselves and our short term thinking about returns on investments’.
  6. Maintain a healthy disposition towards the attainment of wealth. Warren Buffett is a man of high aspiration, despite all he’s achieved. You can still sense this in the light hearted tone the annual letters take. Quoting ‘with the acquisition of Van Tuyl, BRK now owns 91⁄2 companies that would be listed on the Fortune 500 were they independent (Heinz is the 1⁄2). That leaves 4901⁄2 fish in the sea. Our lines are out.’ To fish in a sea of the largest companies in the world with the lightness of perspective shared in that line is a lesson in how to approach business; as a game. And as Buffett wisely states in the 2013 letter ‘Games are won by players who focus on the playing field (long term) — not by those whose eyes are glued to the scoreboard (short term)’.
  7. To succeed you must have a ‘the-pie-is-growing-bigger’ positive perspective based on solid investigation of the long term direction of industries. This positive perspective, despite the negative rhetoric that some of our politicians are using to rally supporters behind them, is expressed in the following line ‘Though we will always invest abroad as well, the mother lode of opportunities runs through America. The treasures that have been uncovered up to now are dwarfed by those still untapped.’
  8. Always keep it simple and transparent. The letters are written in simple plain language. But the simplicity belies the complex nature of the concepts being discussed. It speaks to understanding the businesses at a level higher than most ‘experts’ out there. Sidenote : Simple is not the opposite of complex. This transparency comes from sharing the thinking behind decisions that most investors or shareholders would disagree with (e.g. BH does not issue dividends while earning dividends from its portfolio companies). It’s obviously paid off.
  9. Admit when you are wrong and learn from the mistakes: we are ego-driven animals but in all the letters Buffett talks about successes as well as failure with the same depth and lightness. In the 2014 letter Warren Buffett writes ‘A few, however, have very poor returns, the result of some serious mistakes I made in my job of capital allocation. I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operates’ and about his investment in Energy Future Holdings in 2013 he writes ‘I didn’t ask Charlie. Notice Buffett could have done a few things in referencing these mistakes i) blame the bad decision on his team (like most horrible leaders do ii) brush off the bad judgement in light of all the other great things he’s shared in the letter. Instead, he shared the mistake and shared what he did wrong. You bet he won’t make those same mistakes again.
  10. Your most significant achievements do not have to be financial (despite what the values of some of the biggest firms seem to be: Considering the size of Berkshire Hathaway, it blows my mind that a statement like this would show up The most important development at Berkshire during 2015 was not financial, though it led to better earnings. After a poor performance in 2014, our BNSF railroad dramatically improved its service to customers last year’ in the 2015 letter. It’s a simple line that shows the crux of why Warren Buffett and Charlie Munger are (and will be) known as two of the greatest investors ever; the focus is always on how well you can serve your customer. The money will follow.
  11. The babies being born in America today are the luckiest crop in history and the diversity of those babies (despite the prevailing rhetoric) will be America’s strength for many years to come. A great quote from the 2016 newsletter, and is so apt for this moment in our history, is ‘Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers’.
  12. The final lesson is quite ironic and the most obvious lesson (to me anyway) and it’s that 12 years is not a long timeIt’s 4380 days and when put that way it feels even shorter. The business issues we are talking about now — markets going up and down, the pace of change increasing, old companies that don’t innovate die, what new leadership means for the country etc. — are the things we were talking about 12 years ago. 4 years will pass by pretty quickly.
Things change but things stay the same, we just find new ways to alarm ourselves about them…
While I do not agree with the BRK investments that are based on our utilization of unsustainable natural resources, I urge you to read the annual letters sometime or at least read some of Warren Buffett’s best quotes…there’s a lot of wisdom in those pages.
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Wednesday, March 01, 2017

SR: More Arms Contracts For Police Chief's Family! EXCLUSIVE

More Arms Contracts For Police Chief's Family!  EXCLUSIVE

More Arms Contracts For Police Chief's Family! EXCLUSIVE

Abdullah Abu Bakar - arrested for joining a crowd trying to pull down a cross at a church
Abdullah Abu Bakar -questioned over  joining a crowd trying to pull down a cross at a church
Sarawak Report can reveal that the brother of the Inspector General of Police is a director of a major arms and ammunition company, which has ties to suppliers of armaments to the police force.
This follows our expose last year that a company owned by the daughter and brother in law of the Inspector General of Police (IGP) Khalid Abu Baker is also selling arms and amunition.
Disgruntled critics complained that the company, named Nilai Arms & Ammunition, benefitted from its special access to the signature needed for its customers to get a permit.
The signature concerned is that of the IGP himself, revealing a shocking conflict of interest over the sale of dangerous guns in Malaysia.
Now we have obtained information about a further arms company, this time connected to the IGP’s own brother Abdullah Abu Bakar and involved in even larger contracts.
Unggul Arms & Ammunition Sdn Bhd, which was set up shortly after Khalid Abu Baker became, Deputy Inpector General of Police in 2012 has exclusive distribution arrangements with the major government-owned armaments manufacturer SME Ordinance Sdn Bhd and Sarawak Report has received information that it is sub-contracted sales by SME to Malaysia’s elite police forces.
The main director of Unggul Arms & Ammunition is Khalid Abu Baker’s brother Abdullah Abu Bakar, who recently hit the headlines following his questioning over joining a crowd that was attacking a church
Director of an arms and ammunition company? The Police Chief's brother!
Director of an arms and ammunition company? The Police Chief’s brother!
Abdullah Abu Bakar is also the largest shareholder of Unggul Arms & Ammunition:
Largest shareholder... but did IGP's brother put up any of the money or do any of the work?
Largest shareholder… but did IGP’s brother put up any of the money or do any of the work?

Selling ammo is big business in Malaysia

Unggul Arms & Ammunition has an online site, which advertises a bewildering number of military products, including army parachutes that it claims the company manufactures itself.
Website outlines Unggul's services
Website outlines Unggul’s services
Military grade hardware made by Unggul?
Military grade hardware made by Unggul?  Yes, according to the website.
Huge array of military hardware products sold by Unggul
Huge array of military hardware products sold by Unggul
There is also a Facebook site for Unggul Arms & Ammo, which is clearly linked to its administrator, who is Abdullah Abu Bakar.  This site boasts of an array of bloodthirsty hardware, including semi-automatics, Glock handguns, bullets and shotguns.
Abdullah Abu Bakar runs the Facebook site which bristles with pictures of his guns for sale
Abdullah Abu Bakar runs the Facebook site which bristles with pictures of his guns for sale
Unggul also operates a separate firearms training business and has its own gun ranges, for which it received a sought after permit to operate, which needs official police approval.
Gun range permit signed off by the police
Gun range permit signed off by the police
Abdullah Abu Bakar’s own Facebook site is stuffed with pictures of these gun ranges and also of the products sold by his company Unggul.
Abdullah Abu Bakar's Facebook site is full of pictures of arms and ranges
Abdullah Abu Bakar’s Facebook site is full of pictures of arms and ranges
Once again Sarawak Report queries the astonishing apparent conflict of interest in this business, which relies on the signature of Abdullah Abu Bakar’s brother for permission to conduct virtually every single transaction that it undertakes.
Abdullah Abu Bakar's Facebook image
Abdullah Abu Bakar’s Facebook image
It is notable that this business came into being just months after Khalid Abu Baker became Deputy IGP in 2011, by which time he was able to deputise in the role of signing off gun licences.
His brother Abdullah incorporated Unggul in June 2012.

SME Ordinance Connection

There is another extremely worrying aspect to this already troubled matter.
The state-owned arms manufacturer SME Ordinance Sdn Bhd, which was only recently accorded the exclusive contract by the IGP himself to provide arms and ammunition to elite armed police units across Malaysia, appears to have entered into an inappropriately hasty relationship with Unggul Arms & Ammunition even BEFORE this rookie company had got around to registering a licence.
Documents made available to Sarawak Report show that SME invited Unggul Arms & Ammunition into an exclusive distribution contract for its shotgun ammunition sales in Malaysia on 19th November 2012.  Unggul’s licence to operate did not come through till several days later.
Letter signed by
Letter signed by SME’s Chief Operating Officier
The letter says that the company has been selected to become the distributer of shotgun shells for Peninsular Malaysia:
“Re – The competition to become the distributor of shotgun shells:
With immediate effect SME Ordinance Sdn Bd would cordially like to invite your company to become a distributor of shotgun shells for Peninsular Malaysia
2. If the owner agrees, please forward the “company profile ‘and permit No 121 of the police for further action on our part
Thank you
Chief Operating Officer
License not granted till 23rd November.
License not granted till 23rd November.
Yet the licence to actually distribute these weapons was only granted to the then Deputy IGP’s brother and his company Unggul Arms & Ammunition on 23rd November, indicating an astonishing lack of due dilligence by the state-owned company.
Fond of his medals - IGP Bakar
Fond of his medals – IGP Bakar
SME Ordinance had clearly been willing to offer a completely new and untested outfit this lucrative contract and we have to ask why?
SME Ordinance, which is a subsidiary of National Aerospace & Defence Industries Sdn Bhd (NADI),  has subsequently been reported as having received key contracts supplying the Malaysian police force with weapons which previously had been provided by other global companies.
In particular an RM8.6 million contract was signed with the PDRM for weapons supplies in October 2015:
RM8.6 million contract to supply PDRM weaponry
RM8.6 million contract to supply PDRM weaponry
The senior vice president of NADI Tan Sri Mohd Shahrom Nordin was reported as expecting further deals last year:
PDRM is set to join the Armed Forces by having the Colt M4 Carbine as its standard rifle with some 15,000 units expected to be procured. PDRM’s Pasukan Gerakan Am – which is mostly equipped with Colt M16A1 rifles – is expected to be the first unit to receive the carbines…..National Aerospace & Defence Industries Sdn Bhd (NADI) senior vice president of Defence Tan Sri Mohd Shahrom Nordin told Malaysian Defence that the deal has been approved by the Treasury and the Home Ministry.
He added however that the SME Ordnance Sdn Bhd, a subsidiary of NADI have yet to get the confirmation from PDRM of the contract signing. Mohd Shahrom also said that SMEO had recently completed the delivery of some 200 Colt CM901 7.62mm rifles also to the police for its Special Forces unit, VAT69.
SMEO had also delivered the 2,000 Advanced Piston Carbine (APC) in 5.56mm to VAT69 and the Unit Tindakan Khas. The RM8.4 [sic] million contract for the APC was signed last October. Some of the APCs were also fitted with M203 grenade launchers.[Malaysian Defence]
According to informed sources Unggul Arms & Ammunition has a hidden sub-contracting role within the contract that means that this company owned by Khalid’s brother has a substantial interest in this lucrative deal.

Conflict of Interest is a form of Corruption – is IGP aware?

Given the plain and blatant conflicts of interest Sarawak Report suggests that Khalid Abu Bakar should get his family to remove themselves from their new found careers within the arms business and steer away from occupations that can be seen to clearly take advantage of his position.
This is called conflict of interest and is treated as a criminal form of corruption in most countries, including Malaysia.
In most countries a public official would be pressured to resign with such gross conflicts brought to light as have surrounded the IGP.  However, to the contrary, Sarawak Report has learnt that the Prime Minister, Najib Razak, is planning to encourage the present occupant to extend his position beyond his compulsory retirement date due 5th September this year.
This is speculated as owing to the fact that Khalid Abu Baker is widely known for being (together with the new Attorney General) the key individual supporting Prime Minister Najib Razak, who has been probed for grand corruption over the $7 billion theft from 1MDB.