"As my e-mail from last week has resonated with both of you, let me, for one more time, respond concerning East Africa, which I know about, and in addition to what you have already said. My point last week had been that GTI's enthusiasm for a low median age in Sub-Saharan Africa does not automatically translate into an investment recommendation, as the median age is low because the overall life expectancy is low, not because the emerging middle class is more promising than elsewhere. This doesn't translate into an automatic warning from investing in Africa either, as Africa is visibly growing in spite all of obstacles. AIDS and other health problems are slowing this growth considerably; how much is probably impossible to put in realistic figures. Considering the economic side of this, it is not just a matter of healthcare costs and of the disappearance of educated workforce, but of much much more.

"Example: even an emerging middle-class family which has gotten everything right, including female education and family planning, can see itself confronted at any time with the obligation to care for two or seven more children from dying relatives, and may have to shelve their otherwise possible purchases of a TV set or a car indefinitely, for the sake of feeding and educating the new arrivals. So if it is 10% of the parents of one generation who are dying while their children are still young - and I believe the number is higher, as virtually everybody has cases in his surroundings -, then there is another 10% of families who have to take over these children without being prepared financially. Money is still being spent, but by less breadwinners, and largely for food and education, not for too many typical consumer goods any more. And if relatives aren't willing or able to help, the children will end on the street.

"The economic miracle is, however, that SSA has been and still is growing by impressive numbers. Something is going on, which is stronger than all these problems. And the population is growing, in spite of all diseases. But still: people are buying here from Toyota, Sony, Nokia, Dell, Haier, Tata etc., but there are no African equivalents for such companies. I mean, not only no African world-class companies, but no producers of cellphones, refrigerators, or TVs at all. The last (!) real industrial plant in the whole of Northern Tanzania, a tyre company, closed last year, reason being their tyres burst unexpectedly, killing people in busloads. Even simpler things like sockets, pliers, or knives, are imported from China, India or Brazil. The major food processors are companies like Unilever Kenya or Coca Cola Tanzania. In this respect, East African Breweries, which GTI is recommending, is more an exception than the rule. But it is indeed an African success story (originally, meanwhile with Diageo in the back), selling beer in even more countries than Kenya only. Judging from what you can see in the streets, other substantial success stories are the Telecom provider Zain (previously called Celtel; the founder came from Sudan), or the South African supermarket chain Shoprite. Business in East Africa means mainly agriculture, commodities, trade, tourism, and services, but not industrial production. The emerging middle class is based on these. And the emergence is slow. Also education, access to it, and healthcare are getting better, but slowly. Think in terms of two or three generations. Infrastructure? Hmmm ... The process of economic integration into one East African Community? Hmmm ... Political stability? Hmmm ... losing elections will remain a problem. But as the starting base is so low, the growth rates can nevertheless be, and are, substantial."

Eoin Treacy's view Thank you for taking the time to write this informative email. I sincerely hope that Africa's poorest countries have long-term potential as investment destinations but they also have yet to overcome massive social economic, healthcare and corporate governance hurdles. From the perspective of a judge at an international beauty contest we categorise Sub-Saharan Africa as a maybe but not yet. Due to low liquidity and influence of a relatively small number of investors, the region is really only suitable for investors with very high tolerance for risk.