Otto B. Isong 7 mins read 15/01/2022

For most of us who are exposed to foreign business media, we often hear words like stocks, bonds etc being traded on the stock exchange. When the majority think about investing in our country, they most often don’t even have enough funds to start investing in the regional stock exchange - BVMAC headquartered in Douala (formerly, Douala Stock Exchange). Does this absence mean Cameroonians are not investing? If Cameroonians are investing, what are we investing into? This article attempts to look at the investment landscape in Cameroon with regards to the ASSET CLASSES available to Cameroonians, in Cameroon. 

Definition of an Asset Class

Before we delve into the various asset classes, let us start by having a good understanding of what an ASSET CLASS is in Investing. 

Definition of Asset Class: In Investing, an Asset Class is a broad group of securities (financial instruments) that have similar financial characteristics and behave the same in the marketplace.

For example, Stocks is an Asset Class. Some characteristics common to stocks include:

  1. Partial ownership of the company
  2. Rights to the profits of the company
  3. Rights to influence the management through voting at general assemblies

Given that the group forming an asset class has similar financial characteristics, the valuation models used for one within the class can be used for another and comparison can be made between different elements of the group with a high degree of confidence. 

Asset Classes available in Cameroon

In Cameroon, we have identified nine (09) main asset classes that Cameroonians continue to invest in (that is excluding Ponzi schemes). These include: Real Estates, Bank Deposits, Corporate and SME Debts, Private Equity, Commodities, Shares in Listed Public Companies, Listed Government Bonds, Foreign Exchange and Crypto.

Real Estates

This is the commonest asset class available to Cameroonians and more Cameroonian investors have some form of real estate investments. We estimate at least 80% of Cameroonian investors (not the general population) have at least a real estate investment. The highest of any asset class in Cameroon.

Real estates include lands for lease, commercial buildings, residential buildings, hotels, guest houses, farmlands etc. 

Why is real estate the commonest among Cameroonian investors? This is a hard question we have pondered about for a long time. However, we think the answer boils down to trust as a result of the physical nature of real estates. Other advantages and the main disadvantages of holding real estates are listed below:

Advantages

  • High degree of certainty since the asset is seen
  • Availability of passive income from rents
  • Predictable and stable cash flow (especially if the property is well managed)
  • Preferred as collateral for bank loans
  • Large available market (albeit very informal)

Disadvantages

  • Low liquidity
  • Large capital cost
  • High maintenance cost
  • Fixed location (especially in situations of political unrest and wars)
  • High transaction costs in case of buying or selling

Fixed Deposits

Fixed Deposits are products of banks and microfinance institutions that are aimed at giving the clients higher than usual interest rates if the funds are locked for a longer period of time compared to traditional savings accounts. In as much as the interests might be higher than conventional savings products, they are still relatively low when compared to other investment products. Fixed Deposits are not as popular among the banked as banks would have wanted them to be. 

Advantages

  • High degree of assurance (mostly covered by insurance)
  • Availability of passive income from interest payments

Disadvantages

  • Very low interest rates
  • Little or no potential for growth

Commodities

Metals like gold, silver, etc; precious stones like pearls, sapphire, diamond etc; agricultural commodities like plantains, cocoa, cassava, beans etc; crude oil etc are commodities investors make bets on with the hope of making huge returns depending on the information at their disposal. 

Advantages

  • Potential for high returns
  • Inflation hedge

Disadvantages

  • High volatility
  • High carrying costs

Private Equity

Whenever we invest in the equity of companies that have not listed their shares on a stock exchange, we are making a private equity investment. We estimate that hundreds of thousands of Cameroonians own equity of privately held companies, partnerships, startups and joint ventures, in addition to their sole proprietor businesses. These businesses may include theirs, those of their relatives or friends, those from people with whom they share social or professional networks etc. Investing in private equity currently goes via direct lines of trust - families, friendships, social and professional networks, alumni networks etc. 

Advantages

  • Opportunity for growth
  • Little or no maintenance cost
  • Low transaction costs in case of buying or selling
  • Availability of passive income from dividends

Disadvantages

  • Very low liquidity options
  • Higher risk given minimal corporate governance and risk management compliance requirement

Corporate and SME Debts

Businesses, big and small, often need financing for one or two projects that their equity can not cover. These businesses most often approach investors, institutional and individual, with the hope of raising these funds. While corporate debts are most often provided for by banks and other institutional investors, SME Debts are the domain for all investors - individuals and institutional. 

Advantages

  • Regular stream of income from interest payments
  • No maintenance cost
  • Low transaction cost in case of buying or selling
  • Limited risk exposure

Disadvantages

  • Little or no potential for growth

Shares in Listed Public Companies

Cameroon shares a stock exchange - BVMAC - with other members of the CEMAC zone. As at writing, the BVMAC had listings of the shares of 5 companies. Activity on the stock exchange has been timid, compared to stock exchanges in other parts of Africa. The most recent initial public offering by a company was that of La Regionale which was done in March 2021. 

Investing in listed public companies is not yet a parlour discussion in Cameroon. We do not yet have people talking about the movements in their prices of the shares they have bought. We believe we are still a long way from making the most of investing in the listed public companies.

Advantages

  • High liquidity
  • High potential for growth
  • Low transaction costs in case of buying or selling
  • Availability of passive income from dividends

Disadvantages

  • Price volatility
  • Require intensive research

Listed Government Bonds

Three countries of CEMAC, Cameroon, Gabon and Congo have issued and listed ten (10) government bonds on BVMAC - the regional stock exchange based on Douala. All CEMAC citizens can invest in these through their investment brokers. 

Advantages

  • High liquidity
  • Income from periodic interest payments
  • Low transaction costs in case of buying or selling
  • Low price volatility

Disadvantages

  • Little or no potential for capital gains

Foreign Exchange (Forex)

Foreign currencies like GBP, EUR, USD, JYN, CYN, CHF etc have been a long stay for Cameroonians for a very long time. 

Advantages

  • Potential for high returns
  • High liquidity

Disadvantages

  • High volatility
  • Relatively high transaction costs

Crypto

Crypto, as an asset class, is relatively new to the world compared to other asset classes. Irrespective of its novelty, it has been a fast growing asset class in Cameroon, especially among young adults who are more technology savvy. Crypto has the potential to change finance and related industries for good for the benefit of the majority. However, like with most new and trendy technologies, there is also the potential of huge losses as a result of failed promises, bad businesses and outright scams. 

Advantages

  • High growth potentials relative to other assets
  • Provides a high level of privacy

Disadvantages

  • High volatility in its prices relative to fiat currencies
  • High transaction costs in case of buying or selling

What Next?

As an investor, the last step before making the investment is to decide on the asset mix - choice of asset classes - to include in your investment portfolio. In order to get the right asset mix for you, your financial analyst has to have a good understanding of your Investment Objective, Risk Tolerance, Time Horizon and Available Capital. 

About Genie Capital

At Genie Capital we identify, develop and invest in opportunities, technologies, IPs, processes, etc that deliver superior long term returns to our investors, whether they're investing in Real Estates, SMEs, Stocks, Bonds or Crypto Assets.

We have a mission to help build the financial infrastructure of Cameroon that will enable Cameroonians to directly invest in and benefit from the development of the country, rather than leaving it to foreigners who might not understand our needs and aspirations. 

Though the concepts that are the foundations of Genie Capital have been in the development since 2013 or so, the company was incorporated in Limbe in July 2021 with head office at Mile 18 Junction, Buea - Silicon Mountain, SW - Cameroon.

Author -- Otto B. Isong

Otto is a smart, creative and hard working man in his late 30s. He is trained in the scientific method, economics, finance and accounting. He is good at leading people, developing products and markets. He is a visionary and strategist with interest in digital technologies. Otto leads Genie Capital with empathy, passion and conviction.