Indigenous Peoples' Day Helps Bring a More Accurate View of the Past and Present

We often think of the second Monday in October as Columbus Day, but a growing number of states across the U.S., including Minnesota, are now recognizing it as Indigenous Peoples Day. This trend is no small change. It represents a monumental shift in societal thought from ‘Columbus Discovered America’ to, as MN Lieutenant Governor Flanagan puts it, “Columbus, frankly, didn’t discover anything – there were already people here, with communities and cultures and societies.”  Flanagan is, by the way, the highest ranking indigenous woman elected to executive office in U.S. history.

As present-day inhabitants of this land, we have a lot to be proud of. Our pride comes not only from the 162-year period that the land has officially been called the State of Minnesota, but also from the 12,000+ year period before that in which inhabitants lived off the land and its majestic ‘clear blue waters’ (which is the rough translation of the Dakota word ‘Minnesota’). While there’s much to be proud of, to more fully unlock our state’s potential, we must help it recognize some of the uglier realities of the past.

One particularly sad reality, which is tightly woven into Minnesota’s formative years as a State yet which was left out of MN educational curriculum until only recently, is the events surrounding the largest mass execution in U.S. history. After the U.S. broke peace treaties and caused widespread starvation among the Dakota Indians, several tribes were provoked into what became the months-long U.S.-Dakota War. On December 26, 1862, the warring culminated in the hanging of 38 Dakota Indians in Mankato, on orders from President Abraham Lincoln. If interested to learn more, I would highly recommend checking out Little War on the Prairie, a podcast episode originally produced for This American Life.

Indigenous People’s Day helps build awareness of the past. It also helps build awareness of the present and future. Today, there are 11 sovereign American Indian nations within our State’s borders. 7 are Ojibwe and 3 are Dakota.  While people with Indigenous background live throughout the state, Indigenous culture undoubtedly centers around Native land. Many Americans have never stepped foot on tribal land and so have less of a mental framework to understand the culture. One step to gain a better sense would be to check out the Netflix series Basketball or Nothing. It tracks a Navajo basketball team from Chinle, AZ. The mini-series is unique in that it sheds light on both challenges and opportunities on the Rez and it does so through the lens of Indigenous people.

Cambodia Can Learn from Malaysia and Catapult HDI by Prioritizing Education to Replenish Its Skilled Labor Force

In the previous post, we talked about human development broadly across SE Asian countries. We left off wondering if their might be a correlation between corruption and human development. So, is there? It turns out that, yes, there is.. See below for a statistical view.

Recall from the previous post that Cambodia is one of the region’s laggards. Consistent with that point, on this graph, they sit furthest to the bottom-left, near Myanmar. They have low HDI and a low score on the Corruption Perception Index, signifying high corruption. In contrast, Singapore, Brunei, and Malaysia are far up and to the right = low corruption and high HDI. Cambodia can learn from the region’s HDI stars and they have the momentum to do it.

Every single nation in the region has improved noticeably well since 1990. Even our laggards, Cambodia and Myanmar, saw over 50% score improvements. For both countries, that is no small feat, considering the challenges they’ve faced. Through the 90’s and 2000’s, Myanmar’s authoritarian government held the country back in time by keeping it mostly closed to the world. In 1990, Cambodia was only 11 years off of the devastation of the Khmer Rouge. The Pol Pot-led genocide from ‘75-’79 wiped out nearly a quarter of the population, including most of the educated social and economic leaders.

Despite challenges, both country’s HDI have barreled ahead. They win the most improved awards. Looking forward, how can they continue that momentum? Let’s focus back on Cambodia. Cambodia can adapt models from HDI stars.

Cambodia can best learn from Malaysia and not from Singapore or Brunei. While Singapore and Brunei score higher than Malaysia, the bar charts above show that they are both outliers on key dimensions. Both countries are among the richest in the world. They are nation-states with small populations and unique political dispositions. They are too dissimilar to Cambodia.

Malaysia is within Cambodia’s proximal zone of learning. They are more similar by population, size, and rule. Most interestingly, look where Malaysia started out in 1990 (2 charts above). Their HDI score was at around where Cambodia’s score is today. Malaysia might have a development model from the past 30 years that Cambodia could use for the next 30 years to continue improvements at the same rate and arrive at an impressive HDI destination in 2050, like Malaysia is at today.

So, what can Cambodia learn from Malaysia? After plotting numerous HDI indicators, the factors with the starkest contrasts and most relevance are depicted above. Cambodia’s take-a-ways can be boiled down into two themes.

• Education: The key to ascent is education. Cambodia’s labor force is depleted of skilled workers. Although most can read, many don’t have access to the internet, the world’s library. From a historical context, this makes sense. When the Khmer Rouge eradicated the educated Khmai, it left an enormous hole in the labor force. Cambodia needs to prioritize replenishing its skilled labor.

• Connection: Cambodia needs to follow the path of Malaysia by connecting their people to urban centers, to schooling, and to the internet, with the ultimate goal of education. Pol Pot and the Khmer Rouge wanted the population to be spread out, agrarian, and living in the stone age. There’s no easier way to govern than to have a people without access to education, without access to opportunism, and without access to each other. Today, Cambodia needs to continue their efforts to reverse disconnections and create access.

Cambodia’s path forward should prioritize four steps:

1. Lay infrastructure that maximizes internet access. From what I saw 8 years ago, access through roads and connection to the electrical grid were improving quickly. Now, Cambodia needs to create infrastructure that connects citizens to the internet.

2. Create distance from China. Their relationship has evolved from helpful to unhealthy. Like any advanced or developing country, each’s growth model is unique to themselves. China’s size and diversity has led to a unique model for development, and the way they’ve utilized aspects of infrastructure development has been helpful, but

3. Diversify their partnerships. The more Cambodia can diversify the countries they work with, the greater the influx of unique ideas their people will receive. What’s more, they will open partnerships for global trade and create platforms for entrepreneurism.

4. Use manufacturing as an economic magnet to attract rural workers. Cambodia can learn from Malaysia in employing this model which has been proven out by Korea and Japan. Cambodia is already a manufacturing destination but with greater efforts, like SEZ expansion and technical skill training for rural workers, they can attract more international companies. More disconnected rural workers will then have a chance to leave their agrarian work for higher paying jobs in the city. They will then gain access to more educational opportunities, grow more skills, and be able to provide resources to family members to do the same. With an increased supply of skilled labor, the country will be able to attract more advanced manufacturing business, thus accelerating the development cycle.

By focusing on education and connection, Cambodia will catapult their HDI over the next 30 years, as Malaysia did over the last 30 years.

When Bulgarian Oligarchs Fight, Citizens Get Trampled

Cranky clouds settle in over the magnificent Alexander Nevsky Cathedral in Sofia, Bulgaria. Perhaps they are cranky because of the overwhelming potential of a nation often stifled by political warring. Recently, while in Sofia, I learned about a run on the banks in 2014. It was caused by a personal feud between oligarchs - Mr. Vassilev, Corpbank’s largest shareholder and point of power, and Mr. Peevski, a politician and media mogul.

According to the NY Times, their 2014 fight appeared to escalate with Peevski transferring swathes of money from Vassilev’s bank to FIBank. Vassilev retaliated by spreading rumors about FIBank. As a result, people raced to ATM’s to avoid losing their hard-earned money, as many did when the Bulgarian banking system collapsed in 1996. Thankfully, European and Bulgarian leaders managed the crisis swiftly. But, power rifts continued and the government shut down Corpbank’s operation altogether, leaving Vassilev weakened. A 2015 Forbes article provides another angle on the fighting with a quote from Vassilev. “Peevski is simply one of the main tools that the Bulgarian political mafia uses to blackmail Bulgarian businesses – the visible part of a rather large iceberg of corruption.”

Issues like these certainly do not help reverse Bulgaria’s brain drain problem, which is devastating Bulgaria’s economic potential. According to the Swiss-based IMD World Competitiveness Center, Bulgaria ranks dead last out of countries examined in its ability to handle the loss of top talent. Furthermore, a portion of the outflow is would-be entrepreneurs who could invigorate the economy and heighten a sense of opportunism. But, you can’t blame them for leaving. On the Global Entrepreneurship Index, which measures the health of a country’s entrepreneurship ecosystem, Bulgaria scores a 28.4 out of 100, near the scores of Iran and Ukraine.

All of this adds up to a big loss for people around the country. As the African proverb says, ‘When two elephants fight, it is the grass that suffers most.’ In Bulgaria, when oligarchs fight, citizens get trampled. In the coming years, maybe the oligarchs can clean things up. If they could get along, avoid corruption and develop a trustworthy ecosystem, then surely their basilica will see the brightness of the sun like never before (although maybe that won’t make for as striking of a photo).

Times Are a-Changin': Come Senators, Citizens, Please Heed Larry Fink's Call

Image courtesy Stuart Rankin

The Times They Are a-Changin' by Bob Dylan invokes a feeling of unease for a present reality. It invokes a vision of a better future. It timelessly captures that essence. Of course, Dylan meant it as an anthem for the Civil Rights Movement in the 1960's. Today, it still plays constantly in cafes around the world. It has become like a social change chameleon, blending into its social backdrop, speaking its message. Today, our world’s greatest need is aligning capitalism with social good - developing more sustainable systems.

It isn’t the 19th or 20th century, yet our systems look like those from yesteryear. Sure, the world's production boomed on commerce of the industrial age. Technology advanced in part due to perspectives like those of Milton Friedman. But, the longer we stick with those approaches, the more those systems’ strengths diminish and weaknesses burn bright. Vital resources like drinkable water are running dry. Workers, often times, kids, are being exploited. Protective O3 is disappearing. Dozens of species are going extinct EVERY DAY. We peaked out on the benefits of the previous systems years ago. Now, we’re digging a crater we’ll have to climb out of in the future (yes, including a hole of debt).

But, who pays the biggest price for this? The poorest of the world. Those who have the least voice. If you are reading this, your grandchildren's grandchildren will probably be fine. But will those of the poor be fine? Probably not. And, while resource and opportunity depletion most restricts the poorest, that very restriction has devastating effects on all.

Times are changing. They always are. "Then you better start swimmin' or you'll sink like a stone," Dylan says to those who see the danger. We continue to use 20th century systems and in so doing, we are entropy-izing.  Leaders are not doing enough to keep society afloat the rising tide of change. On that note, Bob goes on, "Come senators, congressmen, Please heed the call, Don’t stand in the doorway, Don’t block up the hall."

Bob poignantly reminds, "There's a battle outside and it's ragin'." He was targeting the complacent legislators and his comfortable friends who were least affected by the racial struggle of the 60's. Today, the least affected are us, the one's of developed and most developing countries with access and opportunity. It's you and me. Not 'them'. It reminds us, living in relative comfort, not to forget the billions in discomfort that our actions most impact.

At the end of the song, Dylan reminds us that, "The first one now will later be last." His point is that we should take action. We should aspire to be like Dylan, himself. He used what he had - a harmonica, guitar, and passion for music - to drive change. Not change through force, but change through, dare I say love.  Our systems are out of date. Every one of us touches many parts of the system. Every one of us holds many tools.

Action is not only the 'right' thing. It is the beneficial thing for you. It's both, as per usual, just as it was when Bob wrote the song. If you haven't noticed, the world's resources are continuing to quickly shift toward sustainable investments.  May we realize what leaders like Larry Fink at Blackrock are incessant about. We're changing but we need to speed it up.

Human Development Levels Differ Drastically in SE Asia; Perhaps there's a Corruption Correlation at Play

SE Asia. If you traveled to or simply studied the region in the first 15 years of the century, you are aware of its economic buzz (unless maybe, if you visited sleepy Vientiane). But, you may have wondered, like I did, how life there stacks up to life elsewhere in the world. The next few posts seek to answer that question, starting at a high level and then drilling down.

One of the best metrics that looks at human development is the UN’s HDI. The index ranges from 0 to 1, where 0 is extreme low development and 1 is extreme high development. For context, Norway and the Nordics score highly and Niger and most sub-Saharan nations sit toward the bottom. Check out the map above for the global view. SE Asian nations, as you might expect from countries in an economically developing region, are mostly hovering right around the global average. In fact, Indonesia sits right at the global average. The massive island nation anchors the region as the largest by both population, at 264 mm, and by land mass (having over 21,000 islands helps with that).

While much of SE Asia’s population sits around the global average on development, if we zoom-in on the region (image above), we can see a lot of differentiation. From this view, a dichotomy jumps off the page. The region’s stars are Singapore, Brunei, and Malaysia. The regions laggards are Myanmar, Lao, and Cambodia.

A more detailed look at key components of the HDI in the image below reveals a continuation of the dichotomy. Interestingly, the stratification with mostly green in the upper-left and mostly red/orange in to the bottom-right appears most clearly when sorting by CPI score - Corruption Perception Index score.

That observation made me especially curious - is there a correlation between corruption and human development in the region? The following post will examine this subject more. But, before moving on, take a look at the stark contrasts between Cambodia and Singapore’s level of corruption, risk ratings, and overall HDI scores.

Unaffiliated Private Colleges in MN Have Bigger Endowments and Leave Students with Less Debt

The previous posting looked a little bit at the top 16 private colleges that buttress Minnesota’s well-regarded education system. This posting focuses more on the students who attend those schools. Out of 15 variables, the variables with the strongest relationships are shown below. The correlations are a little weak, with r-squared values ranging between 56-70%, so the findings mentioned should be framed as simply the most relevant of the bunch. With that said, here are a few take-a-ways, which the collage of graphs below indicate, and that prospective students will be most interested in:

• Students are more likely to graduate on time from colleges that have big endowments and that charge more for tuition. Paying more in tuition also means better student-to-faculty ratios.

• But, then, what’s the value of graduating on time when it costs more? Well, it turns out that students graduate with less debt when they attend colleges that charge more, have large endowments and low acceptance rates.

A student’s financial situation after graduation has always been an issue. Debt at an early age is more difficult to overcome. Recent grads make less than their elders so it takes longer to pay off debt. Therefore, compounding interest has a greater negative effect, deepening the hole they stand in.

Today, student debt is a bigger issue than in the past because of the sheer amount many face. The point: it’s hugely beneficial to attend a college that leaves students less indebted. But, what about attending a college whose grads make more money? That could help. Notice that in the image below starting salaries of grads don’t differ too much. Indebtedness does. It’s the key variable affecting a recent grads financial situation. In Minnesota, graduating from Macalester or St Olaf is good. Graduation from Carleton is best. Carleton grads have around 50% less debt than St. Ben’s grads. It also helps that they make $7k more on average in their first year.

To illustrate the point, look at an average student’s financial situation one year after graduating.

• Carleton grad: assuming an effective tax rate of 20% on a 51k salary, they would have an income of roughly $41k. If they lived reasonably, living on $30k per year for two years, their student loans would be gone in around 2 years, especially consider common grace periods on interest rates kicking in.

• St. Ben’s grad: with the same assumptions, a St. Ben’s grad’s average after-tax income is around $35k. Assuming salary increases offset loan interest each year, it would take a grad 9 years to pay off their debt of $43k. That’s assuming they maintained a low standard of living, spending only $30k per year. An unrealistic assumption. It’s more likely that it would take an average St. Ben’s grad, with these very limited parameters, 10-15 years to pay off their debt.

Students graduating from colleges with BIG endowments are better off. So, what is unique about private colleges with big endowments in Minnesota? One guess might be their are older. There’s a common perception that age matters. Harvard, Yale, U Penn, Princeton, and Columbia have helped create the perception. They make up 5 of the 11 oldest colleges and 5 of the 12 colleges with the biggest endowments in the U.S. The idea doesn’t translate smoothly to Minnesota. The 4 colleges with the biggest endowments are not among the very oldest. There are, however, each over 130 years old.

It appears that a college over a century in age has had a long enough runway for its endowment to take off but colleges with the biggest endowments are not unique in that they are the oldest. Their uniqueness is something less obvious. They are unique in that they are not religiously affiliated. Take a look at the bottom of the chart below and you’ll notice the drastic difference. Carleton and Macalester’s endowments are each 8-10x the median. There’s also a marked difference between each school’s acceptance rate and average student indebtedness compared to the rest.

Students and private colleges in Minnesota can respond to these insights in actionable ways. If a prospective student values a good financial situation after graduation, they should set their aim at schools with large endowments. If a college places great value on recent grads’ financial situations, they should prioritize hiring master endowment fundraisers.

2 Colleges Anchor the Education System of Minnesota, the Nation's 3rd Best State

Image courtesy Juan Salmoral

Coastal Americans find it shocking that Minnesota ranks #3 in the ‘Best States Rankings', a list which U.S. News and World Report says ‘draws on thousands of data points to measure how well states are performing for their citizens.’ Life abounds at the center of North America, regardless of its icy winters. Minnesota’s vivaciousness comes partly from its hearty education system, including a host of private colleges. In fact, one strip of land following Snelling Avenue is one of the most college-densely populated areas in the country. Driving along the street looking at college options can be overwhelming.

This write-up, and the next one, examine 16 of the states most popular private colleges to identify what public data from the Star Tribune and U.S. News have to say about top-ranking schools, their leaders, and why some schools perform better than others. In short, Minnesota’s top private colleges have strong endowments, not unlike you might expect for great schools anywhere. Schools with the biggest endowments link to other important factors, particularly being high in national rankings. Beyond the top 2 schools, the trends get a little hazier.

Minnesota’s 3 most prestigious schools, Carleton, Macalester, and St. Olaf, each fall on U.S. News’ National Liberal Arts Colleges list. Within a category for Midwest Universities, a separate list for mid-sized universities in the Midwest region, Minnesota is known for Hamline, St. Catherine, and Bethel, each for different specific areas of expertise. St. Thomas is the states only large private university. Although it appears to rank lower, its category includes large private universities across the country.

You might expect, then, that the best performing schools pay their president’s more. Do they? The answer is not necessarily, but there are a few trends to note. In the chart below, notice that presidents of liberal arts colleges are generally paid more than their counterparts at Midwest universities.

Another clear take-a-way is that the states two most prestigious colleges pay their president’s significantly more than the rest do. Why Macalester’s President gets paid more than Carleton’s is a mystery. Macalester ranks 22 positions lower. It brings in 24% less revenue. It’s endowment is 10% smaller. From basic data, it appears to be 90% less profitable, at least in 2017. Yet, for no apparent reason, it pays its president 39% more.

Within the Midwest universities classification, there isn’t a ranking-compensation trend to note. After much analysis, it appears that compensation isn’t correlated to anything. Not revenue, not profitability. Not endowment size. Speculatively, perhaps some schools pay their presidents less, even if they rank higher than others, for mission-based reasons. Private schools are non-profits, after all.

On the flip-side of that, why do some schools pay their president’s more? That’s also uncertain. But, what’s not uncertain is that Hamline’s president, Dr. Miller, worked happily in 2017. According to the Star Tribune, Hamline increased their presidential comp by 141% from 2016 to 2017. Are we talking about the manager of a hedge fund in a good year, here? The next highest increase from another school was 17% at Concordia (St. Paul) and the average increase from all other schools other than Hamline was 4%. So, yes, at a 35x greater increase in salary by percentage points, Ms. Miller ought to be thrilled.

Baseball's Globalization Has Equaled Americanization | 97.8% of MLB Players Are from the America's

Image courtesy of churl

The previous posting looked at baseball in the United States of America and this blog will now look at baseball’s Americanization outside of the U.S. Based on the graph below, where orange represents the America’s, it’s clear that even when excluding the U.S., most players are Americans.

There are a lot of players from non-U.S. American countries. 300 of them. That makes up roughly 25.9% of all players in the MLB. In 1947, players from non-U.S. American countries made up only 1.8% of players, so there’s been an increase of over 13x in 71 years. Based on that information alone, the fans at Mets stadium, who I mentioned in the previous posting, where correct. Baseball has become much more international.

When looking at changes in race from 1947 to 2016, we see corroborating trend. The percentage of players reporting as Latino has grown 39.1x in 69 years, from 0.7% to 27.4%.

Most of those Latino players were born outside of the U.S. - 83% of them. However, it’s noteworthy to point out that a chunk were born in the U.S. and another chunk were born in Puerto Rico, a U.S. territory with less than 3.5 million total people.

Puerto Rico’s yield of players per 1 million citizens is 6.4. That’s a yield better than that of either California or Florida. But, they don’t possess the best yield. That title belongs to Curacao at 25.0 (5 players from a population of only 200,000). Equally impressive, the second best yield of 11.4 comes from Dominican Republic. The DR is home to a whopping 123 players, second only to the U.S, but from a population that is only 3% of the size of the U.S.’s. See the image below for more.

Over the past 70 years, baseball has become more international in that:

• Fewer players are from the U.S. - 72% today vs. 97.2% in 1947

• More players are from non-U.S. American countries - 25.9% today vs. 1.8% in 1947

• Slightly more players are from outside of the America’s - 2.2% today vs. 0.9% in 1947

• Non-American players now hail mostly from South Korea, Taiwan, and Japan rather than from European nations

Baseball’s player globalization has mostly meant further Americanization. While California and Florida may be the U.S.’s baseball super-farms, the WORLD’s baseball super farms are Curacao and Dominican Republic. In closing, I wonder:

1. In light of the massive yield of players from countries in the Caribbean region, is the MLB investing at an optimal level to further baseball’s development there?

2. Considering that Japan, South Korea, and Japan each possess massive numbers of baseball fans with large disposable incomes, is the MLB doing enough expand their market and capture value in the region?

California and Florida, Amply Endowed with Big Populations and Warm Climates, are the U.S.'s MLB Super Farms

Image courtesy Chris Swann

Recently at Citi Field, I overheard a few Mets fans discussing how demographics have changed over the past decade. They believed the league has become much more international. It piqued my interest. Has it? What can we learn from public data on player race and origin? After crunching the numbers, here are some things I learned.

Based on 2018 rosters at the start of the season, a whopping 97.8% of players are from the America’s. 74% were born in the U.S. Baseball remains an American sport. If it has globalized, it’s only done so by becoming more widely ‘American’. We will review baseball’s Americanization later and for now, we’ll focus on baseball in the United States of America.

Within the U.S., some states contribute to the player pool more than others. California, Florida, Texas, and Georgia are responsible for approximately half of all U.S.-born players.

Why do some states have a higher production of players than others? There are two unsurprising factors. The first is population. The 14 most populous states (27% of states) produce ~75% of players. 13 of those states are among the 14 states that produce the highest quantity of players. Population and volume are significantly linked.

The second unsurprising factor that leads a state to have a higher production of players is climate. 14 of the 15 states with the highest yields of MLB players are in the south of the country. The one exception, Delaware, appears to be an insignificant outlier, with a high yield appearing due to its small population. Yield was calculated as the number of players born in a state for every 1,000,000 citizens of the state.

The states with the highest yields are Florida and California. Clearly, climate is a key factor to player production. As a quick test of that theory, I also examined hockey player volumes and yields by state. The findings are powerfully reinforcing. 12 of the top 13 hockey player-producing states are in the north of the U.S. More interestingly, the top 20 states by yield of hockey players are all in the north. For reference sake, the top 2 are MN at 9.8 and MI at 4.2 players per 1,000,000 people.

Two factors indicative of a state’s player production are population and climate. Amply endowed on both factors, California and Florida lead all states in terms of player volume and yield. They are the U.S.’s two MLB player SUPER-FARMS.

Recommending a Graduated Investment Strategy for South Africa Targeting Manufacturing and Education, Telecom, and Retail

Image courtesy Steve Crane

My recommendation to investors keen on emerging markets is South Africa. I believe they should diversify their South African investment slightly by investing 50% in a JSE index fund, and 50% in specific industries. An investment in a JSE index fund will capture the steady growth of the country. They should use a graduated investment strategy, where every 2 years, depending on shifts in the economy, they consider significant changes not only between JSE and specific areas, for example, shifting to 30% in JSE and 70% in specific industries, but also between specific industries. Right now, they should invest more heavily in manufacturing and education. Over time, they will likely need to shift a slightly greater share of funding into the retail and telecom industries.

Within manufacturing, the biggest opportunity lies in advanced manufacturing. In the estimates discussed in the McKinsey Global Institute Report, in a previous posting, the authors argued that South Africa can triple its exports by expanding manufacturing in three separate niches: 1) machinery, equipment and appliances; 2) motor vehicle and transportation equipment; 3) chemicals. I believe the greatest opportunity is in the automotive space. A separate McKinsey article on where global growth will come from, the authors explain that the greatest emerging market opportunity will come from the automotive sector. Not knowing which area will expand the most, an investor should spread out investments across the industry.  In 2017, General Motors disinvested in its South African plant. I think investing in one company is too risky for this reason. However, the wider industry is promising. Jason Woosey, editor of IOL Motoring, explained in a 2017 article that even with GM’s departure, “South Africa’s car manufacturers exported a record 344,822 vehicles last year [2016], and NAAMSA [auto association] expects that number to be improved upon this year, by up to 10 percent…” The top exported vehicles were the Mercedes-Benz C-Class, Volkswagen Polo, and the Ford Ranger. The last one is the most intriguing. Investors should put slightly more money in Ford’s operation for two reason. Ford has been ratcheting up its operational investment, so they are a rare firm ready for the emerging trend, and production throughout the continent for several years and particularly in South Africa. Vehicles like the Ford Ranger are attractive for the regional market, especially given its more agile performance in commonly rugged Sub-Saharan African terrain.

Additionally, I investors should put money in education. According to a 2015 BCG publication, teachers in South Africa are notoriously bad. 60% of math teachers fail tests for the level of math they teach. A WEF rating ranked South Africa 144/144 for math and science education. Despite the public sectors inability to provide adequate education, learning will need to come from somewhere. With manufacturing growth, education demand will likely rise. This demand will be driven by required training for manufacturing jobs and by more kids being sent to better schools by families with more disposable income. Three listed companies lead the market for private education and therefore seem best prepared to take advantage of growing education demands. They are Curro Holdings, Stadio, and Advtech.

In future 2-year intervals, as investors consider implementing a graduated investment strategy, they should be looking particularly at growth prospects in retail and telecom. These industries are in consideration not only because of opportunity in South Africa, but also because South African retail and telecom giants are the biggest players in Africa. This is relevant because manufacturing is likely to expand throughout the continent in the coming decade, according to Irene Yuan Sun. In her article and book, The Next Factory of the World, she explains that manufacturing, combined with encouraged African trade, is creating a promising future for the continent. She explains that as of 2015, over half of African countries having joined the Tripartite Free Trade Area, making it the 13th largest economy in the world. As more Africans have more income, the stage may be set for South African retailers and telecom companies to profit.  The three retailers on my short list are Shoprite, Pick n Pay, and Woolworths. Vodacom and MTN are the two telecom companies I’m keeping my eye on.

Africa is the next frontier. Based on IMF data for 2018, 20 of the 35 fastest growing countries were from Africa. By implementing on my recommendation, investors will capitalize on Africa’s growth. They will do this by taking advantage of opportunities in Africa’s second biggest and most stable economy. As a new leader steps up to take the helm for five years, I expect him to clean up corruption and get the country back to a high growth trajectory. Investments will benefit from three segments of growth. It will benefit from national growth through the a JSE index fund. It will benefit from a wave of manufacturing, especially form automotive companies like Ford, and education, especially from private education companies. Finally, it will benefit from pan-African expansion via South African telecom and retail companies which are the largest players on the continent. South Africa, I believe, will provide investors the type of expected return over ten years that matches a medium-high risk profile, optimizing balance between stability and growth.