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Your Last Chance At The Secret African Supermarket

By Tom Dyson, publisher, The Palm Beach Letter
Friday, July 7, 2006

The Benguela Railway runs 1,300 kilometers from a major Atlantic seaport into the center of Africa. It connects some of Africa’s richest mineral deposits and farmland to the world’s consumers.

Problem is, it hasn’t worked in 20 years. They dynamited the tracks in the 70s during the Angolan civil war.

But what’s this?

Go to Angola today and you’ll notice – in the muddy fields beside the tracks – three tidy little camps have sprung up. They accommodate Chinese railroad workers. They’re rebuilding the railroad... replacing sleepers, bridges and stations. Total cost: $800 million.

$800 million is a lot of money in Angola. But the Angolans aren’t paying for it. The Chinese are.

Not many people realize this, but right now, Chinese engineers and businessmen are crawling all over Africa. They’re trawling for oil and minerals, and at the same time, preparing African markets for Chinese-made goods. The Benguela Railway is just one tiny example. Get this: Africa is China’s number one oil supplier.

According to Business Day, “Angola beat Saudi Arabia, the world’s largest crude oil exporter, as China’s top supplier of the fuel in the first quarter [2006], shipping 6.28-million tons of crude oil compared with the 6.01-million tons supplied by the Middle Eastern state, according to customs data.”

There’s a rumor Sudan has “huge untapped oil reserves.” China has approximately $4 billion invested in Sudan. China also has large positions in Nigeria, Chad, Gabon, and Equatorial Guinea.

According to Le Monde Diplomatique, there are 674 Chinese companies with operations in Africa. In Zambia, Chinese-run farms supply the vegetables sold in Lusaka's street markets. In Botswana, Chinese companies control the construction industry and in Nigeria, a Chinese firm launched Nigeria’s first space satellite.

Nigeria is interesting. I spoke with a Nigerian taxi driver last year. He told me the Nigerian government has established Chinatowns in all of Nigeria’s largest cities. 

I could go on. I have a three page list saved on my computer with all the references to Chinese business in Africa.

It’s not just business. The politicians are involved too.

Last month, Chinese Premier, Wen Jiabao toured seven African countries and signed 71 agreements. In April, Chinese president Hu Jintao visited Morocco, Nigeria and Kenya. And later this year, Beijing will host a huge summit meeting between Chinese and African leaders.

Did you know China recently named President Robert Mugabe of Zimbabwe an honorary professor in the Great Hall of the People in Beijing?

It all points to one thing: Africa is finally emerging.

Right now, most investors wouldn’t even risk their spare change in Africa. It’s totally off the investment map. There are no ETFs and few listed stocks. They don’t even have sweatshops there yet. Chaos is the only story the media cares about. And even that doesn’t make the front pages.

This is all good news. It means we can still get in cheap.

Don’t delay though. Africa won’t be a secret for much longer. As it gets harder to procure commodities elsewhere, investors will to look to Africa. It’s what the Chinese are doing. They are tying up supply lines of strategic resources. It’s the only low-hanging fruit left on the planet. And they’re doing it with stealth, getting in there before the crowd finds out.

There is an iShares Africa Fund. The symbol is EZA. I don’t like it. It’s all South African companies. South Africa is too established for my taste. I want the real Africa... countries like Democratic Republic of Congo, Tanzania, Angola, and Nigeria.

To profit from this situation, I recommend you buy the stocks of the small Canadian mining companies that do business in Africa. I think they’ll be future takeover targets for the big global players like BHP Billiton and Rio Tinto.

I’m going to Africa later this year on a research trip. In the meantime, keep reading DailyWealth for more on this story...

Good investing,

Tom





Market Notes


ANOTHER HIGH IN A LONG BULL MARKET

Last week, we asked DailyWealth subscribers for their opinion on the future of crude oil prices. The majority responded in agreement with legendary investment analyst Marc Faber…

Here’s what Marc recently said about oil:

China's yearly per-capita consumption of oil is 1.7 barrels. U.S. per capita consumption is 27 barrels. Korea's and Japan's are 17 barrels. The U.S. has 740 vehicles per 1,000 people. In China there are three, and in India there's one. Demand is going up, and prices will be much, much higher than they are today.

In other words, if China and India hope to reach even half of the U.S. level of wealth and car ownership, it’s going to take an awful lot of oil and gasoline to get there.

The market agrees with Marc’s bullish case right now. Oil just hit a new high… just the latest in a well-behaved bull market.



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