An alternative investment is an investment product other than the traditional investments of stocks, bonds, cash or property. The term is a relatively loose one and includes tangible assets such as Art, Wine, Antiques, Coins or Stamps and some financial assets such as commodities, private equity, hedge funds, venture capital and financial derivatives. Wikipedia
In Kenya, alternative investments that are mostly featured are;i. Commodities – In 1997, the Kenya Agricultural Commodities Exchange (KACE) was set up to link farmers and agropreneurs. Rural farmers with are fed with market information through a web-based platform. KACE allows buyers and sellers of agricultural commodities to trade directly with one another and get rid of the middlemen.The Nairobi Stock Exchange is now pushing for a regional commodities exchange that will not only protect farmers from price fluctuations but will also creates another investment asset class i.e. commodity-backed bonds or even derivatives.The warehouse receipting system is another way farmers and investors are linked together to tackle the issue of storage with a majority of Kenyan farmers being smallholders of agricultural land.ii. Venture Capital – This is probably the fastest growing sector among other alternative investments. There are more than 30 firms in Kenya that call themselves venture capitalists or at least they have a department that deals exclusively with venture capital.The venture capital firm that caught my eye was Enablis Entrepreneurial Network’s financial service offering whose mission is to provide an ongoing revenue stream to Enablis’ local Non-Profit Organizations. This new innovative social venturing approach calls for all profits to be donated to each country operation, ensuring its long-term sustainability. EFC is committed to filling the critical financing gap for entrepreneurs in the developing world unable to find risk capital between the micro-credit and venture capital thresholds.Enablis also holds a yearly business plan competition where they awards entrepreneurs (with a bias for social enterprise) with money to venture into their businesses.At the Nairobi Stock Exchange, there is only one listed venture capital fund i.e. the Aureos Venture Capital Fund.
iii. Private Equity remains one of the best alternative investment asset classes. This is so because in Kenya, we are coming from a low base in terms of hard and soft infrastructure compared to other emerging markets globally. For instance, we still use the rail system made by the colonists in 1900-1910 to transport goods and people from the port of Mombasa to landlocked Uganda-whom have 2.5 billion barrels of oil by the way.Luckily Citadel Capital, Middle East and Africa’s biggest private equity firm have stepped up and bought a majority stake in RVRI. Through its subsidiary Ambience Ventures, Citadel Capital now owns 51% of Rift Valley Railways International (RVRI), which owns 100% of each of the Kenya and Uganda concession companies. Citadel Capital is working with other shareholders, including Bomi Holdings and Trans-Century Limited, to finalize a business and investment plan that includes a US$ 287 million capital expenditure program to rehabilitate infrastructure and rolling stock. A more “efficient rail network could, in time, bring East African transport costs down by as much as 35%,” said Citadel Capital Managing Director Amr El-Barbary.They already signed a deal with the architects of Brazil’s railway turnaround, leading global rail group América Latina Logística (ALL) will bring cutting-edge technology to RVRI’s three-point rehabilitation program for the national railways of Kenya and Uganda
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