Courtesy of The Financial Times, an interesting commentary on Africa:

It was Vinod Khosla, who bagged a billion at Sun MicroSystems in Silicon Valley, who said, ‘The future is not seen in the rear view mirror.’

I started my journey from Mombasa, spent half my life in the City of London running interest rate trading desks, packed my bags when I turned 40 and returned home in 2005.

The Nairobi Securities Exchange quadrupled from 2002 through 2007. I spent two years at the Nation Centre in Nairobi. In those days, prices were projected onto a screen, Kenya had embarked on a Thatcher-style shareholder revolution and 2m newly minted shareholders were created out of thin air. I rubbed shoulders with folks who had sold their cattle, parlayed the proceeds into a line and were swinging the line like we all did when the Nasdaq boomed in the late 1990s. The Kenyan economy expanded at 7.1 per cent in Q4 2007, the fastest rate it had achieved since a brief Brazil coffee frost related boom in 1977 and, before then, just after independence in the 1960s. Cynical sorts – and most of the seasoned Africa hands tend to be hard-bitten – would whisper, ‘It can’t last, it never does’.

I was one of the crazy ones, an Afro-optimist, when it was not very fashionable.

And I would hear WB Yeats echo in my mind, ‘Things fall apart, the centre cannot hold’.

Then in December 2007, I took the family to Mombasa and waited for the election. I watched the election on my TV screen. The results were streaming in and then all of a sudden, no more results were being reported. The lights were literally switched off in the tallying centre. We caught the flight back to Nairobi on the 1st of January and from the airport to our house, we passed two vehicles and both were military. The country came to a standstill and the economy crashed. It grew not much above 1 per cent in 2008. Sometime in January, CNN flashed a picture of men with machetes about 5 km from my watering hole, pulling people out of cars. CNN proceeded to play that reel for about twelve months whenever it mentioned Kenya. My mother-in-law called me from London and implied I was a trader without any idea of a stop loss and she was all set to switch my lights off and enforce a stop loss.

Kenya hurdled the elections this week after a fashion and snapped a sequence of botched elections running all the way back to 1992. The exception was 2002. Queues of Kenyans turned up to affirm their faith in the democratic process. At the final count the IEBC declared that 86 per cent of the registered voters had participated. That is an extraordinary number and gives a stamp of legitimacy to the process.

Despite the beta and volatility we witnessed around the counting process, the switch to manual, the IT bug that multiplied the rejected votes by a factor of eight, we arrived at a clear cut winner in the first round.

I appreciate the outcome is being contested but it is being contested in the courts and not on the street. And the remarkable thing is that the ground has shifted. A call for mass action would have shredded the bona fides of the prime minister in an instant. This extraordinary turnaround and a largely violence-free election confirms a tipping point. It represents a positive contagion.

Complexities remain around the process at the International Criminal Court. The incoming president has confirmed severally that he will cooperate with the ICC. He has to be taken at his word. Kenya remains the geopolitical pivot and the linchpin state in the East African Community. Half of our stock market is held by UK-listed companies. Diageo has a majority stake in EABL. Vodafone has 40 per cent of Safaricom, to name just two. Somalia would not have been stabilised or be in its current new steady state without our help. I think that Barack Obama’s pivot to Asia detours through Africa and that the US is seeking to roll back China in Africa. Therefore, I remain of the view that realpolitik, security and business interests will temper the current ideological position.

It does not make sense for our western partners to lose us to the eager clutches of China and India. It does not make sense for us to lose our western partners. We are better off being multipolar and multilateral in our relationships.

The Nairobi Securities Exchange entered a bull market in May 2012 and was the eighth best performing stock exchange in the world out of 104 that I track. This year, the market has rallied over 17.85 per cent so far and enters Monday on an eight consecutive winning sequence. The stock market had sniffed out this political risk inflexion point. Africa is not for the faint-hearted and it’s not about squeezing out a 100 basis points of out-performance.

And it’s not a free lunch. The landscape is asymmetric. So now having given you a health warning let me outline the opportunity.

I have a supreme conviction that Africa is the last great convergence trade in the 21st century. In many respects, the great flattener was the mobile phone (and with it the mobile internet and the mobile wallet). Where once the continent was adrift and played a different riff, the mobile phone connected the continent to itself and the rest of the world. It was the phone that was the entry ticket into the game for each and every African. It was a wonderful grass roots, bottoms up revolutionary thing because every African could own one. Mo Ibrahim bagged a billion on understanding this simple fact. Sure the resources in the ground are very valuable but it was the mobile phone that unlocked the talent of those who walked upon the ground. Without the phone and ICT, Kenya would have posted zero growth over the last decade. The generation Y are walking around Nairobi, surfing the 21st century on their phones. It is a remarkable thing. And with smart phones costing less than $100 now, this is about to tip and accelerate again.

In 2007, I had to sit in the Nation Centre to trade the Nairobi Securities Exchange. Today I can do it from my mobile phone.

Last Year, I was in Zurich and it felt a little circular because I had started my career with CSFB many years before and they had sent me to Zurich for my internship. I listened to the Swiss central banker, the chairman of Credit Suisse and a number of other personalities. And when it was my turn to speak, I said: ‘Do you know what the year on year growth rate for Johnnie Walker was in east Africa?’

I answered my own question. It was 74 per cent.

I said, this is a popping over the radar moment. You do not need a McKinsey report to tell you about the emerging African middle class. Africa is a statistical black hole but in that Johnnie Walker data, a very simple truth is distilled. The emergent middle class is here and it is no different from the middle class in Washington, London, Shanghai or Bombay. It has grabbed the attention of Ivan Menezes, COO of Diageo, and his executive committee who swung through Nairobi a couple of weeks ago. In fact, my proprietary foot traffic indicator of global CEOs passing through Nairobi has been flashing green for quite a while now. These folks are not on some kind of Bob Geldof circa Live Aid mission. They are coming because they can smell a profit. The big oil majors have also arrived in a big way. I happen to believe that the eastern seaboard of Africa, from Mozambique through Somalia and all points in between, might well prove the last great energy prize in the 21st century. Did you see that CNPC is set to offer $4b to ENI SPA for just 20 per cent of its offshore gas concession in Mozambique? We sit on a geothermal juggernaut.

East Africa is not about derivatives. Its not about structured notes which require a degree in rocket science to understand. It’s about simple things. It’s about the building blocks.

One of my favourite books about Kenya is Elspeth Huxley’s ‘The Flame Trees of Thika’. As the story begins, she writes:

We were going to Thika, a name on a map where two rivers joined. Thika in those days – the year was 1913 – was a favourite camp for big-game hunters and beyond it there was only bush and plain. We were not going as far as that, only two days’ journey in the ox-cart to a bit of El Dorado my father had been fortunate enough to buy in the bar of the Norfolk hotel from a man wearing an Old Etonian tie…

“… Fortunes are being made already out at Kiambu.”

Well, exactly a century later, Kiambu real estate has simply soared. In many cases it’s up nearly 20 times over the last five years.

Everyone I meet is adding some Africa to their portfolios. Are you?

A tsunami of liquidity is set to wash up on our shores.