This shift did not prevent a decline in global revenue, leading to the sale of its North American business to LG Household & Health Care and its global business to the Brazilian MLM, Natura.

Tupperware, similarly, has seen a drastic drop in stock value, over 90% in the last five years, and is facing potential bankruptcy.

During the pandemic, Educational Development Corporation (EDUC) nearly doubled its consultant count due to increased home-based learning and unemployment.

The Federal Trade Commission (FTC) reports that 99% of MLM participants lose money, primarily because they are required to purchase products upfront with the hope of reselling them at a profit.

This shift did not prevent a decline in global revenue, leading to the sale of its North American business to LG Household & Health Care and its global business to the Brazilian MLM, Natura.

Title:

Content: 'Direct Selling' - Avon, Tupperware - Is Extinct

Nov. 18, 2022 11:25 AM ETHLF, MED, NTCO, NUS, PRI, TUP, USNA3 Comments
Robert FitzPatrick
394 Followers

Summary

  • Direct Selling became obsolete generations ago. So how is it that millions today get recruited for "income opportunity" in "direct selling" and billions are traded on "direct selling" stocks?
  • Avon and Tupperware are cited by "multi-level marketing," or MLM, promoters as "proof" that MLM, e.g., Amway, Herbalife, is "direct selling."
  • Usable data on actual income and churn rates of MLM "direct sellers," market saturation, and retail sales to actual customers are not provided.
  • In fact, Avon and Tupperware for years have been walking dinosaurs, still trying to do "person-to-person" sales to end-users with commodity products, while MLMs hype "unlimited" income.
  • The shrunken and devolved state of Avon and Tupperware today reveals that direct selling is extinct. MLM is not, and never was, direct selling.

It is generally accepted that "direct selling" was killed off generations ago by mass merchandising, big box stores, mail-order and then the internet, among other societal changes. The "Fuller Brush man" is long gone. No one's at home. No one wants or needs or has time for a "personal" salesperson. Everything's in stores or online. And, even when "direct selling" still lived, no one ever went into that tough line of work thinking they would get rich from it.

Yet, each year, millions are recruited, and pay thousands, for the "opportunity" to work as "direct sellers," with promises and expectations of "unlimited" income. The number involved today is many, many times greater than ever worked in that "extinct" field decades ago. Billions are being traded on Wall Street for shares of "direct selling" companies. How can this be?

In my book, Ponzinomics, the Untold Story of Multi-Level Marketing, I document the death of "direct selling" and the 1945 invention of "multi-level marketing," or MLM. I describe how "MLM" falsely assumed direct selling's revered old identity. I trace MLM from its Adam, a little California-based company called "Nutrilite," to today's "industry" led by Amway, Herbalife (HLF) down 64% YTD, Nuskin (NUS) down 31%, USANA Health Sciences (USNA) down 49%, Primerica, Inc. (PRI) down 13%, and Medifast (MED) down 45%. MLM's financial solicitations for consumers to become "direct sellers" have reached into – and led to losses for – virtually every household in America.

In the newly invented "MLM," the main source of revenue shifted from end-user customers to the salespeople themselves who are incentivized to "be their own customer" by buying their own products. Obviously, no one makes money purchasing their own inventory, but MLM offered a unique reason to do so – "unlimited" income potential.

No More Need to Knock on Doors

All MLM "direct sellers" can potentially gain "unlimited" income by recruiting an "endless" chain of other "direct sellers." No need to pound the pavement and get rudely rejected at front doors any more. Each "direct seller" on the chain has to meet a quota to "qualify" for future rewards from their recruits who, in turn, are their "own customers" and recruiters too, ad infinitum. The chain can grow without continuous personal effort. The qualifying quota can usually be met by just making a personal monthly purchase of inventory. "Commissions" on all these transactions, all the way down to the "last ones in," flow up the chain. In the MLM pay plan, most of the total commissions go to the top 1%. So, all new "direct sellers" try mightily to recruit (and buy) their way to those top ranks. Of course, only a tiny few can ever be at the top.

Some people argued this is a pyramid recruiting scheme, inherently unfair and deceptive, and a counterfeit of direct selling. In the design and the pay plan, bottom ranks – the vast majority – will inevitably lose. They said constantly adding salespeople in any area destroys profitable retail selling potential, if any exists to start with. They cited data on 90-99% loss rates and huge churn rates among new "recruits" and asked, where are the retail "customers"?

While offering no data on retail customers or salespeople losses or market saturation, MLM promoters offered "proof" that MLM is direct selling by pointing to two long-established and respected direct selling companies in their ranks, Avon and Tupperware (TUP). Both companies were members of the Direct Selling Association, DSA, and both were "direct selling" icons, Avon for its "ladies" and Tupperware for its "parties." To any pyramid scheme accusations, MLM promoters indignantly countered: "Are you calling Avon and Tupperware pyramid schemes?"

Walking Dinosaurs

The truth for both companies is very different from the MLM-spin. Avon and Tupperware used to have differentiated products and real consumer demand. Their salespeople made money from their own retail sales. But moving into the 21st Century, Avon and Tupperware became walking dinosaurs, vestiges of the extinct era of "direct selling." They were still trying to base their businesses on their historical brands and on person-to-person retail sales to real customers, as direct selling companies always used to do.

Despite MLM's citing Avon and Tupperware, and thereby bestowing legitimacy on the "MLM" members of the Direct Selling Association, deep differences between those icons of the old era and MLM burst into public view in 2013-14. The two companies publicly quit the Direct Selling Association, charging ethics violations and DSA-member connections to pyramid schemes.

Avon's Long Good-Bye

Avon had been a true direct seller for decades before MLM was invented. But as the door-to-door model faded, Avon began a long decline. In 2000, Avon began shifting its focus to "incentivizing" salespeople to recruit more salespeople and getting them to buy inventory, MLM-style. In 2009, during the Great Recession, Avon ran its most expensive ad in history, on television during the Super Bowl. The ad never mentioned any Avon products! It only solicited "salespeople." Still, global revenue dropped continuously over the next 10 years. Avon stock value fell from over $30 to just over $3.

Finally, Avon split off its faltering North American business and sold it to the Korean company, LG Household & Health Care. Avon claimed to have 250,000 sales representatives in North America. The remaining global business was later sold to the Brazilian MLM, Natura (NTCO) down 50% YTD, which also owns the retailer, Body Shop. Though Avon global was much larger, Avon shareholders traded 3 shares of Avon for just one in Natura.

The Korean-owned segment of Avon in North America is now classic MLM, selling the proverbial MLM "income opportunity" along with "health" supplements, make-up, jewelry, clothing, scented candles, even toothpaste.

On the Canadian Avon website, Avon promotes the "income opportunity," urging prospects in large bold black type: "Think big. Sell Avon part-time, full-time, you decide how much! It’s your business, your way!"

A disclosure (legally required in Canada, but not in the USA) appears midway down a long webpage in tiny, barely visible gray lettering: "The 2020 earnings of a typical Avon Leadership Representative was between $0 and $2,620 in commissions and bonuses." That's $0 to $50 a week, before subtracting all costs! And the "disclosure" does not break out how much of that tiny return comes from personal sales or the "downline."

Avon quietly rejoined the Direct Selling Association. The Brazilian company, Natura, which took over Avon's global business in 2020, has lost over 60% of its stock value in the last year.

Tupperware on the Brink

Tupperware was one of the first "party plan" companies, which are technically a small subset of MLM. They employ an "endless" recruiting chain, but are more rooted in retail sales transacted at "parties." Tupperware used to have a popular brand with innovative, differentiated products. But, as true direct selling began to disappear, Tupperware went into decline. It added MLM-type "health and beauty" commodities to bolster recruiting appeal but then deleted them. This year, it began also selling its products in Target department stores. Its kitchen-related goods are generally not distinct from other brands. A 10-months "Income disclosure" for Canada (not published in the USA) showed that half the "party planners" were classified "inactive," earning less than $30 for the period on average. 94% of the "active" ones reportedly received about $12 a week on average, before expenses.

In the last 5 years, the stock value of Tupperware has dropped over 90%. Its latest financials warned investors the company may violate loan agreements, setting off speculation Tupperware might declare bankruptcy.

The shrunken and devolved state of Avon and Tupperware, the most famous brand-icons of "direct selling," makes citing them as a defense of "multi-level marketing" as extinct as their old business model.

This article was written by

394 Followers
Robert L. FitzPatrick is the author of the new book, Ponzinomics, the Untold Story of Multi-Level Marketing (2020),the first comprehensive history and analysis of the "MLM" phenomenon, addressing its political influence, propaganda techniques and use of cult persuasion. FitzPatrick is an expert in examining and revealing deception and fraud in Ponzi schemes, pyramid schemes and bogus home-based businesses. He served as expert or consultant in more than 30 court cases involving pyramid schemes and multi-level marketing. He is co-author of False Profits (1997), an examination of the values and beliefs that support the delusions of pyramid schemes. He was featured on NBC Dateline, ABC World News, and CBS 60 Minutes, the documentary film, Betting on Zero and the podcast, The Dream.He has been quoted in many newspapers around the world, including the New York Times and Wall Street Journal. His booklet, Pyramid Nation, has been translated to Chinese and used by government regulators in writing China's first laws on pyramid schemes. His booklet, "The 10 Big Lies of Multi-Level Marketing", has been translated into four languages and posted on numerous websites. His White Paper, "The Main Street Bubble", which details the extensive influence-buying of the direct selling industry was featured in a CNBC Documentary, Selling the American Dream. In 2005, he delivered a seminar to in Colombo, Sri Lanka to central banking representatives from that country as well as India, Bangladesh, Bhutan, Maldives and Nepal. Robert FitzPatrick has developed informational resources for consumers, journalists, academics and regulators including a multi-media PowerPoint presentation and a statistical analysis of the losses suffered by participants in pyramid selling schemes. He also published a widely read booklet on the landmark federal case brought against the Amway Corporation. He is a expert network member of GLG Research, and Coleman Research Group, as well as other networks of experts who are referred to clients for consultation, speaking and report writing. In this capacity, he has provided expert consultation to financial many analysts who sought information about multi-level marketing companies and pyramid and Ponzi schemes. Robert FitzPatrick co-founded and serves as president of Pyramid Scheme Alert, the first international organization to expose and prevent pyramid scheme fraud. He personally responds to hundreds of consumer and news media inquiries each year. He has served as consultant and expert witness for Attorney General or State Attorney offices in four states, the US Dept. of Justice, and in numerous cases involving distributor fraud and pyramid schemes. Robert FitzPatrick is not an investor in multi-level marketing companies. He has never owned and never plans to own stocks of multi-level marketing companies. He has never been compensated based on any stock's performance. He does not offer investment advice and he is not an attorney.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for educational purposes only. It discusses fundamentals of the "direct selling" business model and the evolution of "multi-level marketing."

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Tupperware, similarly, has seen a drastic drop in stock value, over 90% in the last five years, and is facing potential bankruptcy.

During the pandemic, Educational Development Corporation (EDUC) nearly doubled its consultant count due to increased home-based learning and unemployment.

Title:

Content: Educational Development Corp.: Growth Risk Might Be Overblown

Moat Investing
1.46K Followers

Summary

  • EDUC is the exclusive US co-publisher of educational children's books produced by famous Usborne Publishing by leveraging multilevel marketing (MLM) strategy.
  • It has strong fundamentals, fair valuation, and a compelling growth story that is being ignored by the market.
  • We arrived at a target price of $12.4 to $14.6 without incorporating any future growth and expansion in operating margins.

Investment Idea

Educational Development Corporation (NASDAQ:EDUC) has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, and management has skin in the game (owns 23% of shares outstanding). For these reasons, we remain bullish.

Business Overview

EDUC is the exclusive US co-publisher of educational children's books produced in the UK by Usborne Publishing, and EDUC also exclusively publishes books through their ownership of Kane Miller.

The business operates in two segments:

Home Business Division (Usborne Books & More or "UBAM") -(95% of revenues) - This segment sells books through consultants directly to consumers using a multilevel marketing model (MLM). Consultants sell books by hosting home parties, social media, and hosting book fairs with schools and public libraries.

Publishing Division – (5% of revenues) - Sells books to bookstores, toy stores, and other retail outlets.

If you would like to get the gist of our thesis, you can watch our YouTube video below.

Value Proposition

The children's books market is very competitive and fragmented. There are more than 135 publishers of children's books in the US. EDUC is competing with Scholastic and Pearson, which have extensive resources to run marketing campaigns and are well-positioned in both online and offline distribution channels. Although EDUC has a little moat, they have some strengths to their business model that will allow long-term value creation.

They have an exclusive and long-term relationship with Usborne. Therefore, clients of the Usborne in the US must acquire their books via EDUC. Also, there is a consensus that Usborne books are high quality and among the industry's best.

Their sales are a function of the number of active sales consultants. Commissions paid to consultants are a variable cost, and they are only paid when sales are made. Although this makes SG&A grow as the top line grows, since it's not a fixed cost to the business, it allows EDUC to achieve significant operating leverage. Also, it allows them to scale quickly and have flexibility.

Direct sales strategies like multilevel marketing are commonly referred to as pyramid and Ponzi schemes. However, the table below shows that it does work sustainably and increases revenue growth over the long run despite the negative press.

Source: S&P Capital IQ

Why might EDUC be mispriced?

There are multiple factors. Firstly, it's a micro-cap. This usually means there is limited analyst coverage, and due to the stock's illiquidity, there is low institutional interest. These factors, coupled with others, leave the company under the market radar despite its business is doing well and has promising perspectives.

Second, there is negative press around the MLM business models. The MLM model deployed by EDUC is vastly different from dodgy tactics used by other players. For example, many MLM models require the seller to purchase the inventory from the company before selling. However, this reduces the risk for the company and puts extra pressure on the seller, which can be left with expensive inventory that cannot be sold or returned. In the case of EDUC, there is no requirement to hold inventory.

Third, markets might be believing that the business's tailwinds are temporary due to COVID. Amidst Covid, schools were closed, and parents were working from home; this drove home-based learning and benefited EDUC. Additionally, unemployment rates soared, and many were left looking for work. This allowed EDUC almost to double its consultant count from 33 to 60 thousand. We believe the post-pandemic work from home trend will persist, supporting their sales. Furthermore, the active consultant might not fall back to the pre-pandemic level as these roles are usually part-time work which fits nicely with the trending gig economy.

The evidence speaks louder than words

There are also some clues from the management that revenue generated amidst pandemics might be sticky.

Management increased its dividend per share from $0.20 to $0.32. A dividend increase should be seen as a signal that a business is in solid financial shape and management is confident about its future.

Management increased capital expenditures to $4.15 million from $0.64 in 2020. This expenditure was primarily associated with equipment purchases to increase daily shipping capacity. These are some early signs that management is expecting positive growth going ahead. Additionally, this also improves their margins as amidst Covid they paid a premium for extra shifts.

EDUC has increased its inventory; the inventory build-up is approximately 60% of its total assets. This has been in anticipation of an increase in the sales, as it takes a four to six-month lead-time to have a title printed and delivered to them.

Source: Koyfin

Value Investing Approach: Asset Value

To calculate the actual asset value of the company, we tried to replicate the business from scratch. Therefore, below you will find the last reported balance sheet, where we have made some adjustments.

The value of the land recorded on books was $4.1 million. They own a 40-acre complex at 5402 South 122nd East Ave, Tulsa, with 400,000 square feet of office and warehouse space. They also own a facility located at 10302 East 55th Place, Tulsa, that has 105,000 square feet of usable space. According to our channel checks with realtors, the average price per square foot of their land lies between the range of $100 to $115. To remain conservative, we took the average price square feet to be $85. Therefore, we estimate the value of its land to be $42.9 million.

They also have a network of around 55,000 active consultants. To construct such a network from scratch is both costly and time-consuming. We estimate the replication cost of this network to be around $27.5 million ($500 per consultant). This is also roughly five months of sales commission cost incurred by EDUC in the fiscal year 2021.

The rest of the items are taken on book value.

Based on the above adjustment, we arrive at the total asset value of 106.7, and the fair value per share to be $12.4

Source: Moat Investing

Value Investing Approach: Earnings Power Value

This approach allows us to value EDUC without incorporating any growth. Here, we consider the business's historical figures (last five years) to get the normalized earnings and operating margin. To calculate the sustainable earnings, we smoothed out the company revenues for the previous five years to $131 million and then calculated the firm's average operating margin (6.5%) to arrive at the sustainable Operating Income of $8.5 million.

We add back the expenses typically spent on growth, and we estimate around 4.5% of sales is spent on growth marketing, i.e., promotion, advertisement, and discounts. Hence, we add this back as this expense is not required if the firm was not aiming to achieve growth.

We assume the normalized tax rate to be 26% and the estimated cost of equity at 9%. Therefore, we estimate Earning Power Value of the operating business to be $134 million. To that, we add the non-operational cash ($1.8 million), and we subtract long-term debt (10.8); we arrive at an implied market cap of $125.6 million or $14.6 price per share, with 12.3% upside potential, without incorporating any growth or expansion in operating margins.

Source: Moat Investing

Risks to Our Investment Case

  • Stringent regulation regarding MLM companies. For instance, the requirement to treat consultants as employees. This could have implication when it comes to taxation, wages paid and welfare concerns for workers. This could, in turn, shrink the bottom line or, worse, business model tatters.
  • The most straightforward risk is consultants quitting or switching to find other employment as the US economy improves. However, within our valuation model, we have smoothed the growth of revenue in the last five years, which is a function of l consultants recruited. Even if there is some mean reversion in terms of consultants working with EDUC due to the COVID base effect, our thesis would be less impacted.
  • As highlighted earlier EDUC’s inventory level is a significant portion of its asset. Whatever reason they become unsalable (i.e., change in taste or controversy in terms of published content) could impact our valuation.
  • Oil prices have increased significantly since last year (see below). Shipping costs are amongst the most significant component of its COGS; further rise in oil prices (consequently increasing shipping cost) could make it difficult for EDUC to remain profitable.

Source: Trading Economics

Conclusion

EDUC has an attractive value proposition, strong financials, and optionality of significant growth ahead due to structural changes caused by COVID. On top of that, the valuation is reasonable, management has skin in the game (owns 23% of shares outstanding), and investors are not even paying for any future growth at current prices. For these reasons, we remain bullish.

This article was written by

1.46K Followers
We are a group of experienced investors that like to dig deeper into stocks to find growth stories at a reasonable price with strong economic moats. We also aim to conduct high-quality analysis by deep diving into valuations, key business drivers, risk/reward, and different future scenarios.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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The Federal Trade Commission (FTC) reports that 99% of MLM participants lose money, primarily because they are required to purchase products upfront with the hope of reselling them at a profit.

Title:

Content: Terrible Things People Do For Money: What You NEED To Learn

0

You can laugh if you want. But, growing up, I was into professional wrestling. It was something that my dad was a fan of. So, naturally, this is what we did to bond.

Anyway, there was this wrestler named Ted DiBiase whose gimmick was “The Million Dollar” man. And, he had an amazing catchphrase; “Everybody’s got a price.”

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Q4 2021 hedge fund letters, conferences and more

This Hedge Fund Thinks Nintendo Is The Next Apple

Apple's influence over the stock market and tech world appears to be waning, at least in terms of mindshare. While it's true that Apple stock has soared alongside other tech favorites over the last couple of years, tech news sites are no longer overflowing with daily headlines about the iPhone. Apple Stock Is Surging, And Read More

For some of us. That actually might be true.

Questionable Acts People Would Do For Money

A survey of 1,000 conducted by OnePoll.com found that 6% of people would commit murder for $1 billion. Treason, armed robbery, mugging with a weapon, or assisting in suicide are some of the crimes committed by one in ten people.

What about a million bucks? In addition to credit card fraud, one in ten would smuggle drugs over the border or even star in an amateur pornographic video. In exchange for $100,000,000, a quarter of people would steal a bike, forge a signature, lie to police and donate sperm or eggs without their partner’s knowledge. Meanwhile, a demented one in ten would kick a kitten or puppy. And, that same figure would take performance-enhancing drugs to win a sporting event or beat up a stranger.

For $100,000? 25% of people would steal a street sign. It’s also enough for one in five people to forge a signature or take from a restaurant or hotel. One in ten say they would enter into a sham marriage, perform a sexual act on a stranger, falsify tax returns, or snatch a purse for the same amount.

In exchange for $10,000, one in five will steal a street sign, shoplift or flash a stranger. On the other hand, one out of ten people would lie under oath, steal a bike or spend counterfeit cash for the same price.

What would people do for a thousand bucks? 15% of people were willing to shoplift or bet on a fixed sporting event.

Why Do Good People Do Bad Things?

Some people may not have much in terms of a moral compass. I would actually think that most of us are the opposite. Committing a heinous crime not only cheapens life. What’s more, there are additional costs that far outweigh the monetary value.

For serious crimes, you have legal expenses, as well as the probability of going to prison. Also, even if you aren’t charged with a crime, that money can be seized.

And, let’s be real here. Would really trust someone to offer you a large sum of money to commit a crime? There’s a good chance it’s a scam or set it up, such as the fake website Rent-A-Hitman. Even if the offer was real, that’s definitely someone you do not want to associate with.

Still, even decent and law-abiding citizens may do bad things.

Researchers from the University of Utah and Harvard found that even the prospect of money encourages unethical behavior.

“Were were interested in why good people would do bad behavior,” Kristin Smith-Crowe, a management professor and co-author of the study told CNBC.

“We certainly found that the love of money is corrupting and just the mere exposure to it makes people do bad things,” Smith-Crowe said.

“The study didn’t ask people to do horrible acts, there were more mundane like stealing office supplies,” Smith-Crowe added. For example, taking home a ream of paper from work when your printer at home is empty.

The Worst Ways to Make Money

So, with all that being said, that got me thinking. What are the worst ways to make money? And, no. I’m not talking about unspeakable acts like murder or hurting an animal. My focus is on seemingly legit, yet risky, illegal, dangerous, and unprofitable ways to make some extra cash.

Taking online surveys.

There is no shortage of online surveys. With some surveys, you’re asked your opinion on current events or to perform an act of kindness. Most often, however, surveys want your feedback on a product or service.

However, whenever you see a survey that promises decent money in hardly any time, buyer beware. While these surveys do pay, the cost is minimal. I’m taking from a couple of cents to a couple of dollars. Is it really worth your time to make that little amount of money?

A better option would be picking up a second job, even if it’s a minimum wage job you do on the weekend. If that’s not an option, consider a focus group or qualitative research study if you want a well-paying survey.

I should also add that online surveys aren’t the worst idea for certain demographics. For example, a stay-at-parent could do these surveys while their kid(s) are napping.

Medical testing and selling bodily fluids.

“Paid medical testing is neither a scam nor a low-reward opportunity; it’s possible to make actual money if you devote yourself to being a full-time pincushion for science,” writes Jon Skindzier for Ask Men. “No, this idea comes with its own unique set of drawbacks like vomiting, chills, seizure, death — stuff like that.”

“Six subjects in London, for example, suffered organ damage and life-threatening complications while testing an arthritis treatment in 2006,” he adds. “The real question isn’t whether or not you can make money this way; it’s how much bodily harm you’re willing to risk in the process.”

Stying in the “ick” zone, this is also true of selling bodily fluids. Processes are long, complex, and time-consuming, but the pay is low.

It’s possible for women to sell their eggs too. In addition to taking up time, this procedure can also be rather painful since fertility shots are often necessary. It is true that donations are not a dependable way of making money, and very often they are restricted by time constraints.

Multilevel marketing companies (MLMs).

If you haven’t personally been invited, I guarantee someone you know has been. Invited to what? Those “parties” where a friend or acquaintance is selling essential oils, pet care products, jewelry, children’s books, etc.

It turns out, that this is a MLM program.

As the FTC notes, “Most people who join legitimate MLMs make little or no money. Some of them lose money. In some cases, people believe they’ve joined a legitimate MLM, but it turns out to be an illegal pyramid scheme that steals everything they invest and leaves them deeply in debt.”

The FTC has also reported that 99% of people who take part in multiple-level marketing lose money. Why? Because MLM companies require their members to purchase products in advance with the hope of reselling them at a profit.

While there are some legit MLMs, Avon springs to mind, if you aren’t a salesperson or have the upfront costs you might want to consider alternatives. Freelancing, affiliate marketing, or drop shipping might be some viable options that are better suited to your budget and/or skills.

Using click-bait to sell links.

The majority of bloggers earn their living from advertising, affiliate sales, and more. Click-bait links, those that lead nowhere, to the wrong site, or make your browser a mess, aren’t sold or bought by them. Overall, there is little money to be made from these bottom-feeding methods.

How can you make money from a blog then? Partner with trusted affiliate programs such as ClickBank, ShareASale, or Commission. From there, you can set up ads with Google AdSense.

Those fake links will eventually get noticed by your readers, and they will stop reading your articles.

Sign spinning.

We’ve all seen them on the sidewalks holding signs advertising particular businesses. No matter the weather, at least one is always trying to attract customers. Because you are required to stand all day long, the job is extremely tiring as well.

Additionally, the pay is usually low. And, the practice has been criticized for causing distractions among drivers.

If you’re looking for part-time or a side hustle, you might want to explore more fulfilling options. If you’re a dog person, then consider dog walking or sitting. Do you like cruising around town? Maybe deliver food or rideshare.

Day trading.

Unless you have a lot of experience in investing, day trading in the stock market is highly risky. As a new investor, you should stick with mutual funds until you gain more experience.

While it isn’t as exciting or profitable, at least you’ll be able to make money as you learn the ropes.

Selling pirated materials.

Many pirated electronic books or digital copies of Hollywood blockbusters can be found and downloaded online either for free or for a small fee. Sound appealing, right? After all, it’s cheaper than going to the theater or buying an original copy. And, these are major corporations that can take the hit.

Well, it’s not as harmless you may have assumed. In 2022, it’s expected that the movie and TV industry will lose $51.6 billion to online piracy. Additionally, piracy can land you in trouble with local, state, and national authorities as well as your Internet provider.

Online gambling.

I know a couple of people who boast about the money they made gambling — either in-person or online. My first question? “Yeah, but how much did you lose to win that money?”

Trying to make money with gambling of any kind is always a bad move. In addition, online gambling is more accessible 24/7, making it easier to become addicted to it than in-person gambling. If not treated, you can literally lose everything.

If you have a gambling addiction, please got professional help. And, even if you don’t, look for other alternatives to make money where the societal and financial cost isn’t as high.

Work-from-home scams.

Online money-making offers that seem too good to be true probably are. The scammer capitalizes on your desperation to obtain your personal information so that they can steal your identity or use the money to set up a job for you. In cases where something seems fishy, such as poor spelling or grammar in an advertisement or on a website or a request for you to send money, you should be cautious.

That’s not to say that there aren’t legit work-from-home opportunities. In fact, here are 12 work-from-home jobs that will help you earn a million dollars in less than 10 years.

Recycling.

Once again, we are seeing an extremely time-consuming effort for very little result. In addition, lots of recycling must be done before profits can be made. It is usually necessary to obtain recyclables from others before profits can be made. It simply does not make sense to move and clean substantial quantities of items unless you have the storage space and means to accomplish this.

I can personally attest to this. I thought years ago that instead of just recycling my cans, why not make some money off of them. For months I crushed and stored cans until I had several big bags. I took them to the scrap yard and got like $20. It wasn’t even worth the gas going back and forth.

Final Words of Advice

You have to know which opportunities are worthwhile and which ones aren’t if you’re looking to start a new side hustle or just make money online. You can find better alternatives to all these bad ideas on our list of 101 passive business and income ideas.

Article by John Rampton, Due

About the Author

John Rampton is an entrepreneur and connector. When he was 23 years old while attending the University of Utah he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months he had several surgeries, stem cell injections and learned how to walk again. During this time he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine, Finance Expert by Time and Annuity Expert by Nasdaq. He is the Founder and CEO of Due.

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The collectible nature of Labubu toys, often released in limited editions, creates a sense of urgency and exclusivity, driving demand among collectors and fans.

Fans and influencers often showcase their Labubu collections or create creative content featuring the character, further amplifying its visibility and appeal.

The platform's ability to connect like-minded individuals and foster communities around shared interests has also contributed to the phenomenon, as fans engage with each other and share their enthusiasm for Labubu.

Moreover, the involvement of celebrities, such as Rihanna, who have been spotted with Labubu toys, adds a layer of glamour and desirability to the brand, attracting even more attention and interest.

In summary, Labubu's success is a result of its unique design, the collectible aspect, strategic use of social media platforms like TikTok, and celebrity endorsements, all of which have contributed to its status as a viral sensation and a significant revenue driver for Pop Mart.

The collectible nature of Labubu toys, often released in limited editions, creates a sense of urgency and exclusivity, driving demand among collectors and fans.

Title:

Content: Connect with top gaming leaders in Los Angeles at GamesBeat Summit 2023 this May 22-23. Register here.

Amazon led a $20 million investment in entertainment firm Superplastic, which makes synthetic celebrities such as Janky and Guggimon.

On top of that, the companies announced a multifaceted collaboration where Amazon Studios gets a first look at licensing content created by Superplastic. The two companies have signed a first-look deal to facilitate the creation of additional series and films starring other characters in the Superplastic universe.

“We’re not a product company. We’re not a gaming company. We’re not a tech company. We’re an IP company with entertainment,” said Paul Budnitz, CEO of Superplastic, in an interview with GamesBeat. “We’re working with them on a whole bunch of other stuff in the background.”

The Alexa Fund, Amazon’s venture capital arm that focuses on new media, smart consumer electronics, ambient intelligence, and other areas of digital technology, led Superplastic’s $20 million Series A extension investment round.

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“It’s part of an overall evolution of our fund — the migration away from just being focused on voice to more on other consumer technology areas,” said Paul Bernard at Amazon, in an interview with GamesBeat. “The germane topic here is new media, which we took on seriously about 18 months ago.”

Other investors include Craft Ventures, Google Ventures, Galaxy Digital, Kering, Sony Japan, Scribble Ventures, Kakao, Animoca Brands, Day One Ventures, and Betaworks.

This latest round brings Superplastic’s total funding to $58 million to date, and supports the expansion of the Superplastic character universe, which has more than 18 million followers. It’s growing at about a million followers a month.

Additionally, The Janky & Guggimon Show, starring the Superplastic synthetic celebrities Janky and Guggimon, is in development at Amazon Studios. The two companies have also signed a first-look deal to facilitate the creation of more streaming shows starring other characters in the Superplastic universe.

“We couldn’t be more enthusiastic,” Bernard said. There is a lot of democratization of content on places like YouTube.

When the company started, Vtubers, or synthetic celebrities, like Lil Miquela, were just getting started. Now it’s not so unusual to be fans of characters who aren’t real.

Janky and Guggimon have had a rapid rise to stardom, from appearing in Fortnite to walking the runway with Tommy Hilfiger to doing ceramic sculptures with Gucci. They did NFTs with Paris Hilton.

“This is where I think the real metaverse is happening,” Bernard said. “People are showing up with avatars and engaging in role-playing interactions with their fans.”

Bernard said he thinks generative AI will further stir the pot and move more creators to become even more creative.

Bernard said, “It’s a signal into the transformation of entertainment content, not being powered just by humans, but by virtual characters. And that has a lot of implications for a business like Amazon’s media business.”

Janky & Guggimon

The Janky & Guggimon Show follows the adventures of two lazy and spectacularly incompetent best friends who are hell-bent on getting rich and famous but leave a trail of chaos and destruction in their wake. The endearing duo includes Janky, the loveable idiot who spends his spare time scamming celebrities, and Guggimon, a fashion icon and master manipulator who’s too narcissistic to care.

While successful merchandise, gaming, and metaverse activations traditionally follow the success of a popular animated series, this is one of the first times that the sequence has been reversed: Superplastic’s synthetic celebrities Janky and Guggimon built a massive fan base on social media before landing a first-look deal on a major streaming service.

Each episode features a cast of animated and human celebrity friends. If ordered to series, it will be available to stream exclusively on Prime Video in more than 240 countries and territories worldwide.

Over time, Budnitz said the company invested in animation tech such as motion capture to produce animations more quickly and with higher quality. That enables the company to respond to fan feedback more quickly. TikTok is usually the most powerful channel.

“Superplastic’s universe of synthetic celebrities have earned a cult following in every medium they’ve touched,” said Superplastic founder and CEO Paul Budnitz. “The new collaboration partnership with Amazon Studios reaches a massive audience and provides a new playground for us to wreak havoc worldwide. We’re grateful for the investment the Amazon Alexa Fund gave us to help us continue to grow the Superplastic Universe.”

“As we expand the Alexa Fund to address a wider range of consumer technologies that include ambient computing, smart devices, and the future of entertainment, we’re very excited to add Superplastic to our portfolio,” said Bernard. “Superplastic’s virtual celebrities delight audiences and meet their customers where they are, and we see them as demonstrative of a new class of IP that is going to be increasingly relevant with younger generations. We are excited to be an investor and to continue to help Superplastic and Amazon’s Media and Entertainment teams identify more ways to delight customers.”

Superplastic is a Vermont-based character design studio that sells tens of millions of dollars in real and virtual products annually and has collaborated with Gucci, Fortnite, Mercedes-Benz, Tommy Hilfiger, Christie’s Auction House, J. Balvin, Kidsuper, Pusha-T, Paris Hilton, Post Malone, The Weeknd, Vince Staples, Rico Nasty, and more.

Amazon Studios makes original films and television series for a global audience. Original series premiere exclusively on Prime Video, which is available in more than 240 countries and territories worldwide.

The companies crafted a quote from Janky, who said, “We went frum snatchin’ Amazon boxes off porches, to gettin’ Amazon bags, baby. My fans will finally get 2 watch me french kiss my Off-White woodchipper and other $%iT we got planned! Superplastic quadrupled my life insurunce policy and Paul Budnitz already started a Go Fund me page to pay fur my funeral!”

How it came together

Budnitz said the company was approached by multiple studios to make a show about its characters. Superplastic actually came about by making animated characters first and then turning them into sensations on social media. In the old way, someone would create a show with characters and sell it to a studio right away. But that means creators can often lose control.

Superplastic wanted to create a universe with animated characters and still control its own intellectual property. That’s why it started with social media as its No. 1 platform. It always had the intention to take the characters to multiple media, Budnitz said.

“That was a way to make them super famous and then integrate their stories into everything from different revenue streams,” Budnitz said.

The relationship with Amazon started early in the process because Amazon was one of the early investors.

“They came to us and gave us the deal we wanted,” Budnitz said. “They essentially treated our characters like actors, that we retain complete control of them. We agreed. They were just really awesome. So I think the deal itself is a bit different. I’ve never heard of this happening before.”

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Fans and influencers often showcase their Labubu collections or create creative content featuring the character, further amplifying its visibility and appeal.

Title:

Content: What TikTok's Newest Program Means For Your Favorite Creators

TikTok's massive popularity has given rise to an entirely new generation of creators who churn out short, engaging content that entertains millions of people around the globe. Today, TikTok is home to a wide array of content that spans various genres. These could range from simple but entertaining lip-synced music videos to useful cooking hacks, beauty tips, and travel tips. Apart from giving talented creators a global platform to showcase their skills, TikTok has become the single biggest revenue stream for many of them.

The popularity has also led to TikTok emerging as a lucrative platform for brands and advertisers. Companies often use the popularity of TikTok creators to drive engagement quotients and, ultimately, their brand recall. TikTok's short video format also gives brands an entirely new way to engage with their audiences, which are used to being bombarded with text and old-school video advertisements.

While TikTok already had monetization options in place, on May 4, 2022, the company introduced a new contextual advertising solution called TikTok Pulse. In its initial form, TikTok Pulse will give brands the newfound ability to maximize their exposure on the platform by appearing next to the top 4% of all videos appearing on TikTok.

What is TikTok Pulse?

Along with giving brands the ability to increase their visibility on the platform, TikTok Pulse offers them something known as an "inventory filter." This proprietary technology ensures that the ads only run next to popular, verified content. In addition, this algorithm can ensure that ads appearing next to popular video content are relevant to their target demographics.

The platform also gives brands powerful campaign-tracking tools that will ensure the accurate targeting of ads while also confirming the ads that appear next to a specific genre of content are suitable. In addition, campaign managers using TikTok Pulse will also be able to track metrics and get a general overview of the impact of their ads, TikTok confirmed in a blog post.

At the time of writing, the TikTok Pulse program is only open to creators and publishers who have at least 100k followers. This means that, at least for the immediate future, only the larger creators on the platform — including public figures and media publishers — are able to reap the benefits of TikTok Pulse. However, TikTok did confirm that they are working on bringing more creators under the ambit of the program in the future.

What's in it for creators?

If you happen to be a relatively small TikTok creator, the arrival of TikTok Pulse will have little to no impact on your revenue or revenue stream. As outlined above, the TikTok Pulse program — in its current form — will only benefit top TikTok creators that churn out the most popular content on the platform and generate millions of views.

Even though TikTok has set a minimum benchmark of 100k followers for creators to be eligible for Pulse Program, a large chunk of these creators who are well above this number would still not be able to rack up the massive number of views needed for Pulse Program-purchased ads to appear next to their content. According to Variety, TikTok plans to roll out the Pulse program starting in June 2022 as a U.S.-only pilot. The company hasn't revealed plans for a global rollout yet.

Title:

Content: How is TikTok reshaping the concept of fandom?

News TikTok

How is TikTok Reshaping the Concept of Fandom?

In recent years, TikTok has emerged as a global phenomenon, captivating millions of users with its short-form videos and creative content. While the platform has gained popularity for its viral dance challenges and comedic skits, it has also had a profound impact on the concept of fandom. With its unique features and vast user base, TikTok has revolutionized the way fans engage with their favorite celebrities and franchises.

One of the key ways TikTok has reshaped fandom is providing a platform for fans to express their creativity and connect with like-minded individuals. Through the use of hashtags and trends, fans can easily find and contribute to a community centered around their favorite artists, TV shows, movies, or even fictional characters. This has created a sense of belonging and camaraderie among fans, fostering a supportive and inclusive environment.

Moreover, TikTok has given rise to a new breed of fan content creators. These individuals, often referred to as “TikTokkers,” use the platform to showcase their talents and pay homage to their idols. From lip-syncing to popular songs to creating elaborate cosplay videos, these creators have amassed large followings and become influential figures within their respective fandoms.

The influence of TikTok on fandom has not gone unnoticed celebrities and entertainment companies. Many artists and franchises have embraced the platform, recognizing its potential to reach a massive audience and engage with fans in a more intimate way. This has led to collaborations between TikTokkers and celebrities, as well as the use of TikTok as a promotional tool for upcoming releases.

FAQ:

Q: What is TikTok?
A: TikTok is a social media platform that allows users to create and share short videos set to music. It has gained immense popularity worldwide, particularly among younger demographics.

Q: How has TikTok reshaped fandom?
A: TikTok has provided a platform for fans to connect with each other, express their creativity, and engage with their favorite celebrities and franchises in new and exciting ways.

Q: Who are TikTokkers?
A: TikTokkers are individuals who create content on TikTok, often focusing on specific themes or fandoms. They have gained significant followings and influence within their respective communities.

Q: How have celebrities and entertainment companies embraced TikTok?
A: Many celebrities and entertainment companies have recognized the power of TikTok as a promotional tool and have collaborated with TikTokkers to reach a wider audience. They also use the platform to engage with fans and share behind-the-scenes content.

In conclusion, TikTok has revolutionized the concept of fandom providing a platform for fans to connect, create, and engage with their favorite celebrities and franchises. With its vast user base and unique features, TikTok has reshaped the way fans express their love and support, creating a more inclusive and interactive fan experience.

How do teenagers gain identity and intimacy?

What are the traits of collectible toy consumers?

How do teenagers gain identity and intimacy?

What are the traits of collectible toy consumers?

The platform's ability to connect like-minded individuals and foster communities around shared interests has also contributed to the phenomenon, as fans engage with each other and share their enthusiasm for Labubu.

How do teenagers gain identity and intimacy?

What about the person on Tiktok persuades buyers to buy what they see in their feeds?

Moreover, the involvement of celebrities, such as Rihanna, who have been spotted with Labubu toys, adds a layer of glamour and desirability to the brand, attracting even more attention and interest.

In summary, Labubu's success is a result of its unique design, the collectible aspect, strategic use of social media platforms like TikTok, and celebrity endorsements, all of which have contributed to its status as a viral sensation and a significant revenue driver for Pop Mart.


In 2021, Foreign Direct Investment (FDI) into Africa grew by 11%, defying the global trend and setting a positive precedent for future growth.

The UK, holding $65 billion in total FDI stock in Africa as of 2020, is second only to China in terms of investment volume.

Chinese FDI has surged from $75 million in 2003 to $2.7 billion in 2019, with China being Africa's largest source of FDI since 2014.

Geographically, South Africa, Nigeria, and Morocco are significant recipients of foreign investment, with South Africa alone accounting for nearly 34% of the VanEck Vectors Africa Index ETF's geographical allocation.

In terms of industrial areas, the financial sector, materials, and communication services are the largest sectors for investment, representing approximately 82% of the VanEck Vectors Africa Index ETF's portfolio.

The fintech sector is particularly promising, with revenues projected to surge to $30 billion by 2025.

The UK struck five new oil and gas deals worth £2.1 billion at the UK-Africa summit in 2022.

Additionally, the British International Investment (BII) has made significant investments in the pharmaceutical and fintech sectors, including a $150 million investment in Kelix bio and a $20 million deal with Moove.

For instance, a regional agreement between the Democratic Republic of the Congo and Zambia aims to create an industrial zone for electric car battery production.

Furthermore, the African Continental Free Trade Area offers synergies for participating in global supply chains, enhancing Africa's role in technology-intensive industries.

Overall, Africa's investment landscape is characterized by a focus on infrastructure, technology, and renewable energy, with significant opportunities for growth in these sectors.

In 2021, Foreign Direct Investment (FDI) into Africa grew by 11%, defying the global trend and setting a positive precedent for future growth.

Title:

Content: Free zones may be Africa’s best chance to accelerate wealth creation

By Sylvia Brune

Co-founder of AHOY – a flight booking and concierge app – Sylvia Brune discusses why free zones may be Africa’s best chance to accelerate wealth.

Given the demand for goods and services from Africa’s growing middle classes, the continent has huge potential for growth. Over the past year, Foreign Direct Investment (FDI) into Africa grew by 11%, bucking the global trend and potentially setting a bright precedent for the future.

Whether this upwards trend in FDI will have a positive effect on growth and wealth creation is, however, still unknown. Studies have shown that capital has little impact on an undeveloped foundation. Key components needed to enhance capital’s productivity are infrastructure (not just physical), a stable and transparent legal framework, and skilled labour.

Where these are lacking, investors into the continent have to first ‘build’ the commercial foundation, before commencing their projects. Like spending money on hiring advisors, lawyers, and accountants to navigate the various countries’ economic environments, political systems, and bureaucracy. This adds time and uncertainty to projects, acting as an effective ‘tax’ on any return on investment - meaning only projects with a very high upside will be embarked upon.

Evidence suggests that these key components are indeed lacking across most of Africa, albeit with a small handful of countries on the road to improvement.

Countries, like Senegal and Côte d'Ivoire, have made important strides to improve anti-corruption institutions. Cabo Verde and Gambia have managed to gain local trust with 85% and 84% believing their government is fundamentally sound. And Mauritius and Rwanda have made it into the top 35 countries in the world as measured by economic and personal freedom, with Mauritius marginally beating Norway in the global ranking.

The reality is, however, that corruption continues to undermine the rule of law across most of Africa (which hosts 13 of the globe’s 20 most corrupt countries). Rule of law relates to strong property rights, government integrity, and judicial effectiveness - the basis for a sound investment environment. What is even worse than corruption’s effect on FDI, though, is its effect on retaining and developing talent.

Instability and lack of opportunity continues to result in brain-drain - drawing talent and skill away from the continent. The World Bank estimates one-in-nine Africans with a tertiary education live away from Africa – a 50% growth since the mid-00s.

So, what’s the solution?

Given the long, tough road ahead towards building economically sound environments across Africa, I believe the only solution in the short run, is establishing 100s of Special Economic Zones (SEZs) throughout the continent.

For those unfamiliar with SEZs, they are areas which operate under a different legal framework to the country they inhabit – with investment-friendly laws around commercial transactions, taxes, and the protection of private property. SEZs’ advantage is that you avoid building on top of broken legacy system, instead creating a pre-packaged, investor-ready climate.

These zones have been successfully tested and run in China and the Four Tigers (Hong Kong, Singapore, South Korea and Taiwan) to attract considerable FDI, and experience decades of double-digit growth. This format could likewise be used to boost and sustain investor interest in Africa.

SEE ALSO:

SEZs as talent hubs

While SEZs are known mostly as attractive investment environments, with conducive infrastructure and legal frameworks, the secret to their success rate is actually in their ability to attract and retain talent and skilled labour in specialised hubs.

China showed just how powerful an industry focus within SEZs can be. Because they provide a magnetic effect of highly specialised knowledge hubs - comprised of domestic, regional, and international talent.

Capital is like fuel, it’s only effective where there is a flame to throw it on. And that flame is talent.

The potential is clear, and I believe Africa has a burgeoning pool of talent waiting to be tapped into. But whether they are able to put their talents to best use, collaborate, and innovate freely is uncertain, and will determine whether they stay, or search for opportunities elsewhere.

A common hurdle, for example, is work visa rules between African countries, which means it’s easier for talent to find good opportunities outside Africa than within Africa. Talented individuals want to work alongside other talent. Similarly, talent and specialists from outside Africa face considerable barriers when trying to obtain work permits.

For example, Mr. Eazi’s emPawa Masterclass, like many creative undertakings, is dependent on bringing together the best talent. Earlier this year, emPawa struggled to bring artists, producers, and mentors together from across Africa. Due to visa rules and uncertain processing times, some were only provided with visas after the masterclass was already over, some not at all.

Here, again, SEZs are a solution. SEZs are able to receive visa allocations relating to their area of specialisation, which increases the likelihood of collaboration and innovation - which in turn attracts capital.

The Andela example

There’s plenty of evidence that talent wants to stay, provided there are the right conditions to do so. A great example is tech recruitment platform Andela, which proves that when start-ups in Africa have access to the best talent, including a global support network, and then tap into local opportunity, they can raise substantial foreign capital, and the local business community benefits as well.

Andela trains candidates for six months before pairing them with clients, many are the Fortune 500 and a number of Silicon Valley start-ups. So far, more than 90% of Andela’s first batch of alumni are still working in Nigeria.

SEZs would be able to turbocharge the work of companies like Andela. After talent has been developed, they need environments where they can make most use of their skills.

Already, countries like Mauritius, Senegal, and Rwanda have and are in the process of creating SEZs, with the view to building infrastructure, a stable legal framework, and enticing skilled labour – it’s an exciting time and I for one, am eager to see the results as more African countries follow their footsteps.

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The UK, holding $65 billion in total FDI stock in Africa as of 2020, is second only to China in terms of investment volume.

Title:

Content: When asked for his views on diversification as a strategy for portfolio management, Warren Buffett responded, “diversification is protection against ignorance”. Instead of a diversified portfolio, the Oracle of Omaha famously prefers a concentrated one, composed of a few sectors he has rigorously studied.

The UK’s investment strategy for the African continent is seemingly straight out of the Buffett playbook. As of 2020, the UK holds $65bn in total foreign direct investment (FDI) stock in Africa, second only to China. The vast majority of the portfolio is in oil, gas, mining and financial services.

In 2022 five new oil and gas deals worth £2.1bn were struck at the UK-Africa summit. In stark contrast, just £161m (8% of the total summit commitments) were invested in clean energy. One may agree with the UK’s strategy, suggesting that there aren’t many other high-yield investments to be made other than in oil majors, legacy miners and grey-haired banks. And besides, who would disagree with Buffett’s dictum? He is the sixth-wealthiest person in the world after all.

The truth of the matter is that Buffett would not be as wealthy as he is without adapting to changes in market trends, technologies and geopolitics. In May he sold his remaining stake in chip manufacturer TSMC due to geopolitical considerations (TSMC is based in Taiwan). A concentrated portfolio does not mean a stagnant one. It is this insight that the UK is overlooking, setting itself up to miss opportunities in those new industries rapidly taking shape across the world’s youngest and most promising continent.

Two trends are shaping markets across the continent. One of these is the adoption of financial technologies and the other is increased demand for healthcare, a consequence of Africa’s population boom and rising standards of living.

Fintech sector

McKinsey, a consultancy, estimated that revenues in the African fintech sector could surge eight times their current value to $30bn by 2025. Between 2020 and 2021 alone, the number of tech start-ups tripled to 5,200 companies. In 2021, seven of the 10 newly minted African unicorns (private companies valued over $1bn) are fintechs. As more Africans get connected and as digital identification verification models mature, fintechs will scale and profits will follow.

The second sector is pharmaceuticals. As Africa’s population grows and incomes rise, more money will be spent on healthcare. Within this sector, the Covid-19 pandemic laid bare the worrisome state of Africa’s vaccine and therapeutic manufacturing capabilities. Estimates vary, but some assessments forecast vaccine demand to double in volume from about 1-billion doses now to more than 2.7-billion doses by 2040. Industries adjacent to pharmaceuticals such as logistics, packaging and protective equipment are likely to cash in on increased private and public healthcare expenditure.

There are some positive signs that the newly revamped British International Investment (BII), formally the Commonwealth Development Corporation, is adjusting its investments because of these market trends. In 2020, the BII made a $150m investment in Kelix bio, a pan-African pharmaceutical platform focusing on manufacturing and marketing. It also executed a $20m, four-year structured credit deal with Moove, a fintech company that provides customers with cheaper access to vehicles.

Risk premium

These steps are positive but they are small. Inward FDI for Africa remains pitiful. Last year set a record for the continent, bringing in $83bn. To put this in context, the City of London in 2020 hit $831bn in FDI (10 times that of a continent of 54 countries), according to the Office of National Statistics.

What to make of this all? At least two insights. First, the UK should look to new sectors, taking bold bets in companies leading the fintech and pharmaceutical sectors. The second insight is that Africa’s risk premium is overpriced. There is opportunity beyond the industries of the 20th century; one just needs to look for them.

• Nott works for a venture facility for public benefit and is based in London. He writes in his personal capacity. You can follow his writing on Twitter @TheAfricaBrief.

Picture: 123RF

Which European countries lead investment in Africa?

Chinese FDI has surged from $75 million in 2003 to $2.7 billion in 2019, with China being Africa's largest source of FDI since 2014.

Title:

Content: What can Africa expect from FOCAC 2021?

As the 2021 Forum on China-Africa Cooperation (FOCAC) approaches, we examine the state of the China-Africa relationship and what should be on the table at this year's forum.

The eighth edition of the Forum on China-Africa Cooperation (FOCAC) is due to be held in Dakar, Senegal, from 29-30 November 2021, Senegal’s foreign minister, Aïssata Tall Sall, and the Chinese ambassador to Dakar, Xiao Han, have announced.

The theme of the conference will be “Deepen China-Africa Partnership and Promote Sustainable Development to Build a China-Africa Community with a Shared Future in the New Era”, according to Chinese foreign ministry spokesman Wang Wenbin.

Speaking in a press conference in Beijing on 5 November, he said that the meeting would “review and assess the follow-up implementation of the outcomes of the 2018 FOCAC Beijing Summit as well as the joint China-Africa response to Covid-19, and chart the course for China-Africa relations for the next three years and more to come.”

He also predicted that the forum would “inject new impetus into the China-Africa comprehensive strategic and cooperative partnership”.

Four key themes for the FOCAC agenda

On 8 November, Senegal’s foreign minister and the Chinese ambassador to Dakar, Xiao Han, announced that the forum would adopt four resolutions: The Dakar Action Plan (2022-2024); the 2035 Vision for China-Africa Cooperation; the Sino-African Declaration on Climate Change; and the Declaration of the Eighth Ministerial Conference of FOCAC.

These, predicted Eric Olander, writing on the China-Africa Project website, are likely to “serve as the main pillars” of the forum.

The Senegalese foreign minister said that the forum would appraise the results of China-African cooperation during the Covid-19 pandemic and define how it would continue for the next three years and beyond.

She also announced that the seventh China-Africa Business Conference would take place in parallel with FOCAC at the Diamniadio Exhibition Centre in Dakar and by video conference. The 2018 edition in Beijing hosted more than 1,000 African representatives from over 600 enterprises, business groups, and research institutions.

“FOCAC is our common good. Its success will bring prosperity to current and future generations of Africans and Chinese,” said Aïssata Tall Sall.

In an interview with the Xinhua news agency the minister said she expected the forum to address Africa’s place within the Belt and Road Initiative, underlining its importance to world trade.

Hundreds of ambassadors and diplomats are expected to attend the forum, which is likely to be a mixture of online and live events.

However, as Lina Benabdallah, assistant professor at Wake Forest University, has pointed out on Twitter, the event will be at ministerial level, which means that heads of state such as Chinese President Xi Jinping will not be attending.

“This is no doubt a disappointment to #MackySall who expressed big enthusiasm for hosting (in addition to co-chairing) the #FOCAC meeting. At this point his Minister of foreign affairs is in charge of hosting. #FOCAC at the summit level just brings higher visibility, more perks,” she writes.

We examine further below what is likely to be on the agenda at this year’s forum.

What is FOCAC?

FOCAC is a triennial high-level forum between China and all of the states of Africa, with the exception of Eswatini, which continues to recognise Taiwan.

Modelled on Japan’s Tokyo International Conference on African Development (TICAD), it provides an organising mechanism for Chinese foreign policy toward Africa.

Typically attended by the incumbent Chinese president and many of his counterparts across the continent, FOCAC has frequently played host to eye-catching Chinese policy announcements and financial commitments. The forum is alternately hosted in Beijing and major African capitals.

The China-Africa Business Council’s recent report on China’s private sector investment in Africa looks forward to the event as “another milestone and a new starting point for China-Africa economic and trade cooperation” that will provide “a great opportunity for all African countries to attract foreign investment and expand their international influence”.

“Both Chinese and African enterprises should anticipate the opportunity to enjoy great mutual policy benefits,” says the report.

The forum looks to build on the increasingly close economic relations that have been forged between China and Africa over the last 20 years.

According to the China-Africa Research Institute at Johns Hopkins University, the value of China-Africa trade in 2019 was $192bn, up from $185bn in 2018. In 2019, the largest exporter to China from Africa was Angola, followed by South Africa and the Republic of Congo. In 2019, Nigeria was the largest buyer of Chinese goods, followed by South Africa and Egypt.

China is also Africa’s biggest source of foreign direct investment – investment surged from $75m in 2003 to $2.7bn in 2019. Chinese FDI flows to Africa have exceeded those from the US since 2014. Between 2013 and 2018, 45% of China’s foreign aid went to Africa. The number of Chinese workers in Africa by the end of 2019 was 182,745, according to official Chinese sources.

How has FOCAC impacted the financial relationship between China and Africa?

The first official FOCAC was held in Beijing in 2006, following two major ministerial conferences in Beijing and Addis Ababa in 2000 and 2003. Between 2000 and 2019, the China-Africa Research Institute at Johns Hopkins University estimated Chinese financiers signed 1,141 loan commitments worth $153bn with African governments and their state-owned enterprises.

In 2015, China unveiled its largest commitment of the conference series, a $60bn package of aid, subsidised lending, and state-backed investment, a commitment repeated in 2018.

Chinese financial support has proved crucial to African countries over the last two decades. Loans from government and state-owned banks have enabled the construction of major infrastructure projects across the continent, including highways, ports, airports and government buildings.

But much of that support has been relatively opaque. According to a research paper released in late September by the China Africa Research Institute, Zambia’s outstanding external debt to Chinese financiers is approximately $6.6bn, almost double the $3.4bn revealed by the previous Zambian government. The estimates do not include substantial arrears to Chinese contractors for unpaid projects, part of an estimated domestic arrears pile amounting to $2bn.

What was promised at FOCAC in 2018?

For the first time in the history of the FOCAC meetings, China’s commitments to Africa stayed flat in 2018, with $60bn pledged over three years. Prior forums had seen an exponential growth in commitments, starting from around $5bn in 2006.

According to Annalisa Prizzon, a senior research fellow at the UK-based ODI, the 2018 commitment was more weighted towards aid than previous instalments, with 25% of these commitments – or $5bn a year – in the form of grants, interest-free loans and concessional loans.

In a May speech, Chinese finance minister Wang Yi said that over 85% of the eight major initiatives announced at the 2018 Beijing Summit have been implemented, 70% of the $60bn supporting funds have been disbursed or earmarked, and a large number of cooperation projects have been launched or completed.

Other analysts are less enamoured of the track record of FOCAC in delivering benefits to Africa. Writing for African Business, former Liberian public works minister Gyude Moore says that a vast economic chasm has opened between Africa and China. He argues that this year’s forum presents an opportunity for African states to recalibrate and correct their courses using lessons from China’s past.

Also writing for African Business earlier this year, Hannah Ryder, CEO of Development Reimagined, an African-led international development agency based in Beijing, called for “a more organised, collective approach to engagement” on the part of African leaders at this year’s FOCAC, and summarised her organisation’s blueprint for an African China strategy.

For Ryder, writing in the November issue of African Business, the factors that drove China to commit $60bn to African countries in 2018 remain as strong as ever, but the outcomes of this year’s forum remain uncertain.

Future trajectories of China-Africa relations

The report FOCAC at 21: Future Trajectories of China-Africa Relations published in October by the China Foresight project at the London School of Economics brings together a number of international experts to examine emerging trends likely to shape China-Africa relations in coming years.

  • Stephen Paduano, executive director of the LSE Economic Diplomacy Commission, says that the crux of China’s foreign economic policy since the death of Mao has been running trade surpluses. It is far from certain that China can pull back from its overseas spending spree, as a decline in overseas capital flows would create a decline in China’s trade surplus that could be politically unpalatable.
  • Mzukisi Qobo, head of Wits School of Governance at the University of the Witwatersrand in South Africa, argues that African leaders must use their agency more effectively at FOCAC to seek more market access in China, while also using the African Continental Free Trade Agreement as a basis for industrial development and engagement with external actors.
  • Lina Benabdallah, assistant professor at Wake Forest University, points out that in the early stages of the Covid-19 pandemic, when China was in need of assistance, African states provided much of that aid. China’s reciprocation of that assistance, she says, has filled the void left by the absence of other partners but has yet to reach its full potential. FOCAC 2021 will provide the opportunity to negotiate better delivery deadlines for Chinese vaccines and the possibility of producing more of them locally.

The report also contains articles by experts examining China’s security engagement with Africa, its digital infrastructure in Africa, educational exchanges and collaboration on space technology.

What will be on the agenda at this year’s FOCAC?

Analysts have predicted that an era of “easy” Chinese credit in Africa is drawing to a close , as an economic relationship primarily based on the resource trade has shifted towards infrastructure and a political and strategic relationship.

The Covid-19 pandemic has had a catastrophic financial impact on many African countries, leading to fears of debt defaults on the billions of dollars that China has lent the continent over two decades. The World Bank estimates that Africa’s funding gap stood at $290bn in 2020.

Without debt support, unaffordable payments on the vast portfolio of loans from China and other wealthy nations could lead to a series of chaotic defaults by individual African countries.

For its part, China says it is a participant in the G20 Debt Service Suspension Initiative, and says it has signed debt suspension agreements or similar understandings with 19 African countries.

It has also cancelled interest-free loans due to mature by the end of 2020 for 15 African countries. Yet African countries concerned by their fiscal situation are likely to push for much more generous debt renegotiation and forgiveness.

According to Wang Yi, the conference will also focus on joint efforts against Covid-19, including the provision of more vaccines for the continent. Africa’s share of China’s total global vaccine distribution remains at 8% compared to 61% for Asia, according to a Chinese vaccine tracker report from @BridgeBeijing.

There will also be talks on deepening cooperation on China’s Belt and Road global infrastructure plan and adopting sector-specific cooperation measures for priority areas such as healthcare, investment, trade, industrialisation, agricultural security, climate change, peace and security, human resources and digital economy.

According to the South China Morning Post, African countries will be “pushing to grow their agricultural exports into China” at the forum.

The newspaper quotes an interview by Bloomberg with Uganda’s President Yoweri Museveni in which he says that China should “provide tariff-free, quota-free access” for African goods, such as that allowed by the US African Growth and Opportunity Act (AGOA) or a deal mirroring Europe’s Everything But Arms arrangement for least developed countries.

“The only new thing we shall insist on is market access to the Chinese market, because that will help Africa a great deal,” Museveni told Bloomberg on 1 November. “The next thing I would ask from them is to allow our products to enter their market quota-free, tax-free.”

Mauritius is the only African country to have signed a free trade agreement with China.

A very different FOCAC in 2021?

Discussing the forthcoming forum on the China in Africa podcast, Eric Olander and Cobus van Staden predict that the 2021 edition will be “a very different FOCAC than in recent years”.

They foresee the announcement of smaller infrastructure projects than at previous editions, but believe digital and tech will be big – “expect lots of smart cities projects to be announced,” says van Staden.

Agriculture is a theme that they expect to be much higher on the agenda this year, as it will give China a chance to “stick it to the West”.

On the question of whether China will bring a big chequebook to the table, they say that as no other countries have announced the size of their commitments in recent bilateral meetings with Africa, this will be a chance for China to make an impression.

However, the area in which they most expect China to announce a big number is in the amount of vaccines it will be sending to Africa.

As regards green investment, they ponder whether there will be any gesture to replace the investments in coal on the continent that Beijing has recently cut. Given China’s lead in renewable technology, they see the space for a “real movement forward” in this area.

Additional research and reporting by Charles Dietz.

How has China's FDI in Africa changed from 2003 to 2019?

Geographically, South Africa, Nigeria, and Morocco are significant recipients of foreign investment, with South Africa alone accounting for nearly 34% of the VanEck Vectors Africa Index ETF's geographical allocation.

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Content: AFK: One Of The Few ETFs Investing In Africa

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Summary

  • AFK provides exposure to publicly-listed companies doing business in Africa.
  • AFK is trading at less than 10x earnings, which is fairly valued in my opinion given the specific risks associated with emerging markets.
  • As the probability of a global recession is now higher than a few months ago, I would personally be patient and wait for better opportunities in Europe and North America.

Investment Thesis

With some of the fastest-growing economies in the world, African nations are playing an increasingly significant role in the global economy. The population is young and rapidly growing, and household incomes and consumption are projected to rise. According to the WEF, more than 40% of Africans would be in the middle or upper classes by 2030, leading to increased demand for products and services. As a result, household spending is predicted to reach $2.5 trillion in 2030, more than double the 2015 figure ($1.1 trillion). The continent is also home to an abundance of natural resources. For instance, it has huge, untapped reserves of natural gas and oil and largely unexploited hydroelectric power. In this article, I will review the VanEck Vectors Africa Index ETF (NYSEARCA:AFK), which provides exposure to publicly-listed companies doing business in Africa.

Strategy Details

The VanEck Vectors Africa Index ETF tracks the performance of the MVIS GDP Africa Index. "The index includes local listings of companies that are incorporated in Africa and listings of companies incorporated outside of Africa but that have at least 50% of their revenues coming from Africa."

If you want to learn more about the strategy, please click here.

Portfolio Composition

The index places a high weight on the Financial sector (representing around 32% of the index), followed by Materials (accounting for 29%) and Communication Services (representing around 21% of the fund). The largest three sectors have a combined allocation of approximately 82%.

In terms of geographical allocation, nearly ~34% of the fund is invested in South Africa, followed by Nigeria (~11.7%) and Morocco (~10.7%). It is interesting to see that AFK doesn't rank countries by GDP, but rather by how well the capital markets are developed in those countries. Egypt, for instance, which is the second-largest African economy by nominal GDP comes only 8th on the list, with 5% of total assets.

~41% of the portfolio is invested in mid-cap blend issuers, characterized as mid-sized companies where neither growth nor value characteristics predominate. Mid-cap issuers are generally defined as companies with a market capitalization between $2 billion and $8 billion. The second-largest allocation is mid-cap growth equities. It is interesting to see that AFK allocates approximately 77% of total assets to small and mid-cap issuers, which generally have a larger runway to grow than large-cap issuers and can therefore provide higher returns over the long term. That said, small and mid-cap stocks generally have higher betas, thus I think it is important to see if you are comfortable with a higher level of volatility before purchasing AFK.

The fund is currently invested in ~79 different stocks. The top ten holding account for ~42%, with no single stock weighting more than 6%. All in all, AFK is well-diversified and has a very low level of unsystematic risk as a result. However, I think it is important to highlight the fact that AFK doesn't diversify the emerging market risk. In other words, all countries included in this basket are emerging economies and by owning AFK, you are facing some undiversifiable risks specific to emerging markets.

Since we are dealing with equities, one important characteristic is the portfolio's valuation. According to data from Morningstar, AFK currently trades at a price-to-book ratio of ~1.7 and a price-to-earnings ratio of 9.5. This is extremely cheap if you compare it to developed markets which generally trade at over 14x earnings.

However, this countries come with a unique set of challenges. For instance, if you look at the countries with the highest inflation rate in the world, African countries are overweighted in that list. The same goes for other crucial metrics such as unemployment. In my opinion, AFK's valuation fairly reflects the fundamentals of the underlying economies and deserves a discount relative to developed markets and other emerging markets that are in a better shape.

Is The ETF Right for Me?

I have compared AFK's total returns against the iShares MSCI Emerging Markets ETF (EEM) over the last 5 years to assess which one was a better investment. Over that period, both funds had similar results, with EEM slightly outperforming AFK.

To put AKF's results into perspective, a $100 investment 5 years ago in this ETF would now be worth ~$105.04. This represents a compound annual growth rate of ~0.99%, including dividends, which is a mediocre absolute return in my opinion.

If we take a step back and look at the 10-year total return, the results don't change much. EEM came on top once again, outperforming AFK since early 2015. I think it is worth noting fact that AFK failed to deliver positive returns over 10 years despite a good dividend yield and low valuations. I think this is a good example where low valuations are not enough to make a fund/stock a great investment and that you need additional factors that will contribute to its success.

Lastly, with a rising dollar and the potential for a global recession increasing, I would personally avoid investing in emerging markets at the moment, since I believe better opportunities will be available in Europe and North America over the next months.

Key Takeaways

AFK provides exposure to publicly-listed companies doing business in Africa. For many investors, Africa's young and rapidly growing economy represents a lucrative market. AFK is trading at less than 10x earnings, which is fairly valued in my opinion given the specific risks associated with emerging markets. As the probability of a global recession is now higher than a few months ago, I would personally be patient and wait for better opportunities in Europe and North America.

This article was written by

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About me: Value-oriented investor, seeking low-risk investments with the potential to deliver high returns. I like to analyze commodities, ETFs, and cash-flow positive businesses that have a moat and growth opportunities.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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For instance, a regional agreement between the Democratic Republic of the Congo and Zambia aims to create an industrial zone for electric car battery production.

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Content:
African economies should seize the opportunity to better integrate into technology-intensive global supply chains and boost prosperity, but this depends on their ability to harness key market and investment trends, the UN’s trade and development body UNCTAD said on Wednesday.

In a new reportUNCTAD shows that Africa can become a major exporter of higher value-added goods, creating growth and jobs, and fuelling a rise in productivity and wages.

Launching the report in Nairobi, UNCTAD Secretary-General Rebeca Grynspan insisted it would offer a better future for the continent’s economies.

Diversifying trade “builds resilience and enhances innovation”, Ms. Grynspan said, adding that diversifaction was “key” for private sector development and employment opportunities for Africa’s growing population.

Africa’s competitive advantage

Ms. Grynspan highlighted three factors driving the “huge” opportunity for the continent. From a geopolitical point of view, countries and businesses are seeking to diversify their suppliers and thus reduce risk. Africa is well placed to tap into this trend, Ms. Grynspan said, which together with the African Continental Free Trade Area offers “great synergies” for participating in global supply chains.

Africa also has a unique advantage amid the rise of the renewable energy market, as it is a vital source of raw materials for technology-intensive industries – for instance lithium, essential to the production of electric car batteries. It has the possibility to become a destination for manufacturing and should seek to export more complex finished goods rather than just commodities, Ms. Grynspan said.

As for demographics, Africa boasts not only a dynamic, young workforce, but also a “burgeoning” middle class offering local consumer markets for hi-tech goods.

‘Untapped potential’

The report analyses “untapped potential” for African countries to strengthen their position in the automobile, solar energy and pharmaceutical industries.

Encouragingly, Ms. Grynspan noted that Africa’s tech ecosystem growth has already proven impressive, as “hubs in artificial intelligence, 3D printing, blockchain, fintech [financial technology] and e-commerce are thriving” in countries such as Kenya, fostering innovation and strengthening Africa’s chance to capture technology-intensive global supply chains.

Higher wages and resilience

Creating an environment conducive to technology-intensive industries will raise wages, the UNCTAD chief said, underscoring that the average wage on the continent is $220 per month while in the Americas, in comparison, it is nearly $670.

According to UNCTAD, deeper integration into global supply chains would also diversify African economies, boosting their resilience to future shocks.

Attract investment

However, for this to happen, more investment will be needed, Ms. Grynspan said. The report highlights the fact that currently, only about two per cent of global investments in renewable energy go to Africa.

Paul Akiwumi, Director of UNCTAD’s Division on Africa, Least Developed Countries and Special Programmes, said that in order to drive more large-scale private investment, regulatory barriers will have to be removed and regional industrial development plans put in place.

Mr. Akiwumi cited the example of a regional agreement between the Democratic Republic of the Congo and Zambia, allowing for the creation of an industrial zone for the production of electric car batteries. He also highlighted the importance of product registration and intellectual property in order to attract investors.

Urgent debt relief needed

Ms. Grynspan stressed that in order for Africa to be able to seize its competitive advantage, the continent’s economies need debt relief to create fiscal space so that countries can invest in strengthening supply chains and in education for their workforce.

She recalled that African countries pay four times more for borrowing than the United States and eight times more than European nations, as shown in UNCTAD’s recent “World of Debt” report.

‘Change the rules’

“This must change if Africa is to achieve its full economic potential and be a major actor in global supply chains,” the UNCTAD chief insisted, pledging the UN’s unwavering support to nations across the continent.

Ms. Grynspan highlighted UN Secretary-General António Guterres’ advocacy to “change the rules that reproduce these asymmetries” and fix the “distorted” perception of risk which international investors hold in relation to developing economies.

Distributed by APO Group on behalf of UN News.

Which sectors are Chinese investments in Africa focusing on?

Which sectors received the most foreign investment?

Furthermore, the African Continental Free Trade Area offers synergies for participating in global supply chains, enhancing Africa's role in technology-intensive industries.

Overall, Africa's investment landscape is characterized by a focus on infrastructure, technology, and renewable energy, with significant opportunities for growth in these sectors.