A project team consisting of five MBA students from the McDonough School of Business completed a project in correlation with Securitas, which examined the feasibility of developing an aquaculture feed production plant in South Africa.
The project team had a period of twelve weeks, culminating with a week in Johannesburg, South Africa, to deliver its presentation.
The objective was to determine whether investment in a fish feed plant could deliver a nominal rate of return of 18% or higher and, if so, which partners Securitas should work with to pursue the venture. Oceanwise Ltd. (Oceanwise), a South African aquaculture producer of Dusky Kob fish, was identified as one potential partner, and an American animal feed manufacturer, was another.
Two different investment options were identified: A smaller bolt-on retrofit production line and a new greenfield plant, were analyzed to gauge their potential profitability.
To evaluate this business opportunity, market forecasts for the aquaculture industries in numerous Sub-Saharan African countries were developed to gauge the size of the region’s potential customer demand. Nigeria and Ghana were revealed to be much larger markets than South Africa, though the prospect of serving these markets via export poses considerable challenges.
Most Americans did not expect the quick succession of events in Ukraine leading to the removal of President Viktor Yanukovych or the emergence of Crimea as a flashpoint in Ukraine-Russia relations. The situation in Crimea is just the most recent example of how quickly and unexpectedly the international political and economic landscape can change. These changes can adversely impact U.S. business people and investors who have exposure in places such as Russia and Ukraine.
For example, the U.S. and EU have introduced a series of selective sanctions against Russia and some individuals for their role in the current crisis but have indicated that broader sanctions against certain sectors of the Russian economy are possible. Russia has responded by putting a travel ban in place for several American officials. One of the Russians included in the U.S. sanctions, parliamentarian Andrei Klishasa, went further- introducing a bill to allowing for the confiscation, expropriation and nationalization of western assets in response to these U.S. / EU sanctions although it is unclear whether this bill will gain any momentum. Given the interconnectedness of the global economy (including Europe’s reliance on Russia for about 30% of its natural gas), a widening of the crisis or quid pro quo sanctions could impact U.S. businesses with exposure in Russia, Ukraine or Europe.
Fortunately there are solutions which can mitigate the risk of loss due to political risks. These solutions include coverage against political violence, war, confiscation, expropriation, nationalization, forced abandonment and selective discrimination. In addition to coverage, these solutions often provide access to a global network of experts who continually monitor political risk in emerging or frontier markets.
The deterioration of relations between Russia and the U.S. and Europe and events in Crimea are a reminder of the value of protecting your investments and assets (fixed, mobile or inventory) against the perils of political risk. You may also wish to consider protecting your trade receivables against buyer non-payment especially for your international accounts.
For more information see U.S. Freezes Assets of Russian Businessmen and Bank Close to Putin