Is Africa a Goldmine or Graveyard for Investors?
An unpopular perspective on the prospects and potentials of African economies
I saw a clip not too long ago. It was the popular African-American artiste, Akon, expressing his views concerning Africa. He made some striking comments. He said Africa is a clean slate. He explained further by saying that renowned companies are already established in first world countries like the USA and the whole economic landscape is already crowded. So, instead of fighting to rise in the crowded competition, one can go to Africa, build and replicate the successes in the first world countries. It sounds witty, much like some good sense, but is it?
Currently, most African countries are witnessing a brain drain like never before. Every enlightened young person wants to leave. A significant percentage of my friends on the continent have left. 80% of the others remaining in those countries are there because they couldn’t put together what they require to leave. The most important element is the finances required to leave. There are those who jump out of the country with blind hope but the smart ones often leave for school. Now, this is not because they hate their country or anything as such, rather it is because they cannot live the life they envision in their own country.
I had an argument with a friend with the expressions of Akon. Another friend who was in the conversation said, ‘if it was that easy, wouldn’t the people here have done it’. The outside world often think that Africa is filled with these backward thinking people who don’t dream, envision or plan. The educated population of some of the African countries can rival the educated population of many of the top countries of the world. The human capital is there. The problem is consensus; consensus is fricking difficult.
The fact is this, it is easier to be successful in most countries of the world than Africa. That is why people leave!
To be successful in Africa is crazy hard. And people made it hard. Most have it in their culture to make life hard for others in the name of ‘training’. I heard from a credible source that the average pay of educated people working in a top African city is less than $200. In most cases, the companies can afford to pay more but they just won’t. I know a number of people who earn ridiculous amounts. This is definitely not true of every indigenous organization but very common.
So, you have $250 million and you want to invest in Africa? My first question to you is this; what are you thinking? I watch Bloomberg TV quite a bit and I understand basically that the reason for investing in emerging markets is to diversify an investment portfolio. Often times, the large growth doesn’t come from there. However, when it does it is mostly associated with some information and not really metrics. So, if you want to build a Fortune 500 company in Africa from scratch, you would probably just lose a lot of money.
I have thought about it a lot, why international organizations would rather do charity in Africa than establish a company. It is because they know. Yes, they can get raw materials in Africa, but can the system provide the infrastructure (road network, power, etc.) they need? Can the system provide the human resources they need? Can the system provide the consumers they need? You might think Africa has lots of consumers based on what you see, but ask yourself, how many of those products you see in those countries are bought new? In fact, in some countries, it is not advisable to buy new products even when you can afford it. That is because it could get faulty very quickly because of the environment, it could get stolen, or plunge you into financial problems in social circles.
I laugh when I hear government officials from some of these countries going to woo the outside world to bring investment into their country. Those companies agree and do feasibility studies, only to abandon the project. I don’t blame them. Any intelligent investor or manager who sees what they see would just avoid the scene. It is the smart decision.
If you have read my previous articles on Africa, you will observe that I believe the continent (especially) needs a new system of government. Otherwise, development would be pathetically slow which will make the countries perpetually behind. The problem of consensus is not that people vocally disagree all the time, rather it is that people can agree on a specific course of action at 11 pm tonight and by 5 am tomorrow, those who swore solidarity to the course of action would utterly disagree and refuse convincing.
Elections are rigged plainly and there is nothing anybody can do about it. Imagine your company or investment is caught in the crossfire, that would be it! So, for the most part, Africa is a graveyard for big money. A lot of people have brought in big money and had to swallow their pride and exit at a loss. However, that does not mean that there is no goldmine.
There are people who have made fortunes in Africa who came from other countries. If you hear their stories you would need to ask yourself if you are willing to do what they did. Forget about fancy stories, the stories are not really fancy at all. When you have a system that is horrible, to have your way each and every time would be a dirty game even if your way is the supposed right course of action.
Some years ago, the Virgin airline came to Nigeria. After a short while, they sold the company and left. There are a number of rumors about why they left, but there is one I found most interesting. When the airline announces that their flight is by 8 am, they meant the plane will take off by 8 am. However, most people in the country are not used to this. They often assume that they will begin checking in passengers by 8 am. So, there were lots of instances where high profile guests would book the plane and they would still not be at the airport by 7:45 am. Of course, not wanting to wait for 1 hour for another flight, they would call ahead to delay the flight. It was said that Virgin maintained their strict time schedule and started losing money because only a few customers would be ready at takeoff. That resulted in other problems and the eventual decision to sell the business unit.
This is more than a cultural thing. What kind of culture doesn’t keep to time? What kind of culture doesn’t value time? I know; a culture that has made a pact with poverty. If you want the goldmine here, can you be mean enough to do the needful? That is because you would need to own the government officials somehow. If you think you don’t need that because you don’t depend on government contracts, you will be shocked. Yes, it is called democracy, but the majority can turn against you at any time for reasons that defy reason. The lack of education and personal dignity by many makes the majority susceptible to being bought. There are no permanent allegiances, they can change overnight. If you want the goldmine here, you have to do it the old way.
Africa is a lovely place by nature, but the men that have established themselves there have made it a backward place. There is virtually nothing that was created out of Africa. There are Africans that have created remarkable things but not in Africa. Some started in Africa but had to leave because the environment is not suitable for it. That’s the state of the continent.
The best is to invest in education or have a section of your international team in the African country. There are also twists and turns that could make you big money in these countries but you must have a good sight on the ground and have clear goals.
With these, I rest my case