Seeing the Parts Is Not Enough

For both Africa and the businesses hoping to succeed there, it makes sense to be aware of its parts. It also makes sense to look at the whole.

While first considering Success in Africa, I had a casual conversation with a friend, Jeff Walker. Jeff founded and led CCMP, a private equity firm with $12 billion in assets under management. Under Jeff’s leadership CCMP had entered Europe at the dawn of its private equity market and had prospered. “I liked it, ” he said. “You had all these managers who were under-incented, because all they could do was make money for the owners of the companies. Private equity guys like us showed up and said they could be the owners. If that could happen in Africa, that’d be great.”

CCMP did not invest in Africa while Jeff was CEO and is not invested in Africa today. I asked Jeff how he would look at investment in Africa. “The first thing you’re going to look at as an investor going overseas is market size, ” he said. “Is there enough scale there to make the transaction worthwhile? Europe became interesting because of European integration. Does that exist in Africa? ”

It does. In 2000, Tom Gibian founded private equity firm Emerging Capital Partners (ECP) to help bring the model to Africa. Tom’s a committed Quaker who trained at Wharton and cut his teeth at Goldman Sachs. He has a strong sense of personal mission, but it never gets in the way of objective financial analysis. Recalling the premise on which ECP was founded, he commented, “We saw that there was no shortage of human capacity and entrepreneurial opportunity in Africa, but there was a shortage of capital and technology. That was—and is—a promising equation.” Tom invested in the likes of Sam Jonah and telecoms pioneer Mo Ibrahim when few others would. ECP is among the earliest private equity firms to enter Africa. Others have come in since, and in 2011, investors closed $3 billion-worth of private equity deals.²

The principal challenge Tom saw, and still sees, in Africa is fragmentation. “The biggest problem this continent has is too many countries, ” Tom said.

Former treasury secretary and Goldman Sachs head Bob Rubin sees the challenge in historical perspective, considering what it took for investors to see opportunity in other frontier markets. “You, know, I saw Mexico change investor perceptions around, mostly with road shows of large companies, ” he said. “I’ve seen Spain do it as well. I don’t think Africa can replicate that because they have few countries that are large enough for that.^*Most businesses looking at where to go next, they derail the small countries for the most part. So to approach the many small countries of Africa on a national basis may not work for most businesses.”

It’s a challenge seen not only by global investors looking at Africa, but by Africans themselves. There are few business leaders more respected in Africa than Mohamed Ibrahim. A native of Sudan, Mo immigrated to London and launched a highly profitable and stable engineering firm serving European mobile operators. He sold that company to do what no European operator would, though he begged them: start an African cell phone company. Seven years after starting it, Mo sold the cell phone company, Celtel, for 3.4 billion dollars.

I met Mo while working on the Natural Resource Charter, a project to reform natural resources development^† in Africa. When I told him I wanted his help writing a book on what success looks like in Africa, he stopped me short. He knew what he wanted to focus on:

You talk about Africa; we have fifty-four countries. That is a problem. European countries can act as a bloc, can force company behavior and be a force on the world stage. That is difficult for Africa. China, Europe, North America, Brazil: these are the blocs that control power, and they do it because they are blocs. If you are not of that size, nobody cares. Do you know why China is where it is, and Africa is not? Because China is one. If we were one, we too would be there. That’s why regional integration is essential for Africa to really have a place at the table.

You can’t enter new global markets without looking at nations. National-level market analysis and strategy makes sense but it has limits. It makes sense because you need to understand the governance of the country, the political system, the strengths of contracts and the courts, and of course the legal system as it affects setting up, operating, drawing profits from, and shutting down a business. These are de rigueur analyses that are essential in new market entry.

However, if a national lens were the only, or even the primary, lens through which you looked at Africa, you would miss it. Almost none of the successful business leaders interviewed in this book is satisfied to work within the bounds of even the largest national markets of Africa. With the advent of technology and a gradual opening of trade, they do not have to.

Consider Regions

One reasonable way to segment African opportunities is by regional trading bloc. There are five key regional blocs in Africa, which are the active Regional Economic Communities (RECs) of the African Economic Community, an organization to promote mutual economic development among African states: The five are:

• SADC (the Southern African Development Community)

• COMESA (the Common Market for Eastern and Southern Africa)

• EAC (the East African Community)

• ECOWAS (the Economic Community of West African States)

• ECCAS (the Economic Community of Central African States)^*

Figure 3–4: Map of trade agreements

Source: Wiz9999, provided to Wikimedia November 5, 2012.

Some successful businesses approach African regions serially. Vimal Shah’s Bidco is among these. An advocate of owning one’s own supply chains, Vimal’s eye is squarely focused on where markets are coming together as a whole. “In the East Africa community, we are 140 million people, ” he said. “By 2050 we will be 250 million. If I can source, produce, and sell in that market, that is a lot of room for growth.” Vimal sees less appeal in some of the other trading blocs in Africa: “You have got ECOWAS in West Africa where free trade is not happening. And North Africa doesn’t have a free trade agreement apart from COMESA.”

Funke Opeke sees a similar opportunity on the west side of Africa, despite the absence of a functioning free trade regime. Funke is the CEO of Main One Cable Company, a firm that raised and invested $240 million to build a subsea broadband cable to West Africa. When I asked African business school students which CEOs they most admire, Funke was identified repeatedly. When I asked why, they cited her success leading a large project to completion, and her vision to achieve more. The Main One cable first landed in Ghana and Nigeria, two markets that offer extensive growth opportunities on their own. Funke nonetheless expresses her vision in regional terms:

We built the system with a whole-of-West Africa vision. The region has a shared set of development challenges and potential for growth with broadband. We think the rest, especially the southern tip of the continent, is particularly well served now. When we brought the cable to Togo, they had yet to gain access to any cable system directly. Now Togo provides access for us to some of the landlocked countries. It is the same with Benin, where they’ve had some challenges with the existing broadband and the country is not well connected to the Internet. I’m heading for Senegal on Monday, trying to work with the new government to see if indeed we can complete the line they need to Senegal. We’ve always wanted to be not just a Nigerian or Ghanaian company and with the kind of infrastructure we have, we’re able to leverage it across the region. There’s a lot of migration across the region; there’s a lot of commonality of culture.

For Centum’s James Mworia, the value of focusing on a single region is not so much market size as information asymmetry. Through this focus, he can see and capture opportunities that others can’t.

“We are asking the right questions at the regional level first, ” James says, “where we have the relationships and where the market is naturally coming together. We ask, ‘How do we reduce transport cost within this region? How do we share infrastructure such as power? ’ Kenya is now importing power from Ethiopia. That is where we see our opportunity in the immediate term. Once we have the (East African Community) region, we can then say, ‘How do we cooperate with SADDC? If it is not happening at the regional level, it’s unlikely to happen at a Pan-African level.’”

That triple lens of proximity, opportunity, and relationship is a powerful advantage of a single-region strategy. It allows a company to take on opportunities in places where others fear to tread, like South Sudan. Recently independent and emerging from a 2005 comprehensive peace agreement (CPA), South Sudan is a locus of active investment from the rest of East Africa. James Mworia is among those investing there. “We took our insurance company into South Sudan in 2005. It was even before the CPA was signed, but we have a good understanding of the market and we’ve been in the market. We made about $1 million in profit the first year, in insurance of all things.”

A tight focus at the regional level also allows James’s company to perceive more granular opportunities at the subnational level. He cites the Two Rivers development as an example. “We recently got the results of a market survey that was looking at the purchasing power of the primary retail catchment area, ” James said. “Within fifteen kilometers, there are four thousand households that earn more than $4, 000 per month, and seventy-four thousand households with more than $975 per month. That is middle income by any standard measure.^* When you read the big global consulting firm reports they tell you how much wealth is in Africa or in Kenya, but that is the macro story. You would never build Two Rivers based on that. It’s only when we get to the micro level like this that then the thing just grabs us.”^†

⇐ Предыдущая3456789101112Следующая ⇒

Поделиться: