Tuesday, 23 March 2010
Imaduddin AhmedMedium-sized investments in sub-Saharan enterprises will help develop the region more than hand-outs, and return profit, say London financier and Kampala-industrialist
In 1995, New York had more mobiles than the entire continent of Africa. This year, in spite of the low GDP per capita of the continent, it will have as many mobile phones as the USA. Nigeria, according to UNESCO, produces more feature films than the USA. More than 80% of African countries are politically stable, and the average return on foreign investment into Africa is about 30%. Yet, in the words of former UN Secretary-General Kofi Annan, “Africa’s profitability is one of the best kept secrets in today’s world economy.”
This is the message that Zain Latif, principal of a London-based private equity fund, and Emmaneul Katongole, CEO of Kampala-based pharmaceutical manufacturer Quality Chemical Industries Limited, journeyed to Fletcher to convey in an event organized by The Fletcher International Business Center Global Speaker Series.
“There is an information arbitrage,” according to Latif. While small and medium-sized businesses account for 60% of the GDP of OECD nations, they account for only 10% of the African continent’s GDP. Why? Because of problems of perception and because of a lack of research into the fundamentals of companies which promise high growth.
Latif illustrates the opportunity that arises when the market fails to do its by citing the example of John Paulson, who shorted the subprime market to make $15 billion. “Paulson did his homework, he looked at the prevailing numbers, and he had the courage to put on a trade that few people dared to do.” While there is a proliferation of microfinance institutions to help villagers buy sewing kits, and banks will finance multilateral projects worth more than $100 million, there exists a dearth of financing available for domestic medium-sized businesses.
“The plane carrying me from Kampala to New York carried 300 people. In Uganda, malaria kills
300 people every second day. Every second day, it’s like we have a plane crash. Yet we go on as if it’s business as usual, while over 100 million people worldwide watch a man who cheated on his wife. That calls for our involvement,” said Katongole, whose factory produces affordable, WHO-approved malaria and AIDS drugs for the African market.
Both men had traveled far to get to Fletcher, and not just geographically. For Katongole, a visit to Boston had been long-coming; a lifetime dream. He remembered his days at school. His teacher would ask where knowledge was created. The answer was Boston, and the teacher would encourage his students to travel to Boston to seek knowledge.
Unable to attend primary school until he was 10 because of poverty, Katongole wore his first pair of shoes at the age of 16, when his mother sold a cow. After university, he got his first professional job as a salesman at a steel company. Now he sits at the helm of a multimillion dollar firm, and hobnobs with his nation’s elite; he mentioned to the Ugandan vice-president his speaking engagement. The response – “Do you know exactly where you are going? Fletcher graduates simply the best diplomats in the world!”
Latif too shares a story of boldly venturing against the status quo. A Master of Banking and International Finance at the age of 19, he focused on Africa and recognized the potential of a region about to wake-up. At 23, he closed a $125 million deal for HSBC in Nigeria. Soon after, he became perhaps the youngest Vice President of a major investment bank, Merrill Lynch, and then Executive Director at Goldman Sachs at 24. Now 26, he heads his own private equity firm in London, with $25 million under management.
Any other investments with socially beneficial spillovers? Besides financing QCIL, Latif’s fund has the largest stake in the sub-Saharan region’s first state-of-the-art cancer facility, the Sweden Ghana Medical Center. If a success, he hopes to replicate the center across the region. With the capacity to treat only 1% of all Ghanaians diagnosed-annually with cancer, a $1 billion per annum market for foreign medical services next door in Nigeria, and fees half of what they are in the UK, he may well have to follow-up on his promise.
“Thirty-five percent of trained Ghanaians nurses leave. We’re giving them a reason to stay. There is not enough aid money to solve the problems of Africa, but there is enough commercial money.”
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