One of our Private Equity advisory clients recently decided to open an investment office focused specifically on finding investment opportunities in Africa, especially Nigeria and Kenya. Here are some of the points that underlie their thinking… here are some of the thoughts which drove this Fund to a major commitments:
Why in the world would they do that? And how soon should other Funds start thinking along the same lines?
- Africa is bigger than you think in terms of land mass. It’s 100 times the size of Italy. Africa will also be bigger in economic output than Japan by 2020; Japan is the third largest economy in the world.
- Africa is many different things: 54 countries in 5 regions. There is no “Africa” like there is no “Asia.” You have to pick & choose the markets that are best to start in.
- Africa is a continent of three extremes: Climate, poverty and ideology. It’s a matter of learning to look for opportunity that is in touch with and copasetic with these three extremes.
- While the birthrate in Western countries is barely keeping up with an aging populace, Nigeria produces more babies than all of Europe.
- Kenya is remarkably healthy fiscally — and perhaps the place to start. It has 2X the growth and half the debt per capita of the US.
- All the fear and anxiety about Ebola is way overdone. True, it has killed about 10,000 people in the last five years. But Malaria kills about 500,000 people every year, mostly in Africa. So if you want to worry about something …
- Corruption is still endemic in lots of African countries, especially Nigeria. But rescue is coming from an unlikely source: Smart phones. In many countries now, there are phone numbers which average consumers can call to report how much bribe was paid for simple everyday activities. This “sunshine” is having a major impact.
My takeaway: A lot has changed since we installed the first Always sanitary napkin line in Nigeria in 1995. It was a nightmare, in no small measure because P&G would not pay bribes to anyone. But I get the clear sense that things are changing quickly and that I need to update my thinking about what might be possible from an investor’s perspective.