Posted by: beninmwangi | May 1, 2007

The Economist Magazine-What Do the Investors Think?


image source: Wikipedia

Sometimes when I read open ended stories and articles that ask rhetorical questions about Africa, I ask myself ,”what must the international investors think about parking their funds in Africa?”

To be brutally honest with you I have not made up my mind yet on the article that inspired me to write this post, so in the meantime here is an excerpt which seems to sum up the mood of the writer who penned this piece in the latest issue of The Economist, the piece is entitled, “Will Africa Ever Get IT Right?”:

How can the outside world help Africa? There is no easy answer. Western countries, vital donors of aid, should make it clear they will give more help to countries whose governments are relatively clean and efficient—and hold fair elections. The latest aid-givers’ consensus is to identify “good” countries, still quite a small bunch, and let them spend the cash as they see fit. Yet time and again, good guys—most recently, Ethiopia’s Meles Zenawi and Uganda’s Yoweri Museveni—slip back into old despotic ways, putting aid-givers into a quandary. By punishing governments, are they not hurting the innocent poor? In the end, Africa must help itself, just as Asia has. Then the outsiders will pile in, with investment that is better than aid at creating wealth. Even into Nigeria.

I am torn here, because on the one hand what the Economist says here is true. I mean, although there are some countries on the continent which have made some tremendous gains over the last decade, as a whole the continent has a long way to go-politically and economically. However, on the other-hand, I ask myself why would potential investors and business people think any differently about Africa if this type of ambiguous reporting about Africa is all that they hear? Sure, the risk may be higher in a country like Ethiopia or Nigeria, but there are still some companies that do extremely well there-in spite of all of the other things that go on there.

Anyhow, I feel a long-winded spell coming on-so let us stop here. But please, what do you think about this? What do these stories mean for international business people and is it cause for concern? Is there anything that can be done to “contain” the damage caused by a bombardment of negative headlines about Africa-in the minds of potential investors?

Finally, as pointed out on the Africamedia blog, let me also say that this post is not indicative of all mainstream media on Africa. There are some mainstream international media outlets which regularly feature balanced news from Africa. I think Global Voices is a great example of this.



  1. I would not necessarily call the Economist’s coverage of Nigeria this month “ambiguous reporting” if the premium content article you reference in this post is as well-written as the open content Economist article of April 26th “Big Men, Big Fraud, and Big Trouble”.

    A very important and basic requirement for most reputable international investors is some level of political stability and transparency in the relationships between business, government, and the civil society. The sub-title of the Economist article “Big Men, big fraud, and big trouble” says it all:

    “The deep rotteness of Nigeria’s political system threatens all the economic gains this country has made.”

    The article does point to one example of good governance in the Nigerian state of Cross Rivers. Here is an excerpt from the Economist article “Big men, big fraud, big trouble”:

    Progress by saxophone

    Nigerian politics does not have to be like this. Given a chance, good state governors do emerge. In Cross Rivers, for instance, on the border with Cameroon, Donald Duke has effected an impressive transformation over the past eight years.

    In the state capital, Calabar, the streets have no pot-holes. According to the state government, every village is connected to the national grid and everyone has access to clean water. There is almost no litter. Remarkably, instead of the fleet of blacked-out SUVs that normally idle outside governors’ offices, ready to whisk the big man a few hundred metres down the road, outside Mr Duke’s office stand brand new garbage lorries from Germany.
    Moreover, Cross Rivers has no oil wealth. Mr Duke has achieved all this on a fraction of the money available to his neighbours. Instead, he has frozen official salaries, cleverly exploited existing resources and taken on debt. In partnership with private investors, he is also responsible for Tinapa, the largest retail and business development in west Africa. It contains several new giant studios to grab a large slice of the $200m-300m a year “Nollywood” film industry, which churns out, by some estimates, more films than either of its rivals in Los Angeles or Bombay.

    The other key to the state’s success is Mr Duke’s love of the saxophone. Every Sunday evening he performs in his house with his band. And instead of trying to micro-manage his succession, rig the state elections and prepare for endless court battles, when he leaves office at the end of May Mr Duke is going off to America for a music course. It is an unusual example of a politician who is willing to let go.

    But if honest and good leaders can make a difference, the only sure way to break the corrosive link between money and politics in Nigeria is to encourage a private sector that is vigorous enough to give people other ways to make money. As last week’s vote-rigging showed, Nigeria is bursting with energetic entrepreneurial talent. But trying to start a business from scratch is almost impossible. Capital scarcely exists. Although banks are required by law to set aside one-tenth of their pre-tax profits for small business start-ups, few loans are actually made.

    The biggest impediment of all to economic activity in Nigeria is the country’s feeble and erratic power supply. All businesses have to have expensive generators that can double the cost of a start-up; they then have to employ people just to scuttle around grabbing whatever scarce diesel fuel they can find to supply the generators. Two weeks before the election, the ramshackle national Power Holding Company (known to Nigerians as Please Hold Candle) managed to churn out just half the electricity that the country produced in 1960 for about half as many people. If the new president could do just one thing to improve Nigeria’s political and economic prospects, it would be the full electrification of his country.

    End of excerpt

  2. I think the writer of this article was trying to proove a point: TOO MUCH HELP IS BEING GIVEN TO AFRICA .
    This may be true in a way but represents just one of the many faces in which Afrrica is viewed through the eyes of..(for lack of a better term) FOREIGNERS.
    The problems that always arise as a result of AID stem from the deal makers, it takes two to tango….”I GIVE YOU AID we share the spoils” has been the thinking on both sides of the divide. Most Aid gone sour are a result of negotiations involving both the giver and the reciever, the point is the whole world is corrupt especially the guys who give aid knowing exactly what they will get in return…same aid but in a different cover.

  3. Excuse me a second (……while I puke). Thanks! For my own sanity, I have decided to steer clear of any articles or editorials that begin with ‘Will Africa ever get it right?’, or ‘More help needed for Africa’, or ‘Africa in Crisis’ you get the drift. Basically anything patronizing or that reeks of self righteousness and false altruism. Leave Africa alone, after all their problems are not your’s so they don’t need you waxing lyrically about HELP!

    Doom and gloom on Africa is big business, it is addictive for many!

    Compare and contrast with this
    Also, does any one have subscription access to There’s some juicy updates about Ghana’s maiden sovereign international bond. It was originally pegged at $500 million but the government got wind that it would be over-subscribed, there is talk now that it will be $750 million……the article analyses the behind the scenes going ons. Fabulously, the government will also issue a separate ‘Diaspora’ bond on the international markets….first pegged at $25 million, but there are rumblings that it has been increased to $100 million due to level of interest.

    Benin, enough international investors are ‘already in the know’……let’s hope the Economist magazine is not too late to the party! BTW I am also intrigued by Tom Friedman’s (NYT)sudden positive news reporting on Africa’s business landscape?????!!!!!


    Shhhhhhhhhhhhhhhhh! Keep a good kept secret, SECRET! The last thing we need is a rush of short sighted investors who don’t understand the market or the consumer dynamics bumbling and crashing their way through! Too many successful African companies have got burned by foreign investors who didnt understand the low margin, high volume model in the African context…..remember the Africa Online debacle anyone? I’m sure you’re reading the reticence now to list Safaricom on the international markets, same reasons.

    Bottom line, to the greatest risk takers go the spoils! We don’t need to massage anyone’s perceptions. Capital will always flow to the highest returns, as long as economies guarantee ROI, in my opinion savvy African entrepreneurs and those with investment fortitude should get the rich pickings…….

  5. the most important thing is ,africa needs trade no aid.

  6. I have to agree with some of the comments left here. I’ve never been to Africa, so my perception is based on what I see in the media. Over the past couple of weeks, I’ve seen more on scams and giving aid to Africa than how to legitimately do business there. I think a lot of Americans don’t see the opportunity there because we focus so much on collecting money for aid.

    I don’t know much about the political climate in Africa because we have issues of our own here in the U.S. There’s also the fear factor. If I’m not willing to invest in a business in my own community, why should I do it overseas? A compelling argument for investing in Africa hasn’t been given to the public. All we see is the poverty and instability.

  7. BRE:

    Thanks for your insights. The article did highlight Donald Duke and his success with the taking over of the Tinapa theme. I guess my emphasis was moreso on the fact that these type of articles neither motivate anyoine to invest or to consider more aid. But then again, perhaps it is not their responsibility to do this. But it is the resposibility of those that either have a vested interest in doing so or have genuine concern that goes beneath the level of empathy.

    Maybe thats where we come in…any how thanks for sharing your thoughts.


    Interesting points that you have made. I saw an article somewhere about a year ago about a new trend whereby donors were experimenting with a system whereby instead of placing the aid in the hands of gov’t officials, they have been working more closely with cultural and community gatekeepers. One such highly publicized example took place in Ghana, where a large donor organization actually gave the proceeds (several million USD) to the Asantehene (traditional ruler or king in the Asante region of Ghana, not affiliated with government)the issue was very controversial but in the end from my recollection the money went toward its purpose and was all accounted for.

    I favor more trade and smarter aid. Also the point that I rarely hear being mentioned in these sorts of articles is the fact that aid/investment into Africa from Africans living abroad towers over all of the other inflows into the continent with the exception of foreign direct investment, but that could be its own post or article. Thanks Ken!


    Thank you! I will check out both of the links that you mentioned. Your sentiments are not much different than mine. Wait a minute…it just so turns outr that earlier today someone emailed me a link to this article through Angel Africa. I didnt rwad it until I began writing the response to your comment Sijui. What a coincidence, huh? And I have to agree with them this is just the tip of the iceberg. The international credit ratings that they mentioned is huge and signals more to come. Thanks for your mention of the Diaspora investors too, they are certainly changing the scope of the wealth in Africa.


    Hi Gerald, I am really honored to see your comments here. Thanks a lot. It is funny how you said that because in the next day or so I will be posting and very recent interview that took place between and a well heeled business person who has actually participated in some Wall Street level deals, but where the money flowed into Africa.. He touched on the relationship between trade and aid in Africa, I think you shall enjoy it!


    Thanks for being such a passionate contributor to this blog medium. The thing that I would like to point out is that although you are not alone in your questioning, right this very moment someone from North America, Europe, the East, and South America is quietly making tremendous returns in Africa right now. My guess is that our lack of knowing probably plays to the advantage of such investors by reducing the competition. Did you know that the average stock market in Africa is returning over 40% annually in $USD to their investors? That time here has already come and gone here but there it is a reality for many informed investors.

    Thanks again for stopping by!

  8. Hey Benin – congratulations on the move to WordPress.

    Your post further speak to the need to showcase Africa in ways that doesn’t project only the failings of the constituent nations of continent, but the numerous opportunities that exist therein. As simple as this sounds, this is not an easy task, particularly when there are other options for investors. Investing in Africa is not for the faint-hearted – this is the truth, the terrain is rough and very unforgiving even for die-hard African-Nigerians like myself, investing our hard-earned money is not free of trepidation. It must be said however that – and if I can use Nigeria as an example – when the dice rolls ones way, sometimes the returns far exceed what obtains in most western economies, the Lebanese and Indians operating in Nigeria can attest to this.

    Giving a more balanced report on Africa is necessary, but it’s the easiest requirement needed to make the place more favorable to investors. There is an urgent need to strengthen the legal and democratic institutions, just as providing the much needed infrastructure and socially conducive atmosphere. These are the most difficult requirements to meet, and certainly the most slippery to maintain.

  9. I see issues like the above mentioned article of the Economist from two opposing view points. First, there has been foreign investment in Africa. It’s called aid. For the “investors” to continue pouring investment in the form of aid should mean that somebody is reaping the benefits – never mind what the “investment” is doing to Africa. If that is not business 101 (just reap benefits regardless of the damage you may cause along the way), I don’t know what is.

    Second, it shouldn’t be up to The Economist to dectate or set the rules of investing in Africa. If Africa gets its acts together, more and more foreign businesses would be attracted to the continent. For example, it may be hard to imagine a booming cellphone business in Somalia, but it is booming despite the hardship, unrest and mess there. I don’t think businesses will shy away from any situation as long as there is a chance to make big buck. Business people even risk their lives. Take the latest scramble to win contracts in Iraq. Surely, most of Africa is much more stable than current day Iraq. Still, hundreds of contractors risk their lives to go to Iraq. If African countries introduce more investor-friendly policies and the world opens up its markets to Africa, we can get somewhere regardless of media sensationalism.

    You would think that by now depicting a positive image about Africa would be the shocker not the decades old gloom and doom of Africa. Oh well, somethings will never change.

  10. Anyone whose comments were missing:

    Something told me today to check the comment section and I am glad that I did. Somehow Sijui, Frederic, John Powers, and even some of my comments showed up in the spam section. So I am sorry about that. But the other 95 comments in the trash bucket were rife with garbage so I am glad that you don’t have to bother with reading it.


    Great point on risk/return examples. I never knew that you shared with me that sentiment (no hidden message there, ok?). But it’s good to have some company. Funny thing about it is that it seems that Africa is a big secret when it comes to investment because not only do investors from the East do it big there, but look at the large American based corporations…Some of the top American brands in almost every major consumer category can be found making returns in Africa.

    Sijui, yes I remember the Africa Online deal…But you might need to fill me in because I know the part about it being started by the two Kenyans who were living in Boston, Mass. Then after the company became very big and successful there was an infusion from a foreign company, right?? And then not long afterwards the bidding war between Wananchi Online (Kenya) and a South African company (who won the bid). But there is a lot that I am missing and something tells me Sijui that you have the inside scoop 🙂 so when you get a chance I’d love to hear it.


    Hmmm…excellent point I never thought about that-Iraq and business people from other countries risking so much to go there and earn a piece of the pie. But you are right though, there are similar returns to be found in some parts of Africa. But as you and some of the other readers have mentioned it doesnt get publicized that much.

    Anyhow, thanks for your comments!

  11. Benin,
    The Africa Online saga sadly did not have the fairy tale ending you described. Yes, Africa Online was started by two enterprising Kenyans, yes….the venture began to pick up significant steam……….it was at this juncture that the company was approached by foreign investors (read Africa Lakes Corporation and another intermediary perhaps Vodafone? will have to check my facts) anyway, the company pursued the potential of outside equity investors unfortunately the vision that the founders had i.e. grow market share and service expansion by catering to the wide swathe of the middle, was not shared by the ‘new equity investors’ who were obsessed with share price and quarterly profit targets…….the marriage soured soon after and founders were kicked out through board room politics.

    Africa Online continued to loose money and market share, it was quickly upstaged by new entrants like Wananchi Online and others who pursued the very ‘man in the street friendly’ business strategy. Africa Lakes Corporation pulled the plug this year with the sale to Telkom SA……we will wait to see if African Online will be revived to its full potential.

  12. Sijui::

    That was so nice of you to elaborate on the details of the Africa Online debacle. However, as you have said it seems that it turned out to be a rather unfortunate turn of events for the consumers and the original founders.

    Do you see any deeper lessons in this whole Africa Online situation? Me, I think that these situations are more common than we entrepreneurs would like to believe. But that maybe its just a byproduct of rapid growth coupled with expensive capital.

    Thanks again, Sijui!

  13. Cees

    Thank you for your great post, i am always looking to improve my home for my familiy, and your post have given me some insperation, thank you very much

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