Play the Game of Life
Ryan Petersen's Blog

Columbia Business School's new master class, "Entrepreneurship in Africa," could just as well have been called, "Optimism about Africa." Lead by professors Paul Tierney, Jr. and Murray Low, a diverse mix of thirty-five graduate students spent the fall semester studying the current climate for doing business on the African continent.

Throughout the semester, we were visited by an impressive array of entrepreneurs, investors, and non-profit directors. Each shared their experiences from years of doing business on the continent, along with their outlooks for the future. The consensus is overwhelmingly positive: time and again we've been told that Africa lies on the cusp of an economic boom the likes of which it has never experienced before.

As experienced Africa-hands, many of our guest speakers offered sage advice as we work to produce business school case studies about successful African entrepreneurs. In January, all thirty-five students will be traveling in teams of five to complete the case study in Tanzania, Ghana, Nigeria or South Africa. Upon completion, the cases will be made available to African business schools, where they will provide more locally relevant points of departure for classroom discussion.

The Entrepreneurship in Africa course grew out of a broader initiative led by Columbia Business School Dean Glenn Hubbard to link the school more closely to the African continent. Hubbard believes that Columbia can best help people in Africa by focusing on what we do best—educating the next generation of African business leaders.

To do this, we have partnered with the African Association of Business Schools, a network of top African business schools to identify and address their most pressing needs. Columbia professors, including Murray Low and Charles Calomiris, have led seminars for African professors to improve their ability to lead students through the “case” method of participatory learning.

As this initiative progressed, it quickly became apparent that the case method would be rather ineffective without cases relevant to local contexts. Our course was created with the dual goals of providing Columbia students with greater insight into the opportunities of doing business in Africa and creating a series of exceptional business school cases about world-class African companies. In doing this, we hope to dispel the myth that African businesses and their leaders are somehow less sophisticated than their counterparts in the rest of the world.

My own team is working with Lagos-based Computer Warehouse Group, the largest IT systems integrator in West Africa. We'll visit with many of the company's employees in Nigeria, including founder Austin Okere, as we chart the firm's success over the past two decades. With no substantial sources of external financing, the company has now reached $100 million in revenues from a client base including some of the world's biggest brands. Stay tuned to FT.com for an update from our team's trip to Nigeria in mid-January.

As the first trip to Africa for many in the class, it affords the opportunity to see for ourselves which is closer to reality, the hopeful picture of robust economic growth painted by African business leaders and New York investment professionals or the bleak image of nations devastated by poverty, disease, corruption and conflict presented by the mainstream media.

In this sense, our class offered a deeper perspective on the backlash against the more conventional view of Africa—a movement whose epicenter can be found in the now annual TED Africa Conference. Indeed, we were even fortunate enough to share the same kick-off speaker as last June's conference in Tanzania, Euvin Euvin Naidoo of Standard Chartered Bank and the South Africa Chamber of Commerce Americas.

Naidoo is quick to point out that although AIDS, corruption and armed conflict remain serious impediments to Africa's potential, these are not the most interesting stories emerging from the continent. Rather, what fascinates him most are the now common stories of resourceful entrepreneurs with the tenacity to build thriving businesses within this context.

For at least the past five years, the majority of Africa's economies have experienced GDP growth almost twice as high as here in the U.S. To large degree, this growth has been built on foundations of expanded democracy and improved governance. As the first two generations of post-colonial leaders have finally begun to fade from the scene, there is evidence that many of the new governments are committed to economic liberalization and public-sector reform.

Although the run-up of commodities prices over the last few years can account for much of Africa's growth, sectors outside of natural resource are also booming. Scalable businesses in the telecommunications, construction, consumer lending, and retail sectors are appearing across the continent. For the first time since independence, international investors are actively seeking business plans targeting domestic markets as opposed to exports.

With a growing track record of steady economic growth across the continent, foreign direct investment is surging. Among those attracted by domestic consumer markets is Kofi Bucknor, managing director of Kingdom Zephyr, a joint venture between the private equity firm Zephyr Management and Prince Alwaleed bin Talal of Saudi Arabia. The group's first fund, Pan-African Investment Partners, realized returns greater than 300% over just a few years, primarily through shrewd innvestments in banks and consumer lending firms on the continent.

During a recent visit to New York to raise the firm's new $500 million fund, Bucknor provided our class with a unique opportunity to hear his pitch to investors first-hand. His strategy is relatively simple: By providing growth capital, improved corporate governance, managerial expertise, and access to managerial expertise, his fund can transform loosely managed start-ups into more professionalized enterprises with the discipline to deliver consistent results. If it weren't for the $5 million minimum buy-in, he almost certainly would have left the session with a fistful of checks.

Simon Harford, CEO for West Africa of Actis Capital, a UK private equity firm, helped put these inflows of private capital into perspective. He pointed out that investments from foreign companies are already beginning to dwarf aid money from the UN and loans from the World Bank. Harford characterized this as perhaps the greatest investment climate since independence.

Later Sev Vettivetpillai, CEO of Aureos Capital, a global private equity firm with several offices in Africa, believes investments in the $5-10 million range are most appropriate for the African context. Where private equity funds aiming for larger deployments will find it increasingly difficult to find attractive acquisition targets, he believes Aureos will have access to more high quality deal-flow.

Meanwhile, according to Jon Chew and Mark Tunmer of Botswana-based Imara Holdings, fund managers are increasingly attracted to African markets because they represent one of the last asset classes not correlated to global markets. Stock markets in Africa have continued marching along unconcerned by the sub-prime fallout that has roiled markets across the globe. Although this is an attractive feature for institutional investors, the duo were quick to point out that as more funds flow into the market, it will become increasingly difficult for them to deploy their capital in ways that make sense.

Perhaps the speaker with the most intriguing—if a bit idiosyncratic—opportunity in Africa is Ben Howell, manager for emerging markets of the Houston-based hedge fund HBK. His firm has purchased a minority stake in Clark Sustainable Resource Development, a Canadian firm with a contract to log the hardwood forests submerged by Ghana's massive Lake Volta. Since 1965, a forest of pristine old-growth hardwoods has been submerged in some 100 feet of water thanks to the construction of the Akosombo dam. By harvesting the trees with technology from the off-shore oil industry, Howell and CSRD believe they may be able to supply some 20% of the world's environmentally certified hardwoods.

During another session, Scott Malpass, Chief Investment Officer for the University of Notre Dame, presented his view of Africa from his perspective as the manager of one of the largest university endowments. Malpass has realized unprecedented success in growing his school's assets through a strategy of diversifying into emerging markets, particularly China and India. The recent success stories out of Africa have not gone unnoticed, however, as he is actively seeking to move a larger portion of his $15+ billion under management into the region.

In addition to an impressive line-up of business chiefs, we were also fortunate to host several leaders of non-profit groups. Bruce McNamer, President of TechnoServe, told us about his organization's decades-long effort to help entrepreneurs on the continent move up the value chain. We looked closely at TechnoServe's successful efforts to boost the prices received by a Tanzanian coffee cooperative. McNamer was one of many speakers to stress that nearly every African is an entrepreneur at heart, eager to seize opportunities wherever they may be found.

Antony Mwaniki, CEO of Mobile4Good.com, shared his experiences leading a start-up that uses cell phone text messaging to match job-seekers with employers in Nairobi, Kenya. Leveraging technology to help people find employment, his company aims to be profitable while addressing a societal challenge. Funded by Jim Harmon, a New York investor looking to give something back, Mobile4Good is the perfect example of a new, more productive replacement for traditional philanthropy. The venture's backers echo the sentiments of NYU economist William Easterly, journalist Andrew Mwenda and others who argue that its time to rethink our approach to foreign aid.

Perhaps the most inspiring story to emerge from the class came from Isaac Shongwe, a black South African who scored a coveted scholarship to attend an American university in 1989. He later earned a Rhodes scholarship, completing his MBA at Oxford and returning to his native country where he has become a leader in Black Economic Empowerment financing.

Shongwe showed how the combination of humility, brilliance and determination can lead to success in even the most difficult of circumstances. It is with precisely this entrepreneurial spirit that our class now departs for Africa.

Labels: Africa, Columbia Business School, entrepreneurship, Investing in Africa