Know a Few Capitalists? Africa Needs Them Now

That's essentially the message contained in a recent New York Times column by Tom Friedman entitled "Patient Capital for an Africa that Can't Wait". The author of the "World Is Flat", as always, brilliantly articulates the business ethos of the region.

Africa, he says, is in a middle place in the global economy,

"a wild, unregulated, informal, individual brand of capitalism, which we need to channel into formal companies that can grow and scale up, even with corrupt governance." ... "People grow out of poverty when they create small businesses that employ their neighbors. Nothing else lasts."

From IFC, one can still literally hear the applause: "way to go, Tom"; "right on, man"; "yesss, tell'em, it's about jobs and about scaling up small businesses." [Okay, there were also a couple of grumpy comments from our private sector development purists, as in: "who's the "we" in the "we need to channel" part of the sentence, Tom?," and thanks for specifying that capitalists can help start and run legal companies, Tom.]

Overall though, that is the sum of IFC experience and activities in Africa: investing in the expansion of companies such as the one mentioned in Friedman's column, Kenya's Advanced Bio-Extracts company. Like many small companies in Africa, ABE failed to get financial backing and credit from banks because of a lack of track record and collateral.

IFC was among those who stepped in with an investment in ABE, then helped bring in other financial investors like the Acumen Fund to partner in the project. Unlike ABE, whose CEO Patrick Henfrey worked at IFC for 11 years, many companies in Africa lack the financial know-how. They seek IFC as much for training and advice as they do for credit and support.

Backing Africa's small companies pays dividends in terms of development impact too. As Friedman mentions, ABE employs over 150 people in one of their factories and has contracted with several thousand farmers to grow the anti-malarial plant artemisia in Kenya and the neighboring countries of Tanzania and Uganda.

In Africa, both the investment and development potential is enormous.....and as Friedman says, what it needs now is many good capitalists.

Comments

[Alexander Nicolas Keyserlingk]

Does IFC seem not deem the ABE project important enough that it relegates it to the blog? Patrick Henfrey is a real hero and IFC should be proud to have him as an alumnus. This is a real story and should get a full coverage story.

[Alexander Nicolas Keyserlingk]

In your comments of the ABE venture, you fail to mention that Patrick Henfrey is a real entrepreneur as he has risked not only his career but also his personal net worth in launching this project. If he is successful, millions of Africans will thank their lives to Patrick's risk-taking. Africa needs more such entrepreneurs.

[Per Kurowski]

Please, pick the cherries!

When Andrew Jack reported in FT, April 30, “IFC plans African healthcare funds” he mentions that one concern about launching an equity fund, is to “ensure that for-profit healthcare services supported by the debt and equity funds in Africa do not simply back businesses that “cherry pick” richer patients but instead reach the poorest in rural areas in the lower income countries that suffer the most.”

Clearly we should try to find the ways to bridge the horrible needs of the poor in Africa, but while doing so let us not ignore that “cherry picking” is exactly one or perhaps the most important tool for achieving sustainable economic development. If the world had used all its health development funds to help Africa to persistently service the needs of their sweetest cherries, instead of having them go to Paris or London for treatments, then perhaps we would have allowed many more sherry seeds germinate into cherry trees and there would be more cherries in Africa.

It is amazing how sometimes development agencies are hindered from using what has proven to be good development tools in developed countries.