Op-ed by Tony O. Elumelu, Founder of The Tony Elumelu Foundation, Chairman of Heirs Holdings Limited
Op-ed by Tony O. Elumelu, Founder of The Tony Elumelu Foundation, Chairman of Heirs Holdings Limited
Last
week was the first time, in my memory, that a U.S. president came to
Africa with investment at the top of his agenda and prioritised meeting
with the continent's business leaders, who are the true drivers of
development. President Obama should be congratulated for his vision, and
for providing the clearest proof yet that the rules of engagement with
Africa are genuinely changing.
The
age of aid is ending. The type of aid that will help Africa most, and
should receive the highest priority, is aid for business. I believe that
the African private sector has the power to transform the continent
through long-term capital investments, creating both economic prosperity
and social wealth. I call this development approach “Africapitalism,”
and without a doubt, it holds the most promise for the sustainable
development of Africa.
So
it was refreshing to see African businesses at the table, financing and
investing as partners, and making sure that Africa asserts its proper
role in this opportunity.
I
can already feel the impact of Obama's new dialogue with Africa. In
interviews I had with international media covering his trip, aid and
corruption were not the focus, thankfully. Journalists addressed topics
like “capital,” “investment,” and “trade.”
The impact of this shift will be immense.
Power
is the single biggest obstacle to Africa’s development, and as such, it
is the most catalytic and strategic investment anyone can make in
Africa. That is why President Obama’s focus is so timely—and so
necessary. Doubling our generating capacity will double Africa’s GDP,
and move us toward sustainable, domestically led growth. Given its
economic importance, the power sector also presents an attractive
investment opportunity for long-term investors: there is little
competition, and so the return, when it comes, will be high. It will be
similar to returns that early investors in African telecommunications
realised before the sector became saturated and highly competitive.
As
an investor I believe in doing well and doing good. Investing in the
power sector meets both criteria. That is why Heirs Holdings has
committed US$2.5 billion in investment that will expand our recently
acquired Nigerian power plant at Ughelli, as well as develop new brown
and green-field projects across Africa.
But
filling Africa's energy gap requires long-term investment and a huge
capital outlay: it will cost US$1billion just to acquire the Ughelli
plant and bring it up to its full installed capacity of 1000 megawatts.
Given Africa’s huge capital requirements for the power sector, an
initiative like Power Africa is essential for bringing together
international investors and financial institutions to support Africa’s
changing power paradigm.
Nigeria
was one of only seven countries included in the program—countries at
the forefront of power reform in Africa. The world-class privatization
process personally driven by President Goodluck Jonathan demonstrates
that Nigeria deserves that place. And it means that Nigeria’s power
sector will have access to preferential terms and an unprecedented focus
by funders looking to deliver on their public commitments under the
Power Africa initiative. Power Africa also offers a model for the 47
African countries that did not make the initial pilot list. The
continent will not close its energy gap unless more African leaders
urgently reform their policies and encourage this kind of private
sector-led investment.
As
an entrepreneur, I know that attracting capital is not and has never
been the problem. I have always believed that if the policies and
environment are right, investment will flow into Africa. Investors need
to know that the rule of law and the protection of property rights are
assured—this is one of capital’s most important requirements. That is
why I urge global leaders like President Obama to impress upon more
African leaders that investment-led development requires more
investor-friendly policies. I see a willingness in African leaders to
seize these opportunities, but they need support and in some cases
direction. The vision may be clear, but they may not know how to get
there.
Rwandan
President Paul Kagame is another positive role model for the
continent—a progressive African leader who evinces both vision and
commitment. Rwanda now ranks higher than any other sub-Saharan African
country on global competitiveness, and ranks third in Africa overall.
President Kagame and his team have created the sort of enabling
environment that investors can only dream about elsewhere in Africa. For
this reason, Heirs Holdings, Berggruen Holdings and 50 Ventures, chose
Rwanda as the home for our East Africa Commodity Exchange (EAX), which
will launch on July 15th.
The
EAX will bring liquidity, transparency, and pricing power to farmers,
while reducing lending risk to banks. The impact will be to create
social wealth in local communities, and support development in the
region. Like investments in the power sector, the EAX demonstrates
Africapitalism in action: highlighting the huge development role of the
African private sector. When I met with President Kagame last year, he
immediately understood the significance of a commodity exchange for the
East African Region, and he pushed hard to make it happen. The Rwandan
government delivered on all its promises, which enabled our investor
group to deliver on our promises: the right investment team, partnering
with a supportive government, will improve the lives of farmers across
the region.
By
following these models—of Power Africa and the EAX—we can transform the
entire African economy, starting with the power sector. One day, the
70% of Africans who don't currently have access to consistent affordable
power, will take it for granted that they can flick a switch and
transform their homes, offices and schools. And they will remember
Obama's visit. Because with private sector involvement now guaranteed,
that day will soon become a reality.
In
Tanzania I shook hands with an Africapitalist, who also happened to be
the most powerful man in the world. It was a hugely significant event
for me, a life-long African investor, and I believe Obama’s visit was a
significant event for Africa. It will refocus the world's attention on
investment in Africa. It is already changing perceptions and mobilizing
international investors. It will even change the view of many African
investors, who will realize that we must lead the way. Because if we
come forward and show confidence in our continent by directing our
savings into long-term investments in Africa, others will follow. This
is one of the pillars of Africapitalism: Africans for Africa.
Obama’s
visit was a milestone, one long hoped for, and one with lasting impact.
It confirms that the age of aid is ending. It is now time for the
private sector to lead.
*
Tony O. Elumelu is Founder of The Tony Elumelu Foundation, Chairman of
Heirs Holdings Limited, and is the leading proponent of Africapitalism;
the private sector's commitment to the economic transformation of
Africa.
Distributed by the African Press Organization on behalf of Heirs Holdings.
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