Africa is a unique investment destination for many obvious and well discussed reasons. Perhaps the most obvious is the fact that it is now recognised as one of the last places on earth where super returns are possible.
Its uniqueness also derives from the fact that its geographic, infrastructural, cultural and political environments are very different, not only from developed economies and other emerging markets but, within the continent, from one country to another. So, what works in non-African markets cannot simply be imposed on Africa.
Moreover, what works in one African country won’t necessarily work in another.
Super returns are indeed possible. But they can’t be achieved by a conventional approach to funding and investment.
Which is downright marvellous!
Because it means that people and institutions with money to invest have a chance to participate in the coming of age, after centuries of evolution, of the concept of investment finance – and, this time, to get it right.
Ad hoc is good, coherence is better
Historically, financing of projects, business, and growth has been an ad hoc process – driven by individual investors, human or institutional, making opportunistic decisions in search of profit. The ancillary benefits to investees have been a useful by-product, largely because more profit could be made if investees prospered. But pro-active creation of benefits for the investee was rarely the primary objective of an investment decision.
The invention of various types of financial tools and mechanisms has also occurred mostly in response to opportunity. Lines of credit, for instance, were first made available when knights off to the crusades found it too dangerous to carry their gold and silver with them. The Knights Templar stepped in by providing letters of credit that would be honoured in Jerusalem. In fact, the extended financial network operated by the Knights was an early form of banking.
One could say, I suppose, that there was a broader and faintly humanitarian motivation behind what the Knights Templar did – at least, from their point of view, in terms of keeping Christianity alive in the face of attack by the Ottoman Empire. But there was no thought of providing general benefits to the people of Europe and the Middle East, for whom the Middle Ages remained financially and otherwise extremely Dark.
Markets are good, communities are the reality
The point being that the willingness to provide money for the achievement of a specific purpose has arisen in relation to a specific need at a specific time, with no real coherence in the processes used or, more importantly, in the motivation driving the willingness.
People and institutions have always been motivated to risk their money on the chance that someone else will make more for them. They always will be. But they haven’t worked together in any coherent way, with a shared objective of building communities rather than simply markets.
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