Well I hope those of you with the dirty minds clean them a bit... I didn't mean that. This is a useful question in doing business in Africa, as it is doubly hard to make a million here! I have just finished reading a book by Andrew Sardanis "a venture in Africa". Now this guy created Africa's first truly African multinational, but a number of factors led to his decline. I do not think there has been a thorough enough analysis of the decline of Meridien BAIO by our more learned in Africa to see what effects it had and more importantly, to propose how this can be prevented from happening again.
For us to achieve some semblance of greatness how do we go about it? I mean, we have little access to capital, am now thirty and the only loan I ever had was an educational loan from the Reserve Bank of Zimbabwe... this was a staff loan. Now if i need to create employment, I need access to capital. I have the training and experience to make a venture succeed, but have difficulty creating anything of note without the right financing. The key is to create a truly diversified African banking group. Banks such as Stanchart, Barclays and Stanbic are really looking at financing corporates headquartered in the western Hemisphere. Who blames them? These companies offer the safest bet they will get a return.
Now to finance me in Africa these banks would need to have security that would not be required anywhere else in the world. I don't blame the named institutions because they are here to make money but I do blame the governments here. We do not support the best and the brightest in Africa to shine. Can you imagine it is easier for an African to fit into business and become successful in the UK than in neighboring countries? African enterprise cannot flourish until African nations allow easier access to markets: both capital and retail. Whilst our economic unions work well for large scale enterprises supported by government, they do not allow adequate access for mid sized businesses to overcome barriers to trade.
Look at the examples of an enterprise selling toothbrushes in the USA. If I can sell a tooth brush for say US$1, I have a captive market of 300 million people. If i capture 10% of the market, I can make turnover of US$ 30 million. Accessing finances becomes a whole lot easier through invoice discounting and allows the growth of the economy as entrepreneurs can really add to wealth creation and more importantly jobs. However, in Africa, we have fragmented markets and cannot get access to real capital in general. If I was to make the same company in Zimbabwe, I would only have a captive market of 12 million and a turnover of US$ 1.2 million to set up the same company. I would also have difficulty dealing with markets in Zambia, SA and more.
It is high time we as Africans stop talking about integration of our economies and start acting. Once we integrate we will start having home grown financial companies start financing home grown talent. The financial companies would also have greater muscle as they would have larger deposit bases to operate from. In December I had access to US$ 1,000 and did not have much to invest in as the markets in Zambia are not offering much for small time investors like myself to save or invest this money. I mean the stock market is very little liquidity because there are very few players there looking short term. I cannot afford to have my money tied down for long periods of time as I have very little disposable income. My only choice would be to put it into a savings account earning below inflation returns or into real estate (we often try and build until the money runs out then wait for more). I do not think I am the only one in this dilemma. Can you imagine the amount of money that could be brought into the financial system if they could get all of us keeping money under our mattresses to put it in the bank to get a real return?
Until our markets start offering inclusive solutions to allow the less sophisticated savers such as myself to get an above inflation return, we will not begin to see the private sector creating wealth. This is because we will always have to wait for foreign investors to fund enterprises, yet we have the capacity fund it ourselves. So with the global economy only now recovering from its ills, we as Africans cannot really have a say in our future as foreign direct investment will not be the panacea of our ills, as it is not sustainable as the investors will only serve the locals if it benefits them, and in the long term their aim is to take their profits home. Guys we need to wake up!
I am not advocating for the removal of foreign investors i am just saying the model does not work unless there is a healthy mix of both foreign and local players. The local players are use full because they will endure a lot more than the foreign players. The local players also add competition which creates value in the economy. Zambia is twice as expensive as Zimbabwe to live in, but there is no real plausible reason for this except there are not enough players in the industry to warrant effective competition between the players.
Just a thought. More to come.
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