December 30, 2010
Jambo from Nairobi Kenya!
I’m so energized. I’ve been in East Africa for the past three days visiting tech entrepreneurs and tech investors.
While I spend about 95% of my working energy focusing on building iContact into a high-growth purpose-driven business, I like to take a couple weeks each year to travel and explore what’s going on with tech companies in other parts of the world.
This week I’m in Uganda and Kenya to find investment opportunities for the Humanity Fund, a personal investment fund I have for investing in African and American tech companies.
Why Invest in Africa?
There is so much economic opportunity in Africa, support for IT investment, and entrepreneurial energy. There’s an opportunity to make a lot of money investing in great companies while creating lots of jobs and doing a lot of good at the same time.
Africa is the least developed continent in the world. There are 1.03 billion people in Africa. Of this 1 billion (source) 65% of Africans live on under $2 per day (source) and 59% of African households do not have electricity (source), and the number increases to 69% if you only look at Sub-Saharan Africa.
But Africa is no longer about famine, poverty, and war. That was the Africa of the 20th century. The 21st century Africa is about opportunity, technology, and entrepreneurship.
You may read about Sudan, Somalia, Zimbabwe, Eastern Congo, and the Ivory Coast in the New York Times and hear about these countries on the nightly news. But these are only five of the 54 countries in Africa.
The real, untold, narrative of Africa is what’s happening in the other 49 countries. Tremendous economic growth, investment, and rapidly rising living standards. What happened in South East Asia from 1950-2000 (rapid growth and poverty reduction) is now happening in Africa from 2000-2050. Most of the world just hasn’t realized it yet.
Why Invest in East Africa?
Here in East Africa (Kenya, Rwanda, Ethiopia, Uganda, and Tanzania) the GDP has grown at an average annual rate of 7.6% the last four years compared to just 0.5% for the USA. Africa will be the economic lion of the 21st century as McKinsey proclaimed in their July Report, “Lions on the Move: The Progress and Potential of African Economies.”
Take a look at these average annual GDP growth rates for 2006-2009 from the World Bank Development Indicators GDP database.
- Uganda: 8.75%
- Rwanda: 7.925%
- Kenya: 4.375%
- Ethiopia: 10.45%
- Tanzania: 6.675%
- USA: 0.5%
Uganda was the first country I came to in Africa back in 2008 and so I decided to start investing here in East Africa and expand later. I hope someday to run a fund making investments in high-growth socially responsible companies all over the developing world.
Investing As a Way of Making a Positive Impact
This is my third time in East Africa. When I came for the first time in 2008, I held the view that the way to best make positive change was to give money away to NGOs and non-profits.
I come now with the perspective that it takes all three sectors of society (government, non-profits, and for-profits) working effectively to create sustainable economic growth and that the private sector has a huge power to make positive change in the world.
The best way I believe I can contribute to positive change is to help high-growth companies that are creating jobs expand and create more jobs. At the end of the day, the cause of poverty is a lack of jobs and productive capital. Low education, low health care, and low nutrition are the symptoms of poverty, not the causes. If you increase someone’s income they can afford better education, health care, and food for their family.
So now, I believe the best way I can use my experience and resources to make an impact in reducing extreme poverty is to invest in high-growth companies that are creating jobs in developing world.
What I’m best at is figuring out how to grow technology and internet companies. Over the next two years I hope to invest in about ten more privately owned high growth African tech companies as part of dipping my feet into the water and beginning to create a model for eventually building a private equity fund some years down the road.
I hope to be able to eventually show that it is very possible to build a microequity investment firm that gets above market returns investing in high growth socially responsible companies in the developing world.
The field of impact investing is developing rapidly and I’m glad to slowly be learning about it. To learn more check out this Impact Investing Primer from the Rockefeller Foundation and this one from the Federal Reserve Bank of San Francisco.
Existing VC Funds in Africa
In my time here and in talking to people at the Skoll World Forum in April I’ve come across the following funds that are actively making venture capital investments in tech companies in Africa.
- InReturn Capital
- BusinessPartners Kenya
- TBL Mirror Fund
- eVA Fund
- Flow Equity
- FirstLight Ventures
- Humanity Fund
- Grassroots Business Fund (non-profit fund)
- Acumen Fund (non-profit fund)
- RootCapital (non-profit fund)
A more extensive list can be found on the African Venture Capital Association (AVCA) web site. Other resources include the VC4Africa and BiD Network
How You Can Invest in Africa
If you want to invest in private African companies, then you could contact the above VC funds and express interest in investing as a limited partner in their next fund. They will likely require you to be an accredited investor and be able to invest $100,000 and up. You can also find private companies yourself and invest in them directly or join an angel network that invests in African start-ups like Toniic.
If you want to dip your toes into the water of investing in African companies without putting tens or hundreds of thousands of dollars at risk, you can invest directly into publicly traded African companies. There are even Exchange Traded Funds (ETFs) that allow you to get index-fund like exposure to African markets. You can invest as little as $75 in these funds through your broker or your TD Ameritrade, E*Trade, or Scottrade account and participate in the growth of the African economy.
You may want to check out:
- AFK – The Market Vectors Africa Index ETF seeks to replicate the performance of the Dow Jones Africa Titans 50 Index. The fund represents a broad range of sectors and African countries, including exposure to some less traditional, frontier markets. Up 23% in 2010.
- GAF – SPDR S&P Emerging Middle East & Africa ETF. Seeks to closely match the returns and characteristics of the total return performance of the S&P/Citigroup BMI Middle East & Africa Index. Up 22% in 2010.
- EZA – South African ETF, up 29% in 2010.
For proper disclosure, as of this writing I do not own any of these ETFs but might in the future. I am definitely not a qualified securities advisor in any way and past performance is not necessarily indicative of future performance.
Thanks for reading. I hope you enjoyed this post! Please share and comment.
Next, I’ll be posting about the entrepreneurs I’ve met in my first three days here in Africa…
- Ryan, Nairobi, 30.12.10
September 15, 2008
I may be wrong, BUT…
(Update 4/1/2009 – Wow, was I wrong or what! I’ve learned a lot.)
1. This is the End of the Financial Crisis–
This is the end, not the beginning, not the middle. AIG will likely get a $85B-$90B bridge loan from the Fed backed by company assets in exchange for a majority stake in the company. The Dow will continue its rise in the morning with the news of AIGs stabilization. Based on March market capitalization, AIG It is five times bigger than Lehman. AIG is the 13th largest company in the world according to the Fortune 500 versus 37 for Lehman. It is an insurance and annuities company mainly and not a broker. It affects Main St. Americans much more than Lehman did. It can’t, and won’t be liquidated.
2. Oil Is At a Bottom–
Oil is at its bottom. Remember $88.90 per barrel, the bottom today before it started rising at 2:30pm. It is the lowest we will see a barrel of oil sell for in the next fifteen years until sustainable energy technology (“ET” as Friedman calls it, “ST” as Sachs calls it) creates green power at a price/KWH that is lower than fossil fuels can and transportation fully converts to electric ( reducing global demand for oil significantly and possibly reducing the price under today’s price). Oil will trend upwards, more slowly, toward $150/barrel by the end of the decade.
3. The Dow and S&P Have Reached Their Bottom–
The DJIA has reached it’s bottom. Remember 10,742.70, the bottom today at market open. It’s the lowest you’ll see the DJIA go in your lifetime. The underlying profits and productivity of American businesses are simply too strong to justify the S&P 500 the same level it was at in December 1998, nearly ten years ago when the U.S. GDP was 58% lower than it is today (8.7T vs. 13.8T).
This graph shows the S&P 500 at the same place it was in December 1998. Today’s bottom was 1174.
I may be wrong here, BUT… I sure hope I’m not.
The Influence of Hank Greenberg on the Fed
As an aside, Hank Greenberg, a WWII hero and the former CEO of AIG for 37 years, has had quite a bit of influence on the Fed policy vis-a-vis AIG it seems. I heard him on Bloomberg radio today sounding like Mikheil Saakashvili on CNN five weeks ago when Russia was “invading” Tskhinvali. Greenberg wrote earlier today in the Financial Times:
“AIG is not an ordinary company. It has opened markets all over the world and, for more than three decades, stood at the vanguard of the liberalisation of the global trade in services. Its stock is owned directly or indirectly by millions of Americans. And it has contributed significantly to US gross domestic product directly and indirectly over the four decades of its existence. But all that is not why it should be saved. AIG has a trillion dollars in assets. It can (and always has) serviced its debt. With the right leadership, it will continue to do so. Action is needed now: AIG needs immediate help, because the threat to our financial system is real. For that reason, if private capital cannot rescue AIG, a temporary federal bridge loan – not a federal bail-out – is in order.”