Why Invest in Africa?

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.

  1. InReturn Capital
  2. BusinessPartners Kenya
  3. TBL Mirror Fund
  4. eVA Fund
  5. Flow Equity
  6. FirstLight Ventures
  7. Humanity Fund
  8. Fanisi
  9. Grassroots Business Fund (non-profit fund)
  10. Acumen Fund (non-profit fund)
  11. 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.

You can also call your broker and ask them to invest directly in publicly listed firms on the Ugandan Securities Exchange or the Nairobi Stock Exchange.

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

Investigating Gender Inequality in Tanzania

July 1, 2009

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A Post by Guest Writer Jess Shorland

I have just returned from visiting Tanzania. I was there from July 5th through July 12th. On this, my second trip to Karagwe, Tanzania, I had only one week to learn as much as I possibly could about local conflict – the reasons behind it, who was often involved, and possible solutions.

Thanks mostly to Juma Masisi, Director of WOMEDA (the Women’s Emancipation and Development Agency), I managed to talk with over thirty women, all of whom shared their amazing stories with me. The women’s experiences all demonstrated the seemingly archaic gender gap that remains not only in the town of Karagwe, but in many villages across the globe.

So I began my work to speak with these women connected to WOMEDA in this small rural village in Tanzania.

In front of a clay brick house, kneeling on mats woven by the calloused hands of the women sitting opposite me, I began with my own story of how my rights had been violated when I was 17 years old.

I had hopes that being open and candid with the women would bridge some of the cultural gaps and language barriers that I thought could prevent the comfort that fosters honesty. With repetitive “Poles” (which means sorry in Swahili) as Juma translated, the women grew more serious. After I explained my experiences and how they influenced my interest in gender inequality, I asked them if they would share their stories with me. One by one, the women elaborated on their struggles.

The Women’s Stories

Zainabu, 28, has a family of eight children, three wives and one husband. When she married her husband, she had no idea that he would eventually take two other wives, and that one of those wives would live with them in the house that she built. “I thought he would at least ask me, or even tell me, but it was very abrupt,” she said. She explained expressionlessly that she still loves him, but would have never married him had she known that this was his intention.

She finds it painful and difficult to share her husband and no longer wishes to have sex with him. But if she refuses, she faces a high risk of being beaten or kicked out of her house. And she fears leaving him because her husband will keep her children, who are a source of labor and potential income (especially female children because of the dowry system still in place). Looking down at her clasped hands, she said that she could never bear to leave her children.

What she did not know is that under Tanzanian law, children younger than seven are usually left in the mother’s custody, and children older than seven are given the right to make the decision themselves. Because of the lack of information and awareness of these laws, Zainabu thought that she had no other options. For her, it was either deal with it or leave her children. She also has the right to legally object to the second wife staying in her house and could take action to secure her property rights. She made eye contact with Juma as he explained, and inquired further of how she could do this.

Zainabu is but one example of a woman who feels badly about her relationship and the way she is treated, but who does not know that there are legal institutions that can emancipate her from these human rights violations.

The cognitive dissonance created by the feeling that what’s happening to her is wrong and believing that she has no other options creates an internal conflict with which she continuously struggles.

But herein arises another obstacle: in order to take legal action, you have to first get to the court. And you have to have enough funds to carry on with the proceedings.

Take, for instance, the case of a young woman who was raped in the village of Kjungangoma, Tanzania. It is about 30 kilometers from the nearest court.

This woman moved to Bukoba (bordering Lake Victoria) for her own safety. An elder woman in the village decided to seek justice and attempted to continue with legal proceedings. Transportation to town and back by taxi costs about 5,000 Tanzanian shillings, or about $2.00 USD. So the elderhad to walk the 30 kilometers to the court.

The Tanzanian government is supposed to pay these transportation expenses, as well as lawyer fees and court costs. Unfortunately, by the time paperwork is shuffled around, reimbursement is often pushed aside. So, unless a Tanzanian can afford the upfront costs of taking a case to court, both in time and money, he or she is still left without the proper means to seek justice.

This issue now leads me to the story of Methodia, a woman who was born at the time of World War I (she is about 90 years old now). When her only son passed away, she took in his many children. Later, her grandsons soon chased her out of her own house to take over her farm. She went to the magistrate to file a legal complaint, but her grandchildren had already bribed him. He told her there was nothing he could do.

Methodia now lives with her granddaughter, although this is culturally considered shameful. She wants to continue fighting for what is rightfully hers, but fears that if she reclaims the house, her grandsons will kill her in just a matter of months. In broken Swahili while looking down at her feet, she quietly said, “I may be old, but I still matter.”

This issue of corruption runs rampant in many developing countries, but especially in places where the legal system is not closely monitored. Marginalized women seeking their legal rights face an enormous risk of being stopped in their tracks by this very obstacle. The legal process cannot work in places wheremoney becomes more important than justice because basic human needs are not met

Abusing women’s property rights has been a major issue in many of the cases I heard. There is Gertrude, whose husband sold their profitable farm and house to be with another woman, leaving her with literally nothing. And there is Benidette, whose husband left her and took the doors, windows and tin roofing with him. Or how about Zamda, Pascazia and Zainabu who are forced to live with their husbands’ other wives in the homes that they built.

If property rights can be restored and protected, marginalized people will have a sense of ownership and space to better build their economic opportunities. The importance of property rights in terms of conflict resolution and development cannot be stressed enough.

I wanted to get to more sensitive topics with these women. I felt uneasy at first. I knew I had to just dive in and hope that they would share their very private lives with me.

One of the most powerful and insightful moments during my trip happened at the end of a discussion with 25 women. I asked them, “How many of you have sex with your husband?” As Juma translated, the women were obviously caught off guard. I asked again. This time, seven women raised their hands.

“How many of you don’t have sex?” – Only three hands raised, with a little laughter in the background.

“How many of you want and enjoy having sex?”

Silence fell upon that room, the only sound coming from the tarp that covered it. All the women were quiet, and every hand was down.

The explanations that followed told of husbands coming home drunk and abruptly climbing on top of their wives, forcing them to have sex. Another explained that she felt badly to share her husband with one, two and even three other wives–or any number of unidentified mistresses for that matter. Marital rape was obviously present. Women feared that if they tried to stop their husbands, they would be kicked out or beaten.

The Youth’s Stories

I looked to the youth next, hoping for a new informed generation that could show a ray of hope for the future of human rights. I spoke with two groups of secondary school students, ranging in age from 15-22 years. At Ruminyika Secondary, about fifty students began talking with me, and after some time of asking clichéd, obvious questions, they began to reveal their own curiosities. Their questions were inquisitive, touched with a brutal honesty that only increased my respect and appreciation for them.

The discussion was intense as we talked about everything from birth control pills to female genital mutilation to relationship advice. I turned the conversation toward gender roles and asked if the boys ever hit their girlfriends. The boys all laughed and gave each other high fives. A spokesman for the boys explained that it was a common practice to “show her that you love her,” especially if she shows interest in another man. “You have to keep your girl, so you hit her,” the boy said. The girls remained silent, which made understanding their emotions difficult. I could only sit in awe of what I was hearing from such young boys. It was a reminder that children imitate their surroundings, and that many of these teenagers were preparing to lead the same life as previous generations, breeding more of the same gender inequalities. At that moment, I felt helpless–that there was nothing I could do.
Juma and I explained to the group that under Tanzanian law, it is illegal to physically harm someone. Then, a boy shared a disturbing story of rape. He told of his experience of “almost rape” – stopped only by an unexpected car horn that gave the girl time to get away. “I know it is illegal, but I wanted to do it for the sake of doing it. I wanted to accomplish my mission,” he said, almost proudly. Laughter roared from the crowd of about 100 students accompanied by my complete and utter bewilderment. Can universal human rights actually exist in a world of such cycles of violence?

The Future Potential

In the midst of these horrifying abuses of human rights that taint the youth, I found cases that reaffirmed my hope for inherent justice for the equality of all human lives. Take the example of Julianna. After her husband died in 1989 she started her own business, put all four of her children through school and now has her own house and small farm. She has no doubt faced many hardships. She is still not able to access all the opportunities she deserves, but proudly she stated, “No one can mess with my rights now.”

And then there is Godsen, who after my discussion at a secondary school, stood up in front of his classmates and sang a poem he had written about eliminating HIV and AIDS. When his classmates stood up and threw their hands in the air filling the half-finished hall with praising cheer, I remembered that these inequalities in basic human rights are not inevitable. These inequalities have been created by man and can be eliminated by man. Progress is no doubt being made, but much more change is needed.

As Juma and I drove away from the secondary schools on my last day in Karagwe, I noticed a beautiful river at the bottom of a lush valley, overshadowed only by steep hills. I commented to Juma how breathtaking the scenery was, to which he replied, “That is the river that borders Rwanda. In 1994, thousands of Rwandan bodies floated down that river.”

And so, in a new age of globalization, a society teeters between vestiges of past ideals and practices and the crest of social and economic development. Karagwe is filled with amazing people doing amazing things and the amount of opportunity to innovate in the face of crisis seems unlimited. At the same time, the information and social gender gap in this region breeds local conflicts that can, if no action is taken, quickly escalate to a national and even international scale. We must bridge that bloody river, for it is much too easy and foreseeable to resort to violence if economic development, access to information and legal resources are not invested in. We cannot afford to forget that above all, we are one human race, and when working together toward a shared goal, our capabilities are immeasurable.

About The Author:
Jess is a senior at UNC-Chapel Hill, studying Peace, War & Defense. She is the founder and Executive Director of Uncharted Magazine and the creator of Poor Student No More, where she blogs about her journey to get out of student debt.