PART 2
This is Part Two of a two-part travelogue bySangu Delle, an entrepreneur from Ghana and Global Generalist at Valiant Capital Partners who designed a trip to advocate for investment on the African continent. Read Part One here.
Our next stop was Nigeria. Most populous country in Africa, seventh most populous in the world, and most populous country in which majority of the population is black. In 1950, Nigeria has a population of about 50 million. Today, over 160 million people live in Nigeria, and the UN forecasts that number to grow to over 730 million by 2100.
Nigeria is not only the dominant nation in population, but also one of Africa’s economic giants. She was selected by Goldman Sachs in 2005 as one of the “Next Eleven,” with a current GDP of over $415 billion (37th in the world). Nigeria is forecasted to overtake South Africa as the largest economy in Africa, according to research from Citigroup, which says that Nigeria will attain the highest average GDP growth in the world between 2010-2050.
Nigeria is richly endowed with an abundant supply of natural resources; well developed financial, legal, transport and telecommunications sectors; and a stock exchange that is the second-largest in Africa. Nigeria is the United States’ largest trading partner in Sub-Saharan Africa and supplies a fifth of its oil. One of the most striking sectors in Nigeria was telecommunications, and not surprisingly, because major emerging market operators (like MTN, Etisalat, Zain and Globacom) base their largest and most profitable centers in the country. In fact, MTN generates over 50% of its earnings from Nigeria, where it enjoys industry-high EBITDA margins of 65%+.
Nigeria also has a highly developed financial services sector, with a strong representation of both local and international banks, asset management companies, brokerage houses, insurance companies and brokers, private equity funds and investment banks.
Nigerians are very aware of their growing economic power, and share the “African pride” we saw in Ethiopia. Nigerians will remind you of their many accomplishments, including launching three satellites into space and being the first country in Africa to launch a communication satellite.
Nigeria’s film industry, dubbed “Nollywood,” is a huge industry in Nigeria notable for being the second-largest in the world, ahead of the United States’ Hollywood and behind India’s Bollywood (in terms of volume of production).
With a population of 160 million people and government commitment to power reform, Nigeria today is extremely interesting from an investment perspective because it is witnessing an emerging middle class with purchasing power to consume goods and services. . It is at an inflection point with huge challenges, especially with power and infrastructure. If these bottlenecks are addressed, the country will experience transformational growth.
Our final stop was in Ghana, considered one of Africa’s most successful colonial economies. Originally called the “Gold Coast,” and now heralded as the “Gateway to West Africa,” Ghana is a nation rich in natural resources. Ghana is endowed with arable land, forests, and deposits of gold, diamonds, manganese and bauxite. Ghana also recently discovered oilfields off its coast, from which it began extracting crude in late 2010.
Ghana is very attractive from an investment standpoint, and is forecasted to be the fastest-growing economy in the world in 2011, with an estimated GDP of $71 billion. Although Ghana suffered from disastrous corruption and authoritarianism in the 1970s and 1980s, it used the lessons it gained to rise toward individual freedom and political stability after the restoration of democracy in 1991. Its current government system is modeled much after that of the U.S., with much of the executive power held by the president, who is elected by universal suffrage every four years but is limited to two terms.
Furthermore, after the disappointingly chaotic and violent political failures observed in Kenya and Zimbabwe, the peaceful conclusion of the recent Ghanaian presidential elections in January 2009 secured its reputation as one of Africa’s strongest emerging democracies. As a result of the country’s increasingly democratic settlement and social stability, investor confidence has been boosted, leading to rising investment. In addition, the government plans to improve management of public expenditure, lower taxes, and provide support for development in the private sector. The primary investment theme for Ghana is centered on its newfound oil wealth and the expected economic growth. Supply/demand imbalances have created huge opportunities in real estate, consumer, financial services, oil and gas services, and agribusiness.
Telecommunications is also one of the dominant industries in the country, with entire villages branded in the colors of MTN, Vodafone and Globacom.
The biggest takeaway from the trip was that Africa is ripe for business and investment. Telecom is a theme that transcends all the African nations we visited and has unleashed derivative businesses such as tower construction, operation and maintenance, mobile-based technology platforms, commercial real estate among others. There is still so much more room to grow as only 50% of Africans use mobile phones vs. ~100% in the developed world. The continent still has huge risks and one has to be very careful and needs to approach it with a long-term perspective, a stomach for volatility, and with the right local partners.
But for the forward-thinking investor, the returns can be mind-boggling. Case in point: one of the local investors we met in Addis invested in a Pan-African bank in the 1990s at a $38 million market cap. In a little over a decade the bank had grown to a market cap of over $3 billion, almost 80 times return on capital!
The beauty about investing in Africa is that you aren’t only making a great return on your investment, but you are also contributing to the development of the continent. You are providing growth capital that will allow companies to grow, creating more jobs, and helping lift millions of people out of poverty.
Sangu Delle is an entrepreneur from Ghana currently based in San Francisco, California. He is founder of African Development Initiative and CEO of Golden Palm Investments LLC, an investment company with private equity interests in agribusiness, real estate, financial services and healthcare. He is currently on leave from his MBA at Harvard University in order to work as Global Generalist at Valiant Capital Partners.
This is Part Two of a two-part travelogue bySangu Delle, an entrepreneur from Ghana and Global Generalist at Valiant Capital Partners who designed a trip to advocate for investment on the African continent. Read Part One here.
Our next stop was Nigeria. Most populous country in Africa, seventh most populous in the world, and most populous country in which majority of the population is black. In 1950, Nigeria has a population of about 50 million. Today, over 160 million people live in Nigeria, and the UN forecasts that number to grow to over 730 million by 2100.
Nigeria is not only the dominant nation in population, but also one of Africa’s economic giants. She was selected by Goldman Sachs in 2005 as one of the “Next Eleven,” with a current GDP of over $415 billion (37th in the world). Nigeria is forecasted to overtake South Africa as the largest economy in Africa, according to research from Citigroup, which says that Nigeria will attain the highest average GDP growth in the world between 2010-2050.
Nigeria is richly endowed with an abundant supply of natural resources; well developed financial, legal, transport and telecommunications sectors; and a stock exchange that is the second-largest in Africa. Nigeria is the United States’ largest trading partner in Sub-Saharan Africa and supplies a fifth of its oil. One of the most striking sectors in Nigeria was telecommunications, and not surprisingly, because major emerging market operators (like MTN, Etisalat, Zain and Globacom) base their largest and most profitable centers in the country. In fact, MTN generates over 50% of its earnings from Nigeria, where it enjoys industry-high EBITDA margins of 65%+.
Nigeria also has a highly developed financial services sector, with a strong representation of both local and international banks, asset management companies, brokerage houses, insurance companies and brokers, private equity funds and investment banks.
Nigerians are very aware of their growing economic power, and share the “African pride” we saw in Ethiopia. Nigerians will remind you of their many accomplishments, including launching three satellites into space and being the first country in Africa to launch a communication satellite.
Nigeria’s film industry, dubbed “Nollywood,” is a huge industry in Nigeria notable for being the second-largest in the world, ahead of the United States’ Hollywood and behind India’s Bollywood (in terms of volume of production).
With a population of 160 million people and government commitment to power reform, Nigeria today is extremely interesting from an investment perspective because it is witnessing an emerging middle class with purchasing power to consume goods and services. . It is at an inflection point with huge challenges, especially with power and infrastructure. If these bottlenecks are addressed, the country will experience transformational growth.
Our final stop was in Ghana, considered one of Africa’s most successful colonial economies. Originally called the “Gold Coast,” and now heralded as the “Gateway to West Africa,” Ghana is a nation rich in natural resources. Ghana is endowed with arable land, forests, and deposits of gold, diamonds, manganese and bauxite. Ghana also recently discovered oilfields off its coast, from which it began extracting crude in late 2010.
Ghana is very attractive from an investment standpoint, and is forecasted to be the fastest-growing economy in the world in 2011, with an estimated GDP of $71 billion. Although Ghana suffered from disastrous corruption and authoritarianism in the 1970s and 1980s, it used the lessons it gained to rise toward individual freedom and political stability after the restoration of democracy in 1991. Its current government system is modeled much after that of the U.S., with much of the executive power held by the president, who is elected by universal suffrage every four years but is limited to two terms.
Furthermore, after the disappointingly chaotic and violent political failures observed in Kenya and Zimbabwe, the peaceful conclusion of the recent Ghanaian presidential elections in January 2009 secured its reputation as one of Africa’s strongest emerging democracies. As a result of the country’s increasingly democratic settlement and social stability, investor confidence has been boosted, leading to rising investment. In addition, the government plans to improve management of public expenditure, lower taxes, and provide support for development in the private sector. The primary investment theme for Ghana is centered on its newfound oil wealth and the expected economic growth. Supply/demand imbalances have created huge opportunities in real estate, consumer, financial services, oil and gas services, and agribusiness.
Telecommunications is also one of the dominant industries in the country, with entire villages branded in the colors of MTN, Vodafone and Globacom.
The biggest takeaway from the trip was that Africa is ripe for business and investment. Telecom is a theme that transcends all the African nations we visited and has unleashed derivative businesses such as tower construction, operation and maintenance, mobile-based technology platforms, commercial real estate among others. There is still so much more room to grow as only 50% of Africans use mobile phones vs. ~100% in the developed world. The continent still has huge risks and one has to be very careful and needs to approach it with a long-term perspective, a stomach for volatility, and with the right local partners.
But for the forward-thinking investor, the returns can be mind-boggling. Case in point: one of the local investors we met in Addis invested in a Pan-African bank in the 1990s at a $38 million market cap. In a little over a decade the bank had grown to a market cap of over $3 billion, almost 80 times return on capital!
The beauty about investing in Africa is that you aren’t only making a great return on your investment, but you are also contributing to the development of the continent. You are providing growth capital that will allow companies to grow, creating more jobs, and helping lift millions of people out of poverty.
***
Sangu Delle is an entrepreneur from Ghana currently based in San Francisco, California. He is founder of African Development Initiative and CEO of Golden Palm Investments LLC, an investment company with private equity interests in agribusiness, real estate, financial services and healthcare. He is currently on leave from his MBA at Harvard University in order to work as Global Generalist at Valiant Capital Partners.