How Investors Can Win in Africa

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Tony ElumeloFor businesses to understand African investment, they must realize that African long-term capital investments are not a niche asset class, said African investor Tony Elumelu. Financial commitments that build economic prosperity and social wealth should be the focal point of all African investment.

Elumelu, who is chairman of Heirs Holdings, calls this “Africapitalism.” This economic philosophy centers around the creation of social wealth, Elumelu said.

Many years of charity work and billions of dollars have failed to create adequate self-sufficiency in Africa, Elumelu said. Although investors see moneymaking potential in Africa, they have not seen that creating social wealth will ensure investment success.

Elumelu, a former CEO of United Bank for Africa, pointed to Transnational Corporation of Nigeria as an example of how the private sector could invest in social wealth via Africapitalism.

Transnational recently commissioned a fruit juice plant in Benue State, Nigeria. About 60 percent of the fruit fell to the ground and rotted due to a lack of processing and storage facilities.

Private investors stepped in to solve this downstream production problem. By doing so, the investors created jobs, increased the productivity of farmers, opened new domestic markets, increased profitability and conserved foreign exchange.

Investors can see in this example an opportunity to help African entrepreneurs solve problems. This is a case showing that Africans know where development is necessary, and they can show the way.

Meanwhile, African governments can assist in this Africapitalism by getting out of the way and allowing entrepreneurs to work, Elumelu said. The role of government should be to ensure a fair and transparent atmosphere for business to grow.

Short-term investments to extract wealth is not the path to travel, Elumelu said. Investors need to focus on Africa’s competitive spirit, people capital and African ideas and input.

In this new Africa, both Africans and investors will be winners, Elumelu said.

Read more at CNN Money.