Africa’s Plethora of Paradoxes

Dambisa Moyo, perhaps the best-known of Africa’s crop of young promoters, wants the world to invest in her home continent instead of sending aid. This is the premise of “Dead Aid“, her recent bestseller.

She is not alone. Google her name and “economic development” and you may discover another Moyo; less-known but just as influential, who founded the Mandela Institute for Development Studies.   Nkosana Moyo has an impressive resumé in international finance and banking, and is a strong promoter for African investment.

Just as “Dead Aid” illustrates the broad and confounding paradox of humanitarian aid; that more of it does not mean better outcomes for its recipients, Nkosana Moyo uses his new work to explain another counter-intuitive concept – Africa’s risk creates its opportunity.  The essence of the argument makes sense.  Risks dissuade other investors and create niche opportunities that require strong comparative advantage.  The lack of competition and barriers to entry help buffer strong profit margins.  Nuevva knows all about this – our intimate understanding of Africa’s complexity is our raison d’être.

Tanzania is one of a growing list of African countries that is slated for a boom.  There’s gold and other precious minerals, a deepwater port and tremendous amounts of arable land, tourism, and now offshore oil and gas.  So can investors just queue up and expect to win?  Hardly.  Here are some paradoxes:

  • The World Bank labels Tanzania a “top performer” economically and its business environment as “poor”.
  • Ernst & Young calls it “moderate risk” politically and economically, but “high risk” legally and operationally.
  • Industrial gold production commenced twenty years ago, but government tax receipts were delayed until 2011.
  • Cheap labor is plentiful, but it’s difficult to fire staff.
  • Most potential tourists believe the country’s main attractions: Kilimanjaro, the Serengeti, and Zanzibar; are in Kenya

So the paradox is real, and daunting.  Most businesses would think twice about doing business in a place as complicated as Tanzania.  But the potential rewards are real too. To quote one businessman interviewed by the Financial Times, “Despite the best attempts of the government to destroy itself, Tanzania is booming”.

Nuevva’s perspective is simple.  Africa is open to those with patience and a long-term perspective.  This is not to say that money cannot be made in the short term.  Our teams have often promised investors whose products have never been sold in Africa to expect sales within six months.  But the reality is that solid and sustainable gains will remain the purview of those who understand the context intimately enough to decipher the opportunities of its paradoxes.  Africa is open for business.  Just be careful which door you use to get in.

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