Where I live, the sense of progress in the air is palpable; roads are being paved, buildings are going up and train tracks are being laid everywhere around me. Where I live, hydroelectric dams, wind farms and geothermal plants are bringing clean energy to cities. Where I live, capitalism is not a bad word but, rather, a refreshing change that is inspiring entrepreneurs to start and grow companies, bringing much-needed jobs and higher pay to millions of individuals. I live in Ethiopia, one of Africa’s 54 potential success stories of the 21st century – the African Lions.
I say “potential” because I think the Lions are reaching a tipping point. If they tip backwards, they risk sliding into the old African story of corruption and poverty. If they tip forward, we will see more than an end to poverty in this country – we will see the emergence of an economic powerhouse.
To help tip the scales forward and bring countries like Ethiopia roaring through the 21st century, I see six components that can tip the scale in the right direction. Please note the following caveats: this is not a comprehensive list of factors; rather, these are anecdotal statements based on my experience investing in companies in Ethiopia and working in the region for almost a decade. Given these caveats, here are the six components:
The first three components (entrepreneurs, capital and optimism) are present throughout the Lions. The second three components (managers, efficiency and expectation) need some attention. Which way will the scales tip?
The Lions have entrepreneurs, and they need more managers. I run an investment firm in Ethiopia, and what I’ve experienced is that the entrepreneurial spirit is alive and well here. There is an appetite for risk and for returns. To be clear – I am not referring to the small street shop owners; rather, I am referencing the savvy entrepreneurs who want to scale a business into a market leader. It is my job to find these individuals and invest in them. And while they do exist, these entrepreneurs desperately need to gain business acumen and hire qualified managers.
Entrepreneurs need to be balanced by managers who can build hard and soft systems throughout their organization and drive efficiency into their operations and therefore throughout the economy. These managers will deliver the entrepreneur’s vision in a consistent and profitable way to the market. They will break the Lions free from old stereotypes – late, unreliable, inconsistent and untrustworthy – and tip the first scale forward. Entrepreneurs need to seek out, hire and develop strong managers. I could argue for similar skills and discipline in the public sector, but my experience is more in the private sector.
The Lions are starting to attract capital, and now they need efficiency. These two components are symbiotic. The Lions have access to microfinance and big private equity money, but the “midsize money” is only trickling in. For example, a $500,000 investment in a medium-sized food processing company will help create jobs, an increase in production capacity and sales; this is midsize money.
However, if an investor has to wade through bureaucracy, restrictions and corruption to make the investment, it will become impossible to realize an attractive return. As a result, the company will never receive the capital it needs to grow and the middle segment of the economy will stall. The Lions must not stand for this. To tip the scales forward, their government leaders must develop policies and build an efficient process for businesses to form, investments to close and contracts to be enforced. The trickle will become a steady flow, and midsize companies will become multinationals. The Lions must be unrelenting at cutting red tape, freeing up bottlenecks and squelching out corruption.
Finally, the Lions need optimism and expectation. The Lions have optimism; I see it in my staff, entrepreneurs and government leaders. They recognize the potential of the opportunity before them; but the Lions need people to expect more of them from inside and outside their borders.
Inside, they need to have higher expectations from each other. Businesses should expect more from their government stewards, and people should expect more from the companies that provide them goods and services. Demand better service and higher quality, pay your taxes and vote, and see what happens.
Outside, we need to expect more than ending poverty as a vision for the Lions. Countries from the East, such as China and India, already have this vision. They are heavily investing, putting their money to work, and they know how this story will unfold. The rest of us, especially the West, keep talking about ending poverty. We need to expect much more than this. We need to expect growth, quality, consistency and dividends. I have long believed that ending poverty is not a bold enough vision for this continent. We can all do better than that; we can and should expect more.
I live in Ethiopia because I am hopeful that many of the countries on the continent of Africa will tip forward rather than backwards and all become Lions that bring Africa roaring through the 21st century. My goal in this article is to help bring capital to companies, invest in entrepreneurs, develop their management teams and have bold expectations of them.
My advice is this: Do not miss out on being a part of tipping the scales in the right direction for the African Lions.
Matthew Davis is founder and partner at RENEW LLC, an impact investment advisory firm that invests in Sub-Saharan Africa and manages the Impact Angel Network. For over 10 years, he has worked with U.S. and African government leaders and private investors on investment strategies for frontier markets. He specializes in deal structuring and is RENEW’s chief investment officer. Mr. Davis sits on the board and advises numerous companies in RENEW’s portfolio. Email him at firstname.lastname@example.org or contact him on Skype: mattpdavis or following him on Twitter: @RENEWLLC.