In Focus: Amplifying Africa’s Growth Story

Where is the African ‘land of opportunity’ and how can businesses have an impact?

‘Our ambition is to become the number one black community for business school students across Europe,’ opened Ezzy Ndujiuba (Co-President of the Black in Business Club and MBA2024 at London Business School), as she welcomed guests to the inaugural LBS Black in Business Club summit ‘IN FOCUS: Amplifying Africa’s Growth Story’.  

The ambitious event was structured in two parts. First, Elias Papaioannou (Professor of Economics at London Business School and Co-Academic Director of the Wheeler Institute for Business and Development) delivered a lecture on education as a marker of infrastructural development and the impact of mobility on development in Africa, according to recent research. Then, the Club was joined by a panel of industry leaders from Development Partners International, GuarantCo and Helios Investment Partners to discuss investment in the context of diverse economic environments across the continent.

Investing in Africa: panel discussion moderated by Bolutife Babalola

In 2000, a range of economists and journalists deemed Africa ‘The hopeless continent’. But today, investors see it increasingly as a land of opportunity. By 2050 there will be more people in Africa than in the rest of the world combined. The area equivalent of China, continental United States of America, Europe and India combined, the sheer size of the continent means that there is enormous potential for growth in a range of sectors. It also contains both the largest Christian and Muslim populations in the world, whose generally peaceful coexistence represents one of the many ways we increasingly think about Africa as an example to follow. 

‘Opportunity means different things for different people,’ argued Professor Papaioannou, ‘but most people think that a good education is a marker of success. There is a strong connection between education and liberation in the history of African independence. Our research investigates rates of intergenerational levels of education across Africa as a marker of broader infrastructural development. We aim to identify the factors that contribute to improved levels of education as a part of the Wheeler Institute’s mission to help solve the world’s most pressing challenges.’ 

How does religious affiliation affect education? How does ethnicity? These questions are central to Professor Papaioannou’s research into religion and educational mobility in Africa, conducted alongside Alberto Alesina, Sebastian Hohmann and Stelios Michalopoulos and published in Nature last year. Using census data from 2,286 districts in 21 countries, the paper finds that upwards mobility is the key to successful intergenerational education outcomes at the primary, secondary and tertiary levels. It finds that Christians have better mobility outcomes than Traditionalists and Muslims, and that differences in intergenerational mobility between Christians and Muslims persist among those residing in the same district. Although Muslims benefit as much as Christians when they move early in life to high-mobility regions, they are less likely to do so. Their low internal mobility accentuates the educational deficit, as Muslims reside on average in areas that are less urbanised and more remote with limited infrastructure. It also finds that the Christian–Muslim gap is most prominent in areas with large Muslim communities, where the latter also register the lowest emigration rates. 

As African governments and international organisations invest heavily in educational programmes, the paper highlights the need to understand better the private and social returns to schooling across faiths in religiously segregated communities and to carefully think about religious inequalities in the take-up of educational policies. It has profound implications for policy and development across the continent, particularly in areas where there is a wider gap between the education outcomes of particular groups. 

Investing in Africa: panel discussion moderated by Bolutife Babalola

Following the lecture, Bolutife Babalola (Treasurer of the Black in Business Club and MBA2024 at LBS) was joined by Ghali Filali (Investment Professional at Development Partners International and LBS MBA2017); Tola Odukomaiya (Investment Director at GuarantCo); and Ogbemi Ofuya (Partner at Helios Investment Partners and LBS MBA2011), to discuss investment in Africa. 

In the context of a declining economic environment in general, Africa has experienced decreases in investment of around 34% in the last few years. Will Africa ever be a safe haven for investment? 

Ogbemi suggested that we need to think less about the idea of a safe haven and more about risk adjustment. In the last ten years there have been major returns in the venture capital space in Africa, which previously did not exist. How many investable asset classes can we create? The more we can create the more assets we can pull in. Ghali also emphasised the difference between the perceived risk in doing business in Africa and the actual risk. As investors, your job is to spot risk adjusted opportunities despite the noise that you hear. 

There is an infrastructure paradox in Africa: investors are looking for a minimum level of infrastructure before they invest, but Africa needs money to create that infrastructure. What models have you seen that can promote that investment? 

There are deep pools of capital in Africa, particularly when you look at debt, suggested Tola. But they generally don’t invest in infrastructure. You need models that target and unlock those pools of capital – GuarantCo is one. Our model involves communicating with different regulatory bodies and governments to try to locate these pools and their constraints, to build a framework that allows that capital to go into infrastructure. It isn’t that we need more external capital coming in, we just need the right asset classes. 

Is there a tradeoff between attaining ESG/SDGs and investment returns? 

According to Ogbemi, Africa-focused investors are naturally super ESG focused. It is crucial to think about the overall impact of your investment on the operating environment of the community. We see ESG as enhancing returns through improved diversity, environmental footprint etc. 

Are a lack of skills a barrier to investment in Africa? 

‘Not really,’ Tola summarised, ‘because we facilitate training within our investments.’ Company KPIs include tech training and grant funding. There is the appetite and there is the manpower there to deliver on labor. It is just making sure the training is funneled into the right places where it is needed. Training must be an in-built part of the strategy, which links to the focus on SDGs. 

What are the key challenges you have faced raising capital in Africa? 

‘Education,’ argued Ogbemi, ‘Investing in Africa is the path less travelled, so there is generally a less nuanced understanding of Africa as an investment destination than there should be. You spend so much time educating potential investors about the nature of the underlying demand drivers in the population – they are people who still get up, go to work, use phones, buy groceries, spend etc. So it is all about educating investors.’ 

If you were to pick just one infrastructural asset class across any region in Africa, what would it be? 

Ogbemi responded tactically, ‘I would pick two, not one: telecommunications and energy’. When you look at energy consumption per capita in Africa compared to somewhere like India, there is about 50% consumption in comparison. The cost of energy is higher, and consumption is lower. So any solution that delivers cheaper energy to industrial or individual people is very attractive. Telecomms are also imperative for the large population. These two infrastructural areas are so essential to development and they are needed everywhere, so are very attractive for investors. Ghali stressed the need for digital infrastructural development, since there is such little already in place. 

What scares you most, and what excites you the most about investing in Africa? 

All three speakers agreed that investors tend to be excited by the scale of opportunity and the scale of returns that we already see across multiple sectors. The fear comes from the cost of logistics and the randomness of extenuating circumstances, particularly on the macro level. No matter how much data we have, there can always be a macroeconomic issue that will influence the industry and country you are investing in – competing political sectors and policy uncertainty scares investors because it can lead to these unpredictable economic shifts. 

‘In Focus: Amplifying Africa’s Growth Story’ was a collaboration between the Black in Business Club at London Business School and the Wheeler Institute. Special thanks to Ezzy Ndujiuba, Bolutife Babalola and all of the members of the Black in Business Club Executive Committee for their hard work.

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