What does Liberia Export?

In 2010, the value of Liberia's rubber harvest was nearly equal to the value of its cruise ships.

That's one potential headline that could be derived from playing around with The Observatory of Economic Complexity, a web-based visualization app that is co-hosted and developed by Harvard and MIT, holding trade data for most countries. Liberia, along with most of the world's countries, has data on imports and exports available for years 1995-2010. It's fun to play around with and it's macro-economically enlightening.

Rubber should be unsurprising, and although Liberia has no shipbuilding industry above Fanti fishing boats, it does continue to offer one of the world's favored flags of convenience with the Liberia Ship Registry, which I've mentioned before.

Just based on legibility of text size as an indication of significant exports, its curious and fascinating that  Liberia's exports were by and large just three classifications: Cruise Ships (31%) Rubber 30%, Petroleum (26%). As Liberia is and has always been an importer of fuel, the third category is a bit strange.

Diamonds, Cocoa Beans and Scrap Iron are the only other categories that can even be seen without zooming in, the latter not exactly being a growth industry. Raw iron ore should have significantly displaced these other categories the next year with ArcelorMittal's resumption of ore exports.

Photographs from the 1926-27 Harvard Expedition

All my posts on Harvard last week reminded me that I have never written about the Harvard Expedition to Liberia and the Belgian Congo in 1926-1927. The journey mostly concerned Medicine, Zoology, Ornithology, and Botany, and could be imagined as a classic jungle safari with pith-helmeted professors taking samples and specimens.

The venture resulted in a 2-volume, 1,064 page encyclopedic report, published in 1930, which chronicled the journey and its findings. The African Republic of Liberia and the Belgian Congo: based on the Observations Made and Material Collected During the Harvard African Expedition, 1926-27 (yes, that is the whole title) contains both interesting reports, such as accounts of elephants and even beached whale bones, and also pages and pages of rancid tropical diseases. Forsaken African villagers, crippled with elephantitis or ravaged by other horrors, are chronicled in bleak photographs. Surely this was for the betterment of all in advancing man's conquest of these ailments, but it makes for a rather grotesque document over all, especially if the history of tropical medicine isn't your thing.

Most germane to this blog, however, the beginning of the volume concerning the time in Liberia contains a series of photographic plates of Monrovia in its pre-war splendor. I'll mostly let those speak for themselves below, as they are some of the best documentation of the late-Settler town.

Its not particularly helpful that, for all the scientific exactitude that these scholars brought to their own area of enquiry, they were rather vague in the specific location of each photograph. Its possible to make some educated guesses on some, with the feel of Broad or Benson Streets, and others are more obvious. The first one, above, is clearly from Snapper Hill, although without the lighthouse or the Ducor, it seems quite different. A classicly-shaped palaver hut sits about where the Ducor pool might be now. The view from the harbor, below, gives an excellent sense of the overall prospect of the city.

Several of the plates show quite grand, multi-story mansions, two of the most imposing are labelled the President's Residence (whether a state building or a private house, its not clear) and Monrovia College. The residence looks to be on Broad Street; the college seems to be away from other buildings--perhaps even where the University of Liberia is now? Neither of these exist today.

Report from Harvard Business School Africa Business Conference: Post # 3: Infrastructure Panel

Moderator: Elisabeth Koll, Associate Professor, Harvard Business School.

Panelists:

Alain Ebobisse, Global Head, IFC InfraVentures and Chief Investment Officer, IFC

Gavin McGillivray, Director, UK DFID

Chuka Mordi, Director, CBO Capital Partners

Nick Rouse, Managing Director, Frontier Markets Fund

Amadou Wadda, Senior Vice President, Infrastructure, Africa Finance Corporation

The afternoon panel offerings at the Harvard Africa Conference featured a number of compelling options, and as in the morning, it was a tough choice. I ended up attending the Infrastructure-track panel: The $1.0 Trillion Africa Infrastructure Opportunity. For who can pass up a $1 trillion opportunity?!

This was a large panel, a mixed representation of donor funded agencies and private sector executives. This seasoned contingent fostered a fascinating and at times oppositional conversation--especially given the presence of Alain Ebobisse, senior official of the IFC, and to his left, Gavin McGillivray of UK's DFID, rubbing elbows with the forthright Chuka Mordi, of CBO Capital Partners always polite, but at times dismissive in his frankness on what he sees as fellow panelists' failed models, which drew audible gasps and rounds of nervous laughter from the audience. Such was the case when Mr Mordi jocularly asserted that:

'Multilaterial donor agencies are part of the problem…but not in a bad way…Fundamentally, they mean well, but they are a charity.'

That left more several of his co-panelists looking perplexed--but he was not alone. Mr. McGillivray had started out by narrowly defining the effectiveness of donor agencies and governments, with his initial remarks that:

'Governments are generally bad at spotting opportunity. What can the donor community do? Not much. There are three areas where donors might be able to help: governance, regulations, and planning, and regional projects.'

It seemed left to Mr. Ebibose, to defend the multilaterals' position. He handled this delicately, and proved neither afraid to admit the shortcomings of agencies such as his own World Bank Group, nor to defend a meaningful space for them--dovetailing with Mr. McGillivray's thinking.

Mr. Ebibose was also not reticent to point to a lack of capacity in the private sector, not least being: "there are not enough private developers of infrastructure in Africa," and therefore in turn a real need for groups like the IFC, which come in not only with cash, but with expertise.

Mr. McGillivray readily concurred with this particular lack of talent in both multilateral aid agencies and governments--and pointed out that this is where the IFC has leant meaningful assistance to governments, which has yielded positive results and should be expanded.

Mr. Rouse had several very insightful comments here, too:

Some African governments are just suspicious of the private sector. There are places which have the private sector ethos where we can operate, others not. Kenya is great, he said, but next door Tanzania is not.

A number of unpleasant issues--the elephants in the room of infrastructure investment in Africa--were addressed by members of the panel: the challenges of making a long term play in a high risk region; competition from the Chinese; and the often-times unworkable reality of Public Private Partnership models, especially in an environment of corporate and governmental corruption.

One of Mr. Wadda's most insightful comments was his insight into states' lack of capacity in negotiating effectively in PPP transactions. This leads to breaches of contract terms, reneging on contractual obligations, even cancellation of contracts. This has set a bad track-record for PPPs, discouraged future ventures, further eroded the ability of states to attract investor interest, and caused capital's appetite for such arrangements to flag, and given the entire model a poor reputation.

This was a fascinating revelation. Unfairness does not necessarily result in carpetbagging investors raking in huge profits by taking advantage of inexperienced public counterparts, but instead risks transactional collapse, and in turn a further wariness for such risky, long-term, capital- and capacity- intensive ventures in challenging frontiers.

Mr. Mordi expanded on this--repeating that one cannot separate the financial from the political--and that corruption pervades both arenas. Early on, he put it simply: "you cannot do a deal if the company or the country is run by gangsters." If lack of capacity is a weakness, corruption is the parasite that bleeds infrastructure projects to a premature death. This, he said at the start, was the primary challenge: governance. It is impossible to have a short term outlook when looking at infrastructure, and you need competence for implementation--even if corruption isn't crippling the venture, bad management surely will.

Later on in the question period, Mr. Mordi returned to this issue:

Nigerian banks have a systematic problem: a simple one of corruption, nothing else. Five years ago they didn't have the funds to do big investments, and they still don't have the scale, really, but are getting there. The banks are not going to put out money for longer than the government itself, and are for the time being, sticking to government debt because its safest form of liquidity.

This was one of the more technical moments of the session. Several panelists expressed a desire to move away from local currency transactions, and there was a bit of detailed accounting banter about this.

Lekki Toll Road, Lagos.

There were a few references to specific projects, with frequent mention of Lagos's Lekki Toll Road, with its 15 year tenure, by far the longest of any infrastructure deal in Nigeria; future phases of the massive Inga Hydropower in the DR Congo, and talk of the potential for smaller-scale hydropower in Guinea. Mr Rouse asserted that 200-300mw local stations were the solution to Africa's power problems, revealing it as a strategy, but giving no specific examples.

From this lively, revealing debate, it clear that Africa's problems in developing infrastructure are not just a lack of capacity of the physical plant itself, but the operators, investors, and the local, national and international partners who support these deals. Until investment is not made just in hardware, but in improving the talent pool of government stakeholders, infrastructure proposals destined to remain on the drawing board, a failure not of feasibility and financials but of inability and fraud.

Report from the Harvard Business School Africa Business Conference: Post # 2: 5 Take-aways from the Private Equity Panel

Moderator: Lena Sene, Director at New York-based Deer Isle Capital LLC. Her articles on the "missing middle" from Africa.com and Huffington Post can be found here.

Panelists:

Yemi Lalude, Founder and Managing Partner, Adlevo Capital Partners, Lagos. Also has Jo'berg office.

Paul Kavuma, Fund Manager and CEO for Nairobi-based Catalyst Principal Partners, reportedly closed first $70m on 24-Dec 2010, and expects US$100m by June 2011. East Africa-focused.

Hurley Doddy, MD, Founding Partner, and Co-CEO of Emerging Capital Partners, based in Washington, D.C., over US$1.8b in the last decade in at least 6 funds, more than 28 investments spread across 40 countries.

At any good conference, it can be painful to decide which sessions to attend, which means missing all the other concurrent discussions. Despite some compelling options, the Private Equity panel was excellent and informative, with three brilliant, veteran African PE panelists and an equally accomplished and knowledgable moderator, all of whom provided revealing, insightful, and at times unexpectedly frank advice on fund-raising, deal-flow and transactions, as well as career advice on ways into the African PE field (general consensus: its a tough go, better off doing something else, like starting a business-see below).

Lesson 1: Africans are buying things-- and not just scratch cards.

It might be a stretch to think of the current investing milieu as PWM-- Post-Walmart, and the deal wasn't as prominently discussed as the Penn Wharton Africa Business Forum in November, which occurred not long after the deal was announced, and Walmart did not come up in the PE session. However, throughout the day speakers, panelists and students were discussing the emerging middle class, and African consumers.

There is unquestionably a rising attention on manufacturing for, marketing to African consumers. Growing demand and incomes are there now to be captured. The reigning trifecta of African investment: Telecoms, Banking, and Extractive Industries-- are not yet deposed, but they are now discussed alongside talk of consumer products, both in general terms and with reference to specific transactions: the day saw mention of a toothpaste company in Dar Es Salaam, a plastics company in Accra, a food processor in Kampala. There was a sense that the low-hanging and near-ripened fruit of telecoms and banking have been picked at this point. There was some talk about agriculture and mining, and power and other infrastructure was given more emphasis (more on this in a later post on the afternoon's infrastructure session). The connectivity conversation was seen throughout the day's panels to be expanding beyond mobile phones to address the wide-open field of fixed-line broadband access, presumably pushed by the coming undersea cables (see also my next post).

Lesson 2: Get on the ground and start a business. Don't look for a job in PE.

As mentioned before, this new focus to the consumer has in turn shifted attention towards local, indigenous entrepreneurship, and the PE panelists put far more emphasis on encouraging entrepreneurship than in recruiting to their own field.

To some degree, this is of course natural. Mr. Doddy of ECP underscored that his firm, with US$1.8billion put to work across six funds over the past decade, employs only 35 full-time investment professionals across the continent, with a full-time global staff of around 50 people. His fellow panelists joked that they didn't need any more competition from any more PE funds, but there is an objective truth in their repeated assertion that what Africa can most use are quality, investment-grade enterprises--and MBA-quality management to run them. All three panelists underscored that one of their biggest challenges was--cue a classic line about working in Africa--a lack of capacity.

The three PE panelists concurred that they'd be happy to invest in a top-tier MBA's venture on the continent, and that the students stood a better chance as enterprises ripe for funding rather than knocking at the doors of low-turnover the dozen or so Africa-focused PE offices, which, as Mr. Doddy reminded the audience, are still boutique by global standards. Mr. Doddy pointed out that ECP's US$600m fund is big for Africa, but small by global standards.There simply isn't enough turn-over to absorb new classes of graduates.

Lesson 3: If PE is not easy, then African PE is really, really not easy.

Beyond the shortage of quality management and entrepreneurs, all three panelists mentioned a wide range of skills and bona fides that they and their colleagues have needed to cultivate for success in such a challenging milieu. On the ground knowledge is key-- as paraphrasing Mr. Lalude, "compared to the due-diligence we conduct in Africa, we do almost no due-diligence in the United States." Feasibility and research are long, complex, and expensive (just consider the airfare bills compared to deals on other continents) Skepticism is the norm here, where trust is more the norm with counterparts elsewhere. All of this takes more time, and costs more money, meaning the team has to be even more efficient than in other markets.

Everyone knows that "You have to have a good team, who gets along together and knows a lot." --but there was some real insight behind this bromide here. Mr. Kavuma made an interesting comment that the most sought-after investment management recruits now possess technical skills and experience in various sectors (emphasizing both in-country experience and work in sectors and enterprises) which helps in evaluating, managing and exiting deals. They report that there is a shift in opinion; its not enough to have a Wall Street internship and blue-chip MBA to be ready for this kind of endeavor.

Deal exists are always an art, and all three panelists concurred with Ms. Sene that exit planning and investor skittishness over liquidity remain challenges, especially at the smaller end of the scale. Mr. Doddy commented that regional expansion is key to getting companies to an appropriate size. Mr. Kavuma underscored that, post-2008, the big-buyout, debt-leveraging model was on ice, with a shift toward sector attractiveness and solid fundamentals--working harder for the pay-off.

Lesson 4: "Pitching Africa"-- its still "one country"

The veteran panelists dealt out other insightful epigrams worthy of passing along, particularly as the conversation turned to, as Mr. Doddy put it, "pitching Africa" to global investors. It was remarkable to hear Mr. Kavuma comment that, despite the high sophistication of his own investors, "most investors continue to think of Africa as one country." Anyone with experience in African knows that has long been the case, of course, but it was interesting to hear that this (mis)conception pervades at the highest-quality levels of investors, and a real shift away from this viewpoint isn't evident.

Its important to view the recent, high profile media spotlights-- the McKinsey report, Walmart, GDP growth, new oil frontiers--all talking about the continent as a whole, perpetuating the bias that it is a single market and investor space-- and introducing new audiences the continent through this prism. There is a truth to this notion, too, as underscored by the common difficult of lack of capacity and infrastructure, human resource talent, the need for regional strategies given the tiny sizes of domestic markets, the not least the still-ubiquitous challenges of corruption and instability. Yet there are more than 50 countries, each demanding its own attention and requiring local knowledge.

Lesson 5: What PE guys really think about "Impact" investing and ESG.

The session's discussion touched briefly on the twin issues of ESG (Environment, Social, and Governance Accountability) issues and Impact investing--and in so doing, showed how the conversation was evolving, and how wide the gap between mainstream investors and so-called patient capital can be.

None of the panelists' firms are specifically mandated to foreground such issues, so their views were especially interesting. While ECP's Doddy was adamant that "anyone looking to attract capital in Africa better have ESG compliance plans in place." --this was framed in the context of attracting a wider pool of capital into funds. In response to an audience question about the nature of ESG marketing to potential Limited Partners, Doddy was rather dismissive of presenting a strategy that profiled charitable aspects over investment returns. As he put it, you don't discuss poverty reduction when you are talking to people about maximizing returns on investment. This got some laughs from the audience.

Then, paraphrasing Mr. Kavuma:

Impact investing is one of my 'pet herrings'. I believe it has good aspirations, but could have negative implications: for Impact investors, if the track record is just a 2% return, or even just a return of principal capital, than [Equity Investors focused on Africa] are not going to have a business; we need to be able to make risk-adjusted, commercially-competitive returns, or else [African investments] will be stuck getting the crumbs off other people's plates. In coming to markets, there is a place for social good, but we need to remain focused on financial returns, if we are going to track capital.

Afterwards, in the typical post-panel student mob, Mr. Kavuma affably expounded upon his viewpoint. He has great respect for the concepts behind impact and socially-responsible investments, but is absolutely adamant that the fundamentals of transactions have to be competitive on the open market. He reports that he has been invited to speak soon at the Aspen Institute on a panel about Impact investing--he presumes he will be the contrarian in the debate. Aside from watching the fascinating evolution of this still-young field of investing, by both its own players and its detractors-- it is very telling that three successful Private Equity CEOs, focussed solely on Africa, closing funds and arranging deals with ESG fundamentals in place, but not adjusting their numbers or marketing their opportunities as "Impact." Another sign that there are multiple "business in Africa" storylines, which are changing rapidly.

Report from Harvard Business School Africa Business Conference. Post #1: New Themes

This past weekend was the 13th annual Africa Business Conference at Harvard Business School-- the world's largest student-run event focussed on Africa, and one of the biggest annual events in the US for African investment. Not only does HBS enjoy an active Africa Business Club and robust African alumni, but the conference increasingly yields a wide net of quality students and professionals. The overall theme was of the conference, Your African Legacy: Defining the Contribution of the Next Generation--demonstrated in both the remarks of the speakers and the eagerness of the students--manifested an evolution in the ways that business in Africa is developing and being understood.

Cleverly, the HBS conference organizes its panels in "tracks" which is very helpful in aligning the day's events along themes--each of the day's three panel sessions had one panel under each track. This year the themes were: the Business of Infrastructure; Entrepreneurship: Starting and Funding and Business; Healthcare; Moving Up the Value Chain; and Opportunities for Technology. In these headings alone, with their emphasis on tech-savvy enterprise-development over big-play investment banking, its possible to detect a shift in tone from the story lines about Africa from even a year ago.

And what a year its been for African business--some would say the most intense media attention that Africa has ever received from the global business community. While attention on Africa has burgeoned over the past decade, the past year was particularly intense. with McKinsey's much-talked-about "Lions on the Move" report, (which was the subject at the conference of an afternoon presentation session), to the paradigm-shifting plays like the Wal-Mart move for Massmart and KFC's aggressive expansion plans--put Africa above the fold of the business section in 2010.

Yet this not a rest-on-laurels atmosphere, and the HBS conference attendees, from seasoned veterans of African business to native-African MBA candidates, are collectively and individually forging ahead. Africa is not due to arrive, or in the process of arriving. The message is clear: Africa is here, and in ways big and small, the tone and content of the Harvard conference reflected this new reality.

I've separated my reports from the day into two further posts, covering each panel session that I attended. First report from the morning's Private Equity Panel.