The figures are staggering. Over the last 40 years, Africa has received about $570 billion (€435 billion) in economic aid. Yet there has been near-zero per capita economic growth, with gross domestic product for the median African country remaining stagnant. Compare that to India – which has received far less aid, but has achieved huge economic growth. Handouts, says Nigerian businessman Tony Elumelu, simply aren’t working.
The 49-year-old, who made a fortune working in Nigeria’s banking sector and through his family office Heirs Holdings, is on a mission to change philanthropy in Africa. Capitalism and entrepreneurship will transform the face of the continent, he reckons, not charitable donations.
Elumelu’s notion of “Africapitalism” is far from new – most modern development stories have had the private sector at their heart, and international development agencies and multilateral institutions are increasingly prioritising developing capacity in productive sectors, at least rhetorically. But, there are few examples of this being achieved through a private foundation model, and fewer still of African foundations working in this way.
The Tony Elumelu Foundation is one of those rare African philanthropic organisations – and it is very serious about the role it has to play. “We believe that no one will develop Africa but us,” says Elumelu.
For almost 14 years, Elumelu was chief executive of one of Nigeria’s most ambitious banking institutions, the United Bank for Africa, which grew under his tenure from its domestic focus to a company with operations in 18 African countries and branches in London, Paris and New York. It is this experience, which saw him gain prominence not just in Nigeria but across the whole continent, that left him aware of the need for a concerted effort to give African entrepreneurs a head start in often difficult conditions.
“I could see the immense opportunities across Africa, and the challenges across Africa, and the hopelessness in the youth across Africa,” he says. “I thought, what could actually become of Africa if we had good leadership, both in the public sector and the private sector? If we had more entrepreneurs?”
Elumelu’s contention is simple – by creating the right environment and giving the right catalytic support to entrepreneurs and the private sector in Africa, economies will grow sustainably and equitably, with job creation improving the social and economic standing of Africans.
“The private sector can help drive employment. When we started we had 101 staff, and by the time I left UBA we had close to 20,000 staff,” he says. “The point is, if we had more entrepreneurs across Africa, in their respective ways... helping to break down the geographical barriers and creating the flow of business between countries, then we will have an African continent that has truly come of age.”
What stands in many entrepreneurs’ way is a lack of management skills, training and experience. Combine that with archaic regulations and inefficient institutions that add cost and complexity, and a lack of access to finance, and it’s easy to see that Africa isn’t the easiest place to do business. The Tony Elumelu Foundation is trying to address these problems at their source, using a number of initiatives.
For the first, the foundation has brokered a programme of internships with international businesses across Africa, placing talented MBA students into
large companies to gain exposure and experience of working around the continent. The foundation is also in the process of creating its own leadership academy to equip emerging leaders with the skills to compete globally.
To make sure those skills can be put to productive use, the foundation is using its influence to lower the barriers for success in the countries in which it operates. For example, Nigeria, for all its potential, ranks 133rd in the world on the World Bank’s Doing Business report for 2012, as entrepreneurs struggle with issues such as weak property rights and inefficient business registries.
“The private sector has to have the enabling environment, so we thought that a more catalytic and impactful way of intervening and helping to shape the private sector’s role is to engage with governments across Africa to begin to work towards creating the right private sector environment,” Elumelu says.
Part of this initiative includes providing private sector expertise to government ministries – with the aim of helping them to understand the needs of investors. In September, the foundation sent its first Tony Elumelu Fellow to Nigeria’s Federal Ministry of Agriculture and Rural Development in a bid to find ways to bring investment to a sector with huge potential, but which has become moribund after years of neglect. A partnership with Tony Blair’s foundation has placed similar individuals into government departments in Liberia and Sierra Leone.
The financing side of the foundation focuses on an emerging asset class – impact investing. The current buzzword of philanthropy, impact investing tends to focus on providing capital to enterprises that have both sustainable business models and demonstrable social impact.
Elumelu, however, is keen to stress that investing in businesses with development impact is a mission that is shared with the for-profit family office, Heirs Holdings. Heirs Holdings is designed to make the kind of long-term investments that would be difficult in a traditional private equity environment in sectors that are themselves catalysts for development – including financial services, real estate, healthcare and natural resources.
It is, for example, currently trying to tackle Nigeria’s energy problems – the country suffers from a perennial undersupply of electricity, with expensive diesel generators running on imported refined fuel supplying many businesses in place of a functioning grid, and this is a big block on investment.
But the country has a large amount of natural resources – as well as its massive oil reserves, there is huge natural gas resources that are currently underdeveloped. The problem is that, historically, this important commodity has been flared off or exported, rather than being used as a cheap source of domestic energy. When the Nigerian government began a drive to increase local ownership of its hydrocarbon industry, Elumelu acquired a gas license and, instead of directing its production for export, has begun the process of building a domestic power business. It is an example that he hopes will be followed. “Heirs Holdings is a role model family office in Africa,” he says.
Entrusted with the direction of the philanthropic activities is Dr Wiebe Boer, a former McKinsey consultant and associate director of the Rockefeller Foundation’s Africa office. Boer, who was born in Nigeria to missionary parents, gives the impression that the freedom of the more nimble, private sector-focused Tony Elumelu Foundation is refreshing.
“Much of the work thus far in impact investing has been focused on the demand side and building infrastructure for the investors. We now need to also work on the business development side,” he says.
“As a foundation we focus on how to drive Africa’s economic growth through Africa’s entrepreneurs building businesses, rather than the traditional philanthropic model of addressing problems with periodic grants. We have to be as sustainable and catalytic as possible. In the end, private capital is where the most innovation is, so that’s where our focus is.”
Being part of a foundation with a rare heritage – founded by a bona fide African business leader – has its advantages too.
“We have a unique voice that people listen to,” says Boer. “In some ways, our impact may be greatest in the form of setting an example that more African philanthropists follow, and they say: ‘let’s not do the traditional philanthropic model of cutting ribbons and building clinics, let’s do something entrepreneurial’.
“It also gives us a unique place, because normally when it’s an African institution [approaching potential partners] the first question is: ‘OK, what do you need from us?’ We can say: ‘No, we have our own chequebook, we’re looking for you to partner with us in what we’re doing, we’re not looking for your money’.”
Asset manager Alex Trotter met Elumelu in the mid-2000s, when he was in the process of expanding the UBA empire, and they “clicked”. Trotter, who worked in corporate finance, joined UBA to work in its asset management division. Now a director of Fulcrum Investment Management and a trustee of the Tony Elumelu Foundation, he is encouraged not only by the message but by the effect that the combined operation has on local understanding of philanthropy and international perceptions of Africa’s entrepreneurial potential.
“Tony’s heart is absolutely in the right place. The point of being African funded is important. For me when I’m investing one of the most important things is perception,” reckons Trotter, who manages portfolio investments into Africa.
“The point [of the Tony Elumelu Foundation] from the beginning was to be ... quantitatively different. Not just a shell, not just an excuse for brand projection. I’m biased, but what’s gone on in the past two years has been really interesting. The things they’re doing are of global quality,” he says. “If Tony were here, he’d say he wants a thousand Tony Elumelus or a thousand Aliko Dangotes [Africa’s richest man]. It’s being able to equip people, whether that’s with the management skills, the right enabling environment.”
A growing number of people in Nigeria, he adds, have charitable foundations. “Usually it’s the wife of somebody giving cheques to the wife of some governor to build a hospital.” But Trotter reckons Elumelu is changing this. “What I like about it is that Nigeria is a very competitive place. You’re already seeing that having one professionally run philanthropic institution is giving pause for thought to some of the other large businesspeople who are thinking ‘maybe we should be doing this’.”