How Tony Elumelu’s ‘Africapitalism’ Aims to Redefine African Economic Development
Tony Elumelu is living proof that all of this talk about doing well (making profits) while doing good (making social impacts) is not just talk. In 1997, Elumelu and his partners invested $5 million into a distressed Nigerian bank, which he renamed Standard Trust Bank (STB) and turned around to become the fifth largest bank in Nigeria. In 2005, STB merged with United Bank for Africa (UBA), which is now a multi-billion dollar financial services powerhouse. During its growth, UBA brought banking into previously underserved communities and created 25,000 jobs. Elumelu is now taking his learnings from this experience to redefine strategies for African economic development with a philosophy he calls Africapitalism.
Elumelu did not set out to create social change during his tenure at the helm of United Bank for Africa. “We wanted to democratize banking – at the time, it was an economic, not a social act,” he said during a keynote speech the Global Philanthropy Forum earlier this month in Washington, D.C. “But we learned quickly that as we enhanced access to banking, the communities prospered. And as the communities prospered, we also did. The lesson for us is that, indeed, corporations can do well and do good simultaneously. If you integrate both, it can create even more wealth.”
United Bank for Africa grew its business by offering banking to customers that other banks refused to work with. The bank opened 1,000 branches across Africa, and expanded into nineteen countries. One village, according to Elumelu, wanted so much for UBA to open in their community that villagers offered to donate a house for the bank’s local operations. As UBA grew, Elumelu became convinced that corporations had the power to create profits, economic change and social change all at the same time. He also saw the impact that an initial $5 million investment had across Africa, and began to compare this to the impacts of the millions of dollars of aid that flood into the continent every month.
It is this knowledge that is now informing the concept of Africapitalism. Elumelu, who has retired from UBA and started a for-profit investment company, Heirs Holdings, and an eponymous foundation, defines Africapitalism as an economic philosophy that embodies the private sector’s commitment to the economic transformation of Africa. This transformation will be made through investments that create both economic prosperity and social wealth. Private sector entrepreneurs and capital will be the key to developing Africa.
According to Elumelu, there are immense opportunities to grow Africa across sectors from mining to commercial health care to telecommunications. He believes that African development must be led by the private sector, with investors providing capital to entrepreneurs who will then build businesses from these opportunities. “What Africa needs is not just donor funds,” he said. “We need to rethink the mechanism, and how to grow the economic transformation of Africa.”
The Tony Elumelu Foundation is working to bridge the gap between charitable dollars and commercial investment by providing start-up funding and business development services to help African entrepreneurs create successful businesses. Elumelu’s investment strategy, which stems from another of his insights while at UBA, emphasizes a long-term focus. The foundation has successfully partnered with Elumelu’s for-profit investment company to fund companies such as Mtanga Farms, a Tanzanian agriculture company that provides quality seed potato varieties to smallholder farmers. Mtanga Farms has a financially viable business model that also aims to significantly increase crop yields for small Tanzanian farmers, making it a prime example of Elumelu’s belief in doing well while doing good.
And although development, according to the Africapitalism philosophy, should be led by the private sector, governments also have an important role to play in providing the basics that will allow businesses to thrive. “Governments need to provide infrastructure that will catalyze and create opportunity for businesses to do well,” said Elumelu. “This means strong judiciaries, tax authorities, political stability, and electricity – power, power, power.”
The current creation of such infrastructure across many African countries makes the timing right for the implementation of Africapitalism. Elumelu points to Nigeria, Ghana and Rwanda as countries primed for economic development through entrepreneurship. The final missing piece, he says, is a thorough understanding of how to best use capital, which can be determined by working closely with local people to understand what is really needed. “We cannot just have donor capital or investment capital for the sake of it,” he said. “Capital needs to come in to address certain specific objectives that produce economic prosperity and social wealth in a manner that is sustainable.”