Francisco Noguera

Social Capital Markets: Roxanne Miller on New African Capital

Roxanne MillerGuest blogger Roxanne Miller is a 2nd-year MBA student at the Haas School of Business at UC Berkeley, focusing her studies on the intersection of international development, social enterprise and technology.? She spent this past summer interning at Unitus and working on an ICTD health care project in Uganda.? Prior to Haas, Roxanne was a Kiva Fellow in Tanzania and spent several years in marketing roles at Yahoo! and American Express.? She is a graduate of the University of Pennsylvania with a degree in Communications.

By Roxanne Miller

Kevin Jones recently said that “markets convene in conversations” and part of the impetus for SoCap08 was to foster a space for dialogue. ?By the time Tuesday afternoon rolled around, the conversations were flowing.? As I tried to hurry between the afternoon sessions I had to squeeze past folks chatting in hallways, stairwells, restroom lines, even doorways with new acquaintances or old friends.?

I navigated my way into one of the few seats remaining in the “New African Capital” room and settled back to learn more about the equity funding models these African investors were pursuing to support local entrepreneurs.?The panelist’s background and approaches were quite varied and really highlighted a subset of the work being done.? Jo-Ann Pohl from Teba Bank, a South African community-owned bank that started by providing financial services to mineworkers, pitched in to moderate the session when Kojo Paris fell ill.? Pohl said that trying to meet the needs of Teba Bank’s customers, mostly migrant laborers, has been the driving force behind the banks innovation in areas like cross-border transfers and reducing loan interest rates based on saving track records.?

Dr. Modibo Khana Camara, originally from Mali, spoke about his work with Faso Investments, a recently-launched private equity fund focused on investing in under-performing financial services business in Africa.? The social goal of the fund is to increase access to finance by helping their SME finance, microfinance and rural finance investments get on the right track and grow.? A2F Consulting acts as the manager of the fund and provides technical and operating expertise to the portfolio companies.? The fund is backed by two of the most respected investors in microfinance and SME institutions – Blue Orchard and responsAbility.?

Camara’s years of experience at the World Bank were evident in his thorough answers and lexicon of “institution building” and “broad based” solutions.? It was clear that he believes his work is one way to help expand the formalized economy in the local regions.

Samuel Alemayehu, born and raised in Ethiopia, is now a venture capitalist with Venrock and based in the bay area.? He has been an angel investor and advisor to numerous African companies including Zebra Jobs, which he refers to as the “” of Ethiopia.? He’s passionate about supporting technology businesses springing up in Africa and is on the hunt for the next MTN or Google that will be launched by African entrepreneurs.

Although their investments approaches are quite different, there were several points of agreement amongst panelists.?

First, local knowledge is king.?

Camara’s years of experience have shown time and again that in order to succeed, one has to understand the local market and local roots are the best way to achieve that goal.

“You can’t out-local a local” said Alemayehu, who emphasizes that there is no substitute for finding local talent.? He is tired of seeing technology companies try to run their operations from afar when there is a skilled labor pool waiting for them. Pohl weighed in that global ideas are needed but it takes a local presence to translate them properly.

Second, the panelists agreed that supporting locally-developed innovation is vital to their work.? How do you do that?? Alemayehu’s answer is money and mentoring.? He called for the Diaspora of these countries to contribute funds to get ideas moving.? Camara is trying to find the superstars and support their work.? If you have limited funds to finance SMEs, he says you’ve got to fund the innovators in their field.

The final message was that it’s time to change the thinking about entrepreneurship and definitions of success.? Pohl says Africans are very bad at sharing success stories and don’t practice enough self-promotion.? Alemayehu wants to encourage a culture of entrepreneurs that dream big, like the tech entrepreneurs of Silicon Valley, instead of settling for creating a stable business that only employs a fraction of their potential.??

The time went by quickly and before I knew it I was out in the hallway quickly trying to find the room for the next session.? As I waited for that session to begin, I reflected on the comments and how it fit with the discussions I’d had this year with Wagane Diouf, the Managing Partner of Africap — a South African equity fund investing in African-owned microfinance banks.?

Wagane is concerned that if locally-owned microfinance banks are not supported to achieve scale they will suffer under the competitive pressure of foreign entrants into the market.? I can understand his concerns about a future that would have the microfinance markets in East Africa, say, controlled by BRAC, a Bangladesh-based institution.? At the same time, it’s hard to deny that the end customers are better off with more competition that drive down interest rates.?

These seem like complicated problems that require more thought and discussion.? Best to keep those conversations flowing!