?Patient? Capital for an Africa That Can?t Wait
Friday, April 20, 2007
Africa needs many things, but most of all it needs capitalists who can start and run legal companies. More Bill Gateses, fewer foundations. People grow out of poverty when they create small businesses that employ their neighbors. Nothing else lasts. Last week, I was touring northern Tanzania when our car passed the small town of Karatu and we suddenly came upon an open field splashed with colors so bright and varied it looked from afar as if someone had painted a 30-color rainbow on the landscape.
As we got closer, I discovered that it was Karatu?s huge clothing market. Merchants had laid out blankets piled with multicolored shirts, pants and dresses, much of it used clothing from Europe, and were hawking their goods.
This was not Nordstrom. A man with a tape measure dangling from his back pocket and a megaphone in his hand was shouting: ?A thousand shillings for these trousers. It?s like giving them away.? Men and women, themselves dressed in brightly colored native Tanzanian garments, sifted through the mounds of clothing, holding shirts or slacks up against their bodies to see if they fit.
Scenes like this remind you that Africa is neither all tragedy nor all renaissance. It is a diverse continent that?s struggling to find its way in the global economy and has both of these extremes, but is much more in a middle place that looks like that field in Karatu: a wild, unregulated, informal, individual brand of capitalism, which we need to channel into formal companies that can grow and scale up, even with corrupt governance.
Africa needs many things, but most of all it needs capitalists who can start and run legal companies. More Bill Gateses, fewer foundations. People grow out of poverty when they create small businesses that employ their neighbors. Nothing else lasts.
Whenever you read about capital flowing into Africa, though, it tends to be from big lenders like the World Bank, which have very strict criteria and work on big projects, or from microfinanciers, giving out $50 to a woman to buy a sewing machine. Microfinance has a role, but many people don?t want the pressure of being an entrepreneur. They want the stability and prosperity of a job created by capitalist risk takers and innovators. See India.
In some ways what Africa needs most today is more ?patient? capital to spur its would-be capitalists. Patient capital has all the discipline of venture capital ? demanding a return, and therefore rigor in how it is deployed ? but expecting a return that is more in the 5 to 10 percent range, rather than the 35 percent that venture capitalists look for, and with a longer payback period.
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