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Many African leaders have come to regard private investment as the only route to sustainable economic development. "Investors put their money down for what they will get as a profit," says John Agyekum Kufuor, Ghana's president, in his palace in the capital city of Accra. "It's business."
Masoud Alikhani, 66, is among the new wave of investors at the tenuous nexus of venture capital and agribusiness in Africa. Five months ago he pitched a large hedge fund in New York on the merits of ESV Biofuels, as his company is called. The fund's partners agreed to take a tour of the facility in January.
"We are capitalists and opportunists," Alikhani says. "We are doing this to make money. That's the only way to help."
Mozambique, one of the poorest and most neglected places in the world, seems frozen in time. After wresting independence from Portugal in 1975, the nation was ravaged by a civil war in which more than 1 million people were killed, maimed or displaced. An uneasy peace arrived only in 1992. Since then the country has been on the tumultuous path to economic liberalization, alternating between double-digit growth and recession. More than three-quarters of its people remain desperately poor. Yet as Alikhani watches children pick through trash bins outside Maputo's airport, he sees only an upside. "Mozambique," he says, "is booming."
With a degree in agroeconomics, Alikhani seems most comfortable when ticking off facts about crop yields and other arcana. He earned his Wall Street bona fides during stints as a trader at Prudential and Lehman Bros. (LEH, news, msgs) in the 1980s. From 1993 to 1998, he was CEO of a steel, metals, energy and agribusiness concern in emerging Russia.
Today, in addition to his ESV duties, Alikhani holds board seats at three small, publicly listed commodities companies, including a diamond miner.
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But ESV is a whole other bag of seeds. Last year, it bought a long-abandoned cotton plantation in a malaria-laden stretch of Mozambican bush, grabbing 27,000 acres with a lease for 198,000 more. It expects to plant nearly 17,000 acres, harvest its first jatropha seeds, and press its first batch of oil by this time next year. Assuming the Alikhanis and their two other partners succeed in wooing outside investors, ESV could break even by 2011 -- sooner if biofuel prices keep rising.
Already, ESV has become the province's biggest private employer, with a staff of 620. Locals who hadn't earned money in years are making from $60 a month to as much as $2,000 for managers. "When we started, we told people it is a startup, a cash-eating animal," Said Alikhani says. "The faster we begin production, the sooner the benefits come to all."
Inhassune's revival is already under way. Mosquito control, power lines and potable water have quickly arisen from a barren stretch of bush.
"I'd be the last person in the history books to go down as a philanthropist," says Renier van Rooyen, ESV's South African on-site manager. "But you cannot run a business when your workers are out with malaria or sick from dirty water."
Promise and peril
The most obvious investing opportunity in Africa lies in its most pressing need: food. The continent supports one-seventh of the world's population and holds nearly a quarter of its land. But according to UBS, sub-Saharan Africa produces just $178 worth of goods per agricultural acre, compared with $457 in Latin America and $1,077 in Asia. A crippling fertilizer shortage is the main problem.Emerging Capital Partners, the biggest U.S. private-equity firm operating in Africa, sees opportunity there. Among its most daring investments is a $35 million stake in Notore Chemicals, a massive fertilizer project in the oil-producing Niger Delta, home to daily kidnappings and a continuing armed rebellion. Government graft and neglect ran the 12-year-old plant aground in 1999; Emerging Capital bought its stake in the shuttered facility in 2006.
"The government figured a dollar in its pocket was more valuable than the $10 it would make by fixing the conveyor belt," says Genevieve Sangudi, a 31-year-old Tanzanian-born, Columbia University-educated MBA who shuttles in from her home in Washington, D.C., to oversee Emerging Capital's portfolio.
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Africa: The next investing frontierThere's plenty of risk but also potential rewards.
A trip to Notore's facilities in the heart of the delta shows both the promise and the peril of investing there. The first leg of the journey is to Lagos, Nigeria's commercial capital of 15 million, as dysfunctional and chaotic a city as any on Earth. Packed minibuses sit bumper to bumper on overburdened highways as beggars tap windows in search of charity. The landscape is dotted with barbed-wire fences and burning piles of trash.
It takes two hours to travel the 18 miles from the airport to the Protea Kuramo Waters hotel, a high-gated, diesel-generated fortress where, because of the chronic lodging shortage in the city, occupancy is reluctantly granted at $500 a night, a sum that doesn't guarantee a working toilet.
The next stop in Notore's private airplane is Port Harcourt, a bleak delta city an hour away. The locals here have endured years of neglect at the hands of multinational oil companies and government officials easily bribed out of enforcing environmental regulations. Natural gas, a valuable byproduct of oil drilling, is simply burned off in open flares, further darkening the delta's wretched air.
"The delta is now Nigeria's biggest risk," says Bolaji Balogun, 40, the founder and CEO of Lagos investment bank Chapel Hill Advisory Partners. "It needs its own Marshall Plan."
Continued: 'An amazing opportunity'
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