It is fanciful these days to come across Startup founders who say that only Africans can build Africa and that it should be considered top priority for Africans to bind together to defeat the rave of rapacious foreign investors looking to pounce on the opportunities that Africa offers. While this may sound nice and fanciful, it is never a smart move.
You see, there is a lot we are not getting right in Africa and one of such attitude is our US vs THEM mentality. It has led to decades upon decades of regression. In the 1950s and 1960s, African governments went on a spree, nationalizing foreign firms and forcing the expatriates to leave the continent. A good example was what happened in Tanzania in 1967 when Julius Nyerere nationalized key sectors of the economy such as banks, large industries and plantations. These companies at the time were well managed by their foreign founders and they employed several thousand of Tanzanians. Upon nationalization, most of these failed worsening Tanzania’s economic problems. The same pattern was observed all over the continent from Zimbabwe to Nigeria to Congo. Many of these firms eventually went bankrupt and for a large majority of those still standing, the level of service to the final consumer has been abysmal.
YOU NEED FOREIGNERS
One of the reasons African founders give for not wanting foreigners owing and running companies in Africa is that the foreigners take over businesses that should go the natives. But this is the wrong way to look at things. You need foreigners to develop the market and expand it to reach a lot of consumers. Because foreigners are bringing with them a lot of expertise, they in turn transfer the expertise to their employees who can in turn go ahead to start even better companies. I have been shocked at the amount of information and data foreigners who have never stepped foot on Nigeria have about the country. This is what is needed for a nascent industry like the technology space.
The truth is that usually only the most skillful and business-savvy foreigners can leave the comfort of their countries to establish companies or be a part of the investor community in a place of Africa. While the opportunities are immense, it is important to state that there are many basic facilities and infrastructure lacking in Africa. Where they are coming from, power supply, for example, is taken for granted. Here, as much as 40% of their cost is attributed to generating power supply for their companies. In 2016, Nigerians spent N3.5tr generating their own electricity. That’s unbelievable. This is the sort of problem they are coming to surmount
To think that everything is rosy for the foreigner coming to build a business in Africa is to be misguided. For some of them, the appreciation of these problems leads to call for solutions to these problems from their countries. A good example is how the power problem in Africa led to an innovative solution by Lumos. As it stands, Lumos offers clean and affordable solar power to a market of customers living off the electricity grid in Africa. This simply shows that we don’t have all the answers.
In a lot of cases, the more foreign direct investment flowing into a country, the more prosperous the country is. See the chart below:
As you can see, Africa lags behind in unimaginable proportions. To kick against foreign direct investment is to kick against the development of the continent of 1.3 billion people. In a continent where the most basic of amenities is lacking, these are the funds going into creating a conducive environment for the indigenous entrepreneurs and their customers.
As an aside, isn’t it hypocritical when foreigners allow Africans into their countries to work and build businesses, while Africans are intent on stopping them from doing the same. For instance, Nigerians abroad remitted $35 billion in 2016. For perspective, the biggest ever budget in Nigeria’s history presented in 2016 was $30 billion. How then do we reconcile this hypocrisy?
COMPETITION IS GOOD
You can be sure that the major reason indigenous startup founders kick against foreigners is because they are not favorably disposed to competition. But competition is good. The reason there are many crappy services in Africa is because there is a lack of good competition. Look at what used to happen in the early days of telecommunications in Nigeria. People made long distance calls at exorbitant prices. With more competition came the need to become creative, look for better ways to produce things and even make more money. Due to competition, more Nigerians have mobile phones than bank accounts. And telecommunication companies can make (and are making) even more money.
If a country does not have a good banking system, it needs foreigners. If a country does not have the best (or a variety) of agricultural products, it needs foreigners. If it does not have a great technology ecosystem, it needs foreigners. The idea of protecting the country against foreigners is costing the country quality goods and services. A good example I often refer to is how the competition in Oil and Gas made Rockefeller revolutionize energy in America:
Due to competition, as the price of kerosene fell from 58 cents a gallon in 1865 to 26 cents a gallon in 1870, and then to 8 cents a gallon during the 1870s, far more people were able to have light after sundown. Before 1870, only the rich could afford whale oil and candles. The rest had to go to bed early to save money. By the 1870s, with the drop in the price of kerosene, middle and working class people all over the nation could afford the one cent an hour that it cost to light their homes at night. Working and reading became after-dark activities new to most Americans in the 1870s.
This is what competition does.
CONSUMER IS KING
Someone asked me if it’s still entrepreneurship when we copy and paste innovations and business models from developed markets to Nigeria. Of course it is. By definition, the activity of setting up a business or businesses, taking on financial risks in the hope of profit. Even in developed markets, it is a rare thing to see a truly innovative idea. Most of the time, it is the ideas on ground that are fine-tuned to make life easier for the consumers.
And that’s exactly what makes the consumer king. If foreigners bring a business innovation from their countries and the African consumer does not like buy into the concept, there is nothing they can do about it. It always has to do with the consumer. A business exists to serve the consumer. It is competition that makes giving the consumer the best possible. Trade transcends tribe or nations. People do not have to like you to buy from you. A lot of Africans dislike homosexuals but that has not stopped them from buying iPhones made by Apple, whose CEO is gay. I am reading Thomas Sowell’s “Migrations and Cultures”, I found it intriguing that even though the Jews and Polish immigrants who first settled in Chicago were notoriously unfriend toward one another, they nevertheless found each other commercially indispensable as tradesmen and customers, respectively.
WHAT WE NEED
The obsession with stopping foreigners from entrying the market is unnecessary. We need them. We need to welcome them. We need to work with them. Even if their objective is to make quick profit and exit, they cannot do this without employing local talents and training them on how to meet their profit-making objective. If they fail to do that, they will go bankrupt. The sheer amount of human capacity gifted the continent free in building profit-making enterprises is enough reason to have them come here. If the foreigners run away after making money, they cannot uproot all the locals who made the businesses successful. These ones can go ahead to make even better products.
Therefore, let the foreigners come. The world is flat. It is a win-win situation. They spend on the ecosystem. The consumer benefit. They leave in their wake human resources they cannot uproot. No patriotic citizen should be against these.