Africapitalism as a catalyst for the development of Africa

8th September 2016

BusinessDay, Wednesday 07 September 2016. Back Page

Africapitalism as a catalyst for the development of Africa

Elumelu is chairman of Heirs Holdings and UBA Plc. He delivered this speech at Oxford University in United Kingdom.

There is need to see private sector companies as development partners in Africa. Consequently, we have to expand the pool of development actors and expand our development mechanisms to enable all actors to participate in a way that is congruent with the way they naturally function. Large national and multi-national companies across Africa, both African and foreign owned, are creating hundreds of thousands of jobs in multiple countries, and integrating the continent more and more each day.

According to a World Bank study, Africa’s private sector accounts for about two-thirds of total investments, four-fifths of total consumption, and three-quarters of total credit on the continent. This all adds up to increased development based on economic opportunity. The private sector needs to be recognised and charged with being a key player in not just Africa’s development, generally, but Africa’s development agenda, deliberately, and specifically.

This is what I’ve been preaching; I call this Africapitalism.

Africapitalism is an economic philosophy that promotes long-term investment in strategic sectors that will create economic and social wealth that is financial returns for share-holders as well as social dividends for society. Although Africa has received a record amount of FDI in re-cent years, one-third of that investment still flowed into extractive based projects.

This is why Africapitalism as an approach is so important to Africa’s economic and social future. In practice, Africapitalism advocates for more local value creation instead of the extraction model, intra-African trade and investment, regional integration, and the development of local human capital and other capacities to drive Africa forward.

Africapitalism therefore means we cannot leave the business of development up to our governments, donor countries and philanthropic organizations alone. The private sector must be involved in the business of development. We in the African private sector must wake up, recognise and embrace our role in driving the economic growth and the social development of Africa, and we must act on that responsibility in tangible ways.

We must do this not just through philanthropy and the CSR practices that have been inherited from western companies, but by the way we run our business and the types of investment choices we make. As we strive for greater financial returns, the development dividend must be part of the strategic calculations we make. And we must think in the long-term because the kind of challenges we face on the continent require not only vision but also patience and perseverance.

I am the Chairman of Heirs Holdings, and we practice what we preach.

We are a Pan-African company that invests in the key strategic sectors of power, oil & gas, financial services, real estate & hospitality, agriculture, and healthcare all for the long term, and all with an aim of creating value within our own economies.

Let me share with you my personal experience of how the practice of Africapitalism in financial services, energy and power has buttressed my belief that private companies do indeed create financial and social impact in their chosen sec-tors and geographies.

In 1997, my partners and I took over the shuttered Crystal Bank and rebranded it into Standard Trust Bank (STB). We achieved unprecedented growth through innovation and by pursuing down-market customers who had not previously had bank accounts. This approach fuelled an amazing growth trajectory for the bank, but also helped create a culture of responsibility and accountability, facilitated payments, and opened up access to credit for tens of thousands of financially disenfranchised Nigerians.

Though economic profit was our primary motivation, we democratised access to banking first in Nigeria, and then across Africa in the process. This had a formidable impact on my understanding of how a business, even in pursuit of profit can simultaneously deliver a meaningful social return as well.

The success of STB allowed us to merge with the much larger United Bank for Africa (UBA) in 2005. However, we had the vision of expanding financial inclusion beyond Nigeria and facilitating intra-African transactions, so we opened bank subsidiaries in 18 other countries across Africa, often allowing customers in some previously underbanked economies to open bank accounts with zero balance.

That strategic calculation to be patient and democratize access to banking services has paid off.

Today the United Bank for Africa has over 11 million customers in 19 African countries supported by over 20,000 employees and through our financial plat-forms and transactions, we are facilitating regional integration and development.

Making financial services available to the unbanked in Nigeria and across Africa: that is Shared Purpose, that is Africapitalism.

In the power sector, Heirs Holdings recognised that over half of Nigeria’s population of 170 million lacks access to power of any kind and we as a country only generate 10% of the 40,000MW our economy needs to meet our basic domestic consumption needs. So, our subsidiary, Transcorp, acquired a plant that was producing only 160MW of its 1,000 MW capacity under government control, and today we are generating about 20% of electricity output in the country. Our ambition is to generate 25% of the country’s power supply.

We made this investment with the intent of realizing profit for our shareholders, but also to unlock other economic opportunities, like new businesses and expansions which create new jobs, all of which will come as a result of reliable and affordable access-to-power and lower operating costs.

We know megawatts on the grid, means more electricity for homes, hospitals, businesses, and very importantly, more homework at night. And we are doing it within the framework of the national power plan. So what is good for Heirs Holdings is good for Nigeria and her citizens.


That is shared purpose; that is Africapitalism.


Another example from outside the Heirs Holdings Group, is that of Dangote Industries. This company used to be the largest importer of cement and numerous other basic commodities in Nigeria. However, since they converted their operations to local manufacturing and began creating significant local value, they have not only grown to become the biggest company listed on the Nigerian Stock Exchange, creating thousands of jobs in Nigeria, but their model has increased demand for their product and they are now operating in fourteen different African countries.


That is shared purpose; that is Africapitalism.


The beauty of Africapitalism is that it is not restricted to only indigenous African businesses, though as African business leaders we must set the example for others to follow. Africapitalism is really the way in which all existing and future local and foreign investors can and should develop their investment plans for Africa. They must separate themselves from the traditional investors who have collectively extracted trillions of dollars’ worth of riches from beneath the African soil, or grown in the African soil, while delivering little to no enduring tangible opportunities for the economic advancement of the millions living on the surface. To be clear, the “Shared purpose” inherent in Africapitalism does not absolve governments of their role in advancing development. In fact, “Shared Purpose” means everyone has a role: business, government, philanthropies, NGOs, and multilateral institutions alike. Africapitalism is the nexus between the ability of the private sector to create value and the government’s creation of a business-friendly environment. These two roles have become further intertwined and even mutually dependent and mutually reinforcing to create an equitable, inclusive, and prosperous Africa.


Let me talk about how companies can recreate this virtuous cycle of development through economic empowerment. Many companies, particularly those in commodity-dependent economies, need to redouble their efforts to incorporate emerging local entrepreneurs into the value chain of their businesses. This not only helps to create jobs and build local capacity, it also helps to insulate their businesses from breaks in their supply chain caused by external shocks.

For instance, Coca-Cola pursued a concerted strategy of sourcing juice concentrate and other raw material for its beverages in local markets across Africa. This is creating opportunities for local fruit growers, aggregators, and transporters while also supporting local agri-processing and the local beverage industry. It has helped create entire supply chains of entrepreneurs where there was formerly none including Transcorp’s agribusiness subsidiary, Teragro, the first company in Nigeria to process our abundant oranges, pineapples, and mangos into concentrate.

Coca-Cola, Transcorp, and Dangote Cement’s activities are examples of local value creation, a key pillar of Africapitalism. Companies that incorporate local value creation will be both more sustainable and more profitable in Africa in the long-term. In addition, by investing in local economies and creating local jobs, they are also increasing the pool of those who can afford their products and services.

Africapitalism is a call-to-action for businesses to make decisions that will increase economic and social wealth, and promote development in the communities and nations in which they operate.

Such a decision will ultimately help businesses become more profitable as the communities they serve become well-off consumers, healthy and better educated employees, and even entrepreneurs who go on to become suppliers, service providers, and consumers. Africapitalism’s call-to-action is to use your power as individuals employees, employers, investors, and consumers, and for almost all of you, leaders in the public, private and social sectors to support the kind of business practices that lift up society whilst making profits.

You are the world’s future leaders and the most important determinant of Africapitalism’s success or failure can be boiled down to that single, but complex imperative: leadership. A true leader is one who remains committed to a higher purpose that most others do not yet see.

The old business model of a myopic pursuit of profit above all else is at best imprudent and, at worst, reckless in our increasingly interconnected and interdependent world. As future leaders, you must therefore shape how businesses need to change in order to address the complex challenges of the 21st Century, not just for Africa. but for the entire world. It won’t be easy, but nothing worth having ever is.