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Investment Savvy in Africa

July 13, 2010

In her book “Dead Aid”, Dambisa Moyo makes the compelling case that what Africa needs isn’t more development aid, but more investment. She says “free money” (grants, development aid money)  has harmed Africa by creating dependencies and stifling local innovation and business creation. She points to the billions of dollars that has poured into Afrcia with little-to-no improvement in the lives of many Africans.

She makes the strong case for foreign profit-seeking investors to enter Africa, find the best local partners, make the best local deals, and create local private sector economic opportunities that will benefit the geography while making the investor a proper ROI.

Whether it was directly or indirectly, it is great to hear that Export Development Canada has heard the message and is making a USD 20 million investment in an African tech fund.

Obviously, the devil’s in the details so who know how savvy this move really is, but conceptually this is an all-around win and Canada should be making more of these deals. Hopefully this will signal a continued evolution in the way Canada approaches emerging markets.

Why is this good news?

1)  Good news for Africa: via the Africa Telecommunications, Media and Technology Fund it gets access to global capital, which means that local and global entities will share in the risks and the rewards of the investments so everyone wants them to succeed.

2) Good news for Canada: through the fund it gains leverage in a key, growing market (again, if administered properly)

3) Good news for Canadian companies: they now have an “in” into Africa that they didn’t have before.

The Americans, Chinese, Europeans, Japanese all play the game of using global investment dollars to invest and create global opportunities that their national companies can benefit from. It is good to see Canada bringing its financial  athleticism to this competition as well.

Some may cynically say this is profiting from the poor. Nothing could be further from the truth. This is investing in developing nations and giving them full access to the resources and opportunities that exist globally, which many of us take for granted.

I’ve highlighted in other posts how Canada is increasingly becoming present on the global stage. This is just another example.

Tying global investment to a high ROI expectation and opening opportunities for foreign companies to work with local ones may not solve the questions of poverty on its own, but it is a really good place to start.

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