Africa's Greatest Investment: $34M to $170B
Finance creates empires and business is a contact sports because it is a game played with money. Decisions have consequences unlike when you are playing games on blackboards. In business, your strategies are tested by market forces.
So when South Africa's Naspers invested in China-based Tencent $34 million, it was making a huge call, in 2001. Today, that $34m berth is now worth $170 billion (with b), based on Tencent's current market capitalization. Magically, Naspers is the 65th most valuable company in the world. That berth is perhaps the greatest investment in Africa.
That takes to my thesis in Nigeria: we can reform our investment climate, starting with venture capital sector. To create such enablers in Nigeria, I propose the following specifically for the VC sector:
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- Government should offer new VC (venture capital) firms in Nigeria a ten year tax incentive on profits if they have asset base of at least $50 million and will deploy the capital in Nigerian startups within 10 years.
- Offer new VC firms in Nigeria the opportunity to repatriate 100% of profit within ten years. That will help the country to attract foreign investors to make Nigeria home.
If we have this type of incentive, we will see many VC funds making Nigeria home to explore opportunities in Nigeria and continental Africa. That influx of capital will have many multiples of benefits to our economy, our people and the Nigerian technology space.
Nigeria needs to have investment houses that can run the type of berth that Naspers did.
The issue is not capital, the problem with Nigerian startups or businesses is poor technical know how, risk tolerance and unrealistic projection. Global business landscape is fast changing and requires certain skill to pinpoint companies like Tencent. Just like Masayoshi Son did with Alibaba when he invested $20 million that was valued as much as $70 billion on the day Alibaba went public, same with Warren Buffet Cocal-cola 1987 investment. I don't Nigeria businesses are even tracking these unique start ups or even have Naspers tool.
How will those who always see foreign investors as 'vultures' see this? Asking them to give such a tax incentive is to them 'corruption' and also constitute 'wasting our resources'. We seem to like foreign investment, but we don't to care about learning how these things work.
