Land of opportunity

There’s no doubt Ireland cares deeply about Africa. We give aid, deploy peacemakers and welcome migrants.

Mon, 14 Jul, 2008 - 01:00

But why are we so reluctant to invest and do business there? Caroline O’Doherty reports

WHEN it comes to caring for Africa, it’s hard to beat the Irish.

At least that’s what a recent report by the Washington-based Centre for Global Development suggests at first reading.

Its researchers compiled a commitment to development index for Africa that enabled them to measure the involvement of 21 of the world’s richest countries with the world’s poorest continent.

Ireland got second place, just a little below Sweden and far above other wealthy countries like the United States, Australia and Japan. A combination of our generous aid to Africa, our deployment of peacekeepers to its many trouble zones and our absorption of the continent’s migrants all helped give us a high score.

But there was one area of involvement with Africa where we fell right to the bottom of the list — commercial investment. There, we and New Zealand share the title of most reluctant. It seems we want to help Africa but there’s no way we want to do business there.

It strikes as odd given our enthusiasm for Africa in other ways and it certainly jars with the perception that, no matter how far-flung the country or obscure the opportunity, you’ll always find a Paddy pulling a pub or surveying scaffolding.

In one way our priorities may be noble. Africa has centuries of an unhappy history that show how, too often to do business meant to plunder, and investment went hand in hand with exploitation.

Another viewpoint, however, is that a relationship where one side does all the giving is not the most constructive and that if we are to see Africa and its people as equals instead of dependents, we need to have as much riding on their success as they do.

Paul O’Brien, overseas director with aid and development agency Concern, believes foreign investors have the potential to bring huge benefits to Africa, seeing parallels with the boost Ireland enjoyed when hi-tech industries arrived from overseas.

“Concern employs over 4,000 people and most are nationals of the countries where we work, so we see first hand the difference it can make.

“Very often the person working for us has a whole network of family dependent on them and for them to have a regular income coming in is a strength for all of them.

“But it’s more than just the wage. There is a knock-on effect in terms of knowledge. For example, we have about 20 Kenyans who started out as local staff and who are now working in other countries heading up sizeable operations. It’s the same with commercial companies, local staff can move on to bigger things or get to a position where they can work for themselves and maybe become an employer in their own right. In that way, the impact can be very positive.”

That’s the altruistic side of it. But there is also an attractive commercial side to Africa too. It has a huge pool of people available to work for low wages with the potential for those same people to become a market of consumers. On the face of it, entrepreneurs should be forming disorderly queues up to set up shop there.

One who did is Jerry Kennelly, the Kerry man who hit the headlines when he sold his Stockbyte photographic library company to Getty Images for €84.7 million in 2006.

Jerry was one among those listening at the 2005 Ernst & Young Entrepreneur of the Year awards ceremony when head of aid agency GOAL John O’Shea challenged the winners to share their skills abroad.

In typically bold style, O’Shea didn’t let the winners bask in their glory too comfortably, appealing to them to take one week out to see another side to life.

“Just go and watch people eke out a precarious existence in rubbish heaps, where they’re fighting with rats for sustenance and being treated like animals by their fellow human beings,” he told them.

“Because of what you have upstairs you will be able to provide them with an avenue out of that morass of misery. The people of the third world – millions of them – need and deserve that entrepreneurial support.”

Jerry went to Nairobi and set up Create Africa, a publishing company that produces postcards, calendars, posters and prints for the tourist market using local photography.

The images are often idyllic but the reality of doing business in Kenya was far from it. “We have superb infrastructure in Ireland, even though we might be whining about it. The phones work, transportation works, the postal system can be trusted. You just can’t take any of those things for granted in Africa,” he says.

“The costs of running an office were way out of proportion. The internet access was crap and would cost five times what it would cost here — €1,000 a month.

“The phone system is very unreliable and the postal system couldn’t be trusted. We couldn’t send international orders from Kenya — they would disappear. That had to be done from Ireland.

“Transport was a disaster. Just getting from one side of Nairobi to the other was an ordeal. It was only 10 miles but it could take three hours in choking traffic and heavy pollution. The cost of all that means the ability for added value is not as great as here.”

And yet for all the hair-tearing moments, Jerry was hooked and although he handed over Create Africa to the charity ICROSS, and all profits now support the organisation’s work, he believes Africa has the potential for commercial success.

“There are a lot of very smart people there but not the culture of entrepreneurship — at last not at any kind of serious level. It’s got to be fostered from an early age. Entrepreneurs drive improvements in infrastructure because they demand it, but if there is a culture of just getting by things move a lot slower.”

The Irish are not entirely absent from Africa. One investor is Kenmare Resources, which has a substantial titanium mining operation in Mozambique. Located in one of the poorest areas of the country, the Moma mine claimed to create 1,200 local jobs during the construction phase and 450 while in operation. The project’s prospectus adds: “The procurement of local goods and services is expected to create an additional 1,500 jobs.”

KMAD, Kenmare Moma Development Association, has been set up to establish health services, savings and credit schemes, and education programmes as part of the company’s involvement in the area. The mine has some years to go before it can prove its worth, both commercially and ethically, but on paper it seems to have the balance right.

Tullow Oil, although now headquartered in London, was set up in Ireland in the 1980s and has extensive oil and gas interests in 13 African countries.

Its founder, Roscommon man Aidan Heavey, was also spurred by John O’Shea’s challenge and set up a life jacket manufacturing facility in Uganda where he discovered local fishermen frequently drowned for the lack of cheap and locally available basic safety equipment.

Not all Irish entrepreneurs are so hands on. The Irish branch of investment company RBM International is the financial partner with Canadian firm Anvil Mining in a copper mining operation in the Democratic Republic of Congo. These are all the traditional heavy industries associated with foreign investment. Paul O’Brien of Concern believes there is room to develop business links in the hi-tech and service sectors too.

“Mobile technology does a fantastic service in Africa. Mobile phones mean even very poor people can communicate, send data — we’ve been able to transfer money with smart cards on mobiles — so all sorts of possibilities open up.

“When you see how Denis O’Brien developed the business in the Caribbean, it shows how that could be replicated in Africa.

“There is a lot of scope in tourism too and the Irish know a lot about developing that business. I know it’s hard to imagine when you look at a country like Ethiopia and the government there is looking for food aid and at the same time trying to sell it as a tourist destination but in another way it makes perfect sense.

“Africa is a fantastic place for food and culture and landscape and it should be able to use those natural advantages. If we go back years ago, we see the way Ireland was presented.

“People would never come to Ireland because of the situation in the north. It’s the very same with Africa. The problems — and they do exist — can overshadow the potential.”

He’s not alone in that view. Denis O’Brien is on the advisory board of Connect Ethiopia along with Philip Lynch of food and agribusiness giant IAWS, and together with founders such as Brody Sweeney of O’Brien’s Sandwich Bars, they are helping to develop proposals for coffee production and tourism-related projects.

Meanwhile, Traidlinks, an initiative encouraged by Irish Aid, has seen a group of Irish food company executives band together to develop production of tea, coffee, dried fruit and nuts for export from Malawi to Ireland under the Heart of Africa brand name.

The growing emphasis on doing real-life marketplace business with Africa as opposed to artificially supporting local enterprise for the sake of it is reflected in Irish Aid’s most recent policy document, the 2006 White Paper.

It says: “There is a role for Irish business. The importance of the private sector in the fight against poverty is increasingly being recognised. Local businesses in developing countries can benefit from contact with appropriate business partners, who can offer expertise, investment and support.”

So why is Ireland at the bottom of the Commitment to Development Index where commercial investment is concerned? One of the reasons offered by the compilers of the index is that Ireland, like New Zealand, does not provide political risk insurance and that both countries “do little to prevent double taxation”.

It is true that the state does not insure overseas ventures — the controversy over alleged abuses of the export credit insurance scheme as aired at the Beef tribunal put paid to that. But Ireland is a member and financial supporter of MIGA, the Multinational Investment Guarantee Agency, a branch of the World Bank that insures projects like Kenmare Resources’ Moma mine against the risks of war, civil disturbance and foreign governments reneging on their agreements.

The validity of the taxation argument is also questionable as a shrewd business person with a good accountant can always find a way to minimise their liabilities. So does the relatively small Irish presence in Africa say more about attitudes here than opportunities over there?

Jerry Kennelly says there is definitely a need to foster greater entrepreneurial spirit in Ireland although he’s still not sure he would advise a young business person to plunge head first into Africa as a starting point.

“It’s tough stuff and it took all of my experience to get the Create Africa project across the line. There are easier places to cut your teeth.”

But working with the Young Entrepreneurs Programme run by Institute of Technology Tralee he sees common needs here and in Africa.

“We don’t have a great culture of entrepreneurs in Ireland. It’s only quite recently that entrepreneurship has been celebrated here — before that it was always viewed with suspicion. People are interested in the freedom of it but you have to get them young. It’s already late when you’re trying to change the mindset of a young adult because they’re thinking ‘Who will I work for?’ rather than ‘How can I work for myself?’.

“It’s even harder in Africa but the way to go is to start very small scale in schools, using African role models where you can.

“Mentoring programmes, matching companies here and over there, developing trade links — they all help too.

“But you have to encourage people to be in a position where they want to be part of that and believe they can be. Writing a cheque for charity is all very well but it doesn’t matter a damn in the long term. If you can nurture entrepreneurial ability, you can help make lasting change.” Commitment to development

Top five overall

1. Sweden

2. Ireland

3. Britain

4. Netherlands

5. Denmark

Investments

1. Britain

2. Netherlands

3. Germany

4. Canada

5. Australia