In Bond Street tube station an ad catches my eye every morning: ‘140 million people, 9th largest market in the world, 42 billion tonnes of bitumen, 3rd largest movie industry in the world, Africa’s fastest growing telecommunications market. Nigeria ...it’s more than what you think it is.’ The effect is slightly ruined by the grammar of that final slogan, but the message gets across: anyone in the business or investment world who has written Nigeria off as nothing more than a no-hope nation of clever but fraudulent letter-writers is making a mistake. The same could be said of much of the rest of Africa. It’s not hard to find misery: start in Zimbabwe with Robert Mugabe’s 82nd birthday party taking place in a country where average life expectancy is now only 34; move on to the Aids crisis in South Africa, the drought that hit northern Kenya last year, the war in Sudan and the child soldiers of Uganda. Yet there is a great deal more to the continent than these stories of woe.
Almost all African countries are seeing positive economic growth (six out of 53 are not) and the continent as a whole is growing at around 5 per cent a year — not exactly China, but not bad. In fact, says David Lenigas, chairman and chief executive of Lonrho, ‘there’s money all over Africa’: a fast-growing middle class, a core of excellent companies forced by circumstance to be efficient, rapidly improving infrastructure, a massive resource base and huge opportunities for those prepared to look below the headlines. At the most basic level, you can put a lot of recent growth in Africa down to aid, says Lenigas: ‘go to the poorest village in Africa ...it might look like a dustbowl and the kids might not be in the best of health, but they are all going to school.’ Huge spending on health and education, courtesy of foreign donors, has finally begun to kick in, and a new generation of literate and ambitious children is reaching working age. But the thing making the most difference right now is resource money. Think of any commodity and you can be sure of three things: China needs a lot of it, there’s a global shortage of it, and there’s an African country with huge reserves of it. No wonder Chinese president Hu Jintao and his colleagues visited 48 African states in the past 12 months.
All this makes it look like the right time to be investing in Africa — or perhaps even rebuilding a pan-African conglomerate. That’s exactly what Lenigas intends to do. Most of us connect the name of Lonrho with the late Tiny Rowland, whose personal empire it once was. At its peak, Rowland’s Lonrho had 800 businesses operating in everything from textiles and tea estates to Nairobi’s famous Norfolk Hotel, and at the end of the 1980s it was making profits of £270 million a year. But by the time Lenigas took over what is now Lonrho Africa Plc last year, it was reduced to an Aim listing, a modest cash pile, a hotel in Mozambique (the Cardoso) and a shareholder list that still included several hundred irate survivors from Tiny’s ultra-loyal ‘Barmy Army’.
An ebullient Australian, Lenigas has a history as a dealmaker, and Lonrho is not the first Aim-listed company operating in emerging markets that he has been involved with. Since January last year, with the old Lonrho on his mind, he’s been making an awful lot of deals. Lonrho now has stakes in uranium and diamond businesses, but its main thrust is in infrastructure. Lenigas has bought the port of Luba in Equatorial Guinea; he’s barged into the African bottled-water sector via a Swiss firm, Swissta, operating in Mozambique and the Democratic Republic of Congo; he’s bought stakes in the South Africa-based Norse Air and the Kenyan discount airline Fly540, on the basis that the roads in Africa are so bad ‘you have to fly’. Luba is profitable and expanding at speed. Fly540 is leaving Kenya Air in the dust — Lenigas is particularly pleased to tell a story about how one of their planes broke down and they had to beg Fly540 to get their passengers back to Nairobi from Lamu.
The Cardoso Hotel will be unrecognisable by the time he’s turned it five-star and developed the site next to it. Bottled water is so in demand that ‘you can get payback in a year or two’; there are plans for plants in Kenya, Sudan, Angola and Equatorial Guinea. And all this is just the start: he says there are a score of other deals on the table and, better still, he plans to pay for all of them in cash, which in his case seems to be raised at will. His last fundraising round, he claims, took only three days and ‘no broker needed’.
It’s big talk — but it makes some sense. Debt is cheap for Western companies, but in much of Africa corporate lending is done at what Lenigas calls ‘credit card rates’. Before Lonrho stepped in, Swissta was paying 22 per cent on its debt. Get rid of that kind of burden, says Lenigas, and businesses that seemed to be struggling suddenly look viable.
But what of corruption, a constant of African business that Tiny allegedly managed to Lonrho’s advantage? That ad for Nigeria on the Central Line platform could well have added ‘home to the planet’s greatest fraudsters’ to its list. Not a problem, says Lenigas. There are ‘so many good deals around in Africa there’s no need to do the dodgy ones’. When he’s asked for money he asks for a receipt; if a deal can’t be done cleanly in two weeks, he says he won’t do it.
Lenigas makes investing in Africa sound easy. Corruption? Just don’t pay bribes. Crappy infrastructure? Just buy your own airlines. Poverty? It’s on the way out. Insanely high interest rates? Just pay cash.
Can it be that straightforward? Maybe. Lenigas is keen to be an acceptable face of Western capitalism in Africa — Tiny’s Lonrho having famously been referred to by Edward Heath as the ‘unpleasant and unacceptable’ face. Lenigas talks of involving community and government partners at every turn, and of a plan to provide Swissta water at cost to new mothers and children. But he also comes with a large dose of brashness and front — an echo of Tiny, perhaps, but maybe no bad thing. However much Africa might be growing and modernising, doing business there is not for the faint-hearted. Lenigas has quite a job ahead of him if he really wants the new Lonrho to hit the scale of the old. The timing is good — there’s plenty of investor money around keen to find exposure to Africa. If he does the right deals and gets the right management, he’s in with a chance. Lonrho, like Nigeria, is more than what you think it is.
Merryn Somerset Webb edits MoneyWeek.