As the chairman of the $200 million investment fund Satya Capital, Mo Ibrahim is making aggressive investments in broadband, retail and other industries in Africa.
Mr. Ibrahim, who founded one of Africa's first mobile networks, claims the continent offers one of the world's best returns on investment: Africa was the top performing region over the past 10 years in terms of equity investments, with a 31% return compared with 25% globally, according to the International Finance Corporation, the corporate investment arm of the World Bank.
Mr. Ibrahim struggled to build Celtel in 1998, when few Africans were using cellphones. Mobile-phone use in the region has since skyrocketed, with 547.6 million mobile connections at the end of 2010, up from 9.8 million in 2000, according to Wireless Intelligence, a market database for industry association GSMA. Mr. Ibrahim sold Celtel for $3.4 billion in 2005.
As a philanthropist, through the Ibrahim Foundation, Mr. Ibrahim aims to tackle corruption in Africa and create democratic societies. He points to the use of cellphones in the demonstrations that have overthrown leaders in Tunisia and Egypt and continue to challenge regimes in North Africa. "Mobile technology enabled civil society to connect," he says.
Mr. Ibrahim also wants multinational corporations to take responsibility for some of the region's corruption. "African politicians don't corrupt themselves. It's like an adulterous relationship; it takes two," he says. Mr. Ibrahim points to figures from Global Financial Integrity, a nonprofit Washington research institution, that show manipulation of export and import data by companies wanting to send money out of the continent to repatriate profits—so called trade mispricing—reached $35.2 billion 2008.
Mr. Ibrahim, 65 years old, spoke recently with The Wall Street Journal about the early struggles of Celtel, Africa's growth potential and the benefits of making money honestly. Edited excerpts:
WSJ: Why did you think you could successfully operate a cellphone network in Africa?
Mr. Ibrahim: Africa had very few phones: 950 million people and only two million phones. So the market was there.
Secondly, Africa had a bad reputation in business circles. Of course some African countries have issues but the vast numbers of countries are actually okay. So the perception of Africa is much worse than the reality. And whenever there is gap between perception and reality there's a fantastic business opportunity.
WSJ: What were the challenges with getting funding for Celtel?
Mr. Ibrahim: It was extremely difficult because the banks wouldn't lend us money. Again banks were ruled by the same misconceptions about Africa. We had to fund the company through equity. It is a very strange way to fund a telecom company. That hindered a lot of progress. In seven years of operation we had to have eight to nine rounds of financing and each time we put our own money on the line. When we sold the company, the company was debt free.
WSJ: What did you learn from managing Celtel?
Mr. Ibrahim: Governance pays. Because we ran a well-governed company with no skeletons in the cupboard or under-the-table envelopes, we commanded a high premium when the time came to sell.
WSJ: You also back a private-equity firm called Satya Capital—what are the returns like?
Mr. Ibrahim: It's a $200 million fund. It was started about three years ago and so far we've probably doubled our investment—nowhere in the world you can have that return of investment as in Africa.
WSJ: Where are you putting your money?
Mr. Ibrahim: We have invested in a telecommunications satellite company called O3B focusing on the other three billion people without broadband [primarily] in Africa and we think it's going to be a great success.
We have [also] invested in retail, financial institutions, private health, mining food, and production. This is an emerging market with a huge growth potential. It's a place to go and make money but you need to make it honestly.
WSJ: Why do you believe that fighting corruption starts in U.S and European boardrooms?
Mr. Ibrahim: Business is the obvious partner in corruption—we always focus on the officials but they are not corrupting themselves. For every corrupt official, there are several business partners; it's time for board members to take their fiduciary duties seriously.
WSJ: Do you think the U.S. has made progress with the Dodd Frank Act?
Mr. Ibrahim: Absolutely. It is wonderful that once again the U.S. is taking a leading role in fighting global corruption. For 10 years corruption was legal in Europe and tax deductible, we hope that Europe will follow [the U.S.] this year as they have promised to do.
WSJ: Are you worried about China in Africa?
Mr. Ibrahim: We just think of them as a trading partner. For decades [raw materials and commodity] prices there didn't move. Then China comes and prices move up, so we are happy. All that we demand from them is transparency.
FROM – http://online.wsj.com/article/SB10001424052748704495004576265421554727688.html
April 18, 2011