Africa: The Potential Opportunities in Energy and Telecom

In fact, he noted, public dialogue about Africa has changed little since October 1960, when then-presidential candidate John F. Kennedy said: "If we are to create an atmosphere in Africa in which freedom can flourish -- where long-enduring people can hope for a better life for themselves and their children, where men are winning the fight against ignorance and hunger and disease -- then we must embark on a bold and imaginative new program for its development."

"I found it very interesting that a great man almost 50 years ago could be transported in time -- and we face challenges very similar to what was described back then," Naidoo said. In fact, he has devoted much of his career as a student and then an investment banker to trying to put a different face on Africa and its chances for what he calls "a turnaround" -- beginning with his Harvard Business School case study, a look at South African leader Nelson Mandela's career from a business perspective.

As late as 1987, the British government still considered the African National Congress of Mandela -- then languishing in prison -- as a terrorist organization. But by 1994, then-Prime Minister John Major was hailing Mandela, released and elected the nation's president, as a statesman. "We wanted to pick an African story that would show Wall Street and the West great news from Africa, so we picked a leader we felt would have lessons across sectors, from the public sector to the private sector, and across continents, from Africa to the rest of the world," Naidoo said of his Mandela case study. South Africa, he added, was in a political version of Chapter 11, with bickering parties and key personnel anxious to leave, before Mandela restored the nation's image and prestige.

Since that study, Naidoo said he has gained considerable new insight into the specific development strategies that hold the greatest promise for bringing a broader reversal of fortune to the entire continent. He showed a graphic comparing types of investment strategies to native animals of Africa, with special praise for what he called the "speedy gazelles."

Businesses, like mobile phone companies and regional logistical initiatives, are "highly scalable. They move from one area to the other and are very active and on-the-move," like gazelles. Indeed, the African entrepreneur whom Naidoo holds in especially high regard is mobile telephone mogul Mo Ibrahim, the Sudanese-born executive who started African-based Celtel in 1998 and sold it to the investment arm of Kuwait for $3.4 billion just seven years later. Naidoo said that Ibrahim's genius was to successfully achieve an economy of scale in 15 African nations at the same time, while maintaining his integrity.

"Mo had a premise of never being corrupted, of never accepting bribes, of never tolerating less than the best," Naidoo stated. "The context was that he rose on the winds of change" -- including seeing a successful exit strategy by capitalizing on what are becoming known as "sovereign wealth funds," which invest the excess cash of nations with a huge trade surplus.

Although these new sovereign wealth funds remain just a fraction of more traditional private investment funds, their influence is expected to grow in the near future, from about $2.2 billion in annual investments now to roughly $5 billion over the next decade, according to Naidoo. The largest of these sovereign funds are either linked to oil wealth -- the biggest is that of the United Arab Emirates -- or other countries with a cash surplus, including China. For strategic reasons, these government-tied wealth funds are finding Africa attractive.