Making investment work for Africa

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Yabiso, a new company in the Democratic Republic of Congo (DRC)’s mining sector, is set to become the first in the country that is open exclusively to investment from the general population. Scheduled for launch in the first quarter of 2021, the firm will allow any DRC national – but not corporates, regulators or officials – to invest between €50 and €10,000 and become a partner in the company.

Dan Gertler, the Israeli businessman who founded Yabiso, has even made a zero-interest loan scheme available to Congolese citizens who wish to participate but do not have the funds to do so. The first such initiative in the DRC, it is models like this one, which tie the success of a business to that of the communities which surround it, that will make a tangible difference to the fortunes of the African people.

While implementation is certainly going to be challenging and it remains to be seen how the government will manage with it, it is an important step towards a new way of doing business. For too long, investment into the continent has benefited external interests to the detriment of the local populations whose lands are being plundered and whose labor is being exploited. Yabiso – which translates into English as “it’s ours” – is a step in the right direction for the future of African commerce and economy – one that indicates a new trend in how investment and business is being done on the content.

Bucking the African trend

The idea that companies which exploit local resources should give back to the societies in which their operations are based is far from a new one, yet Yabiso still remains an outlier rather than an accepted norm. Indeed, 70% of African growth over the last ten years has been driven by the continent’s abundant natural resources.

Given that extracting these resources requires a significant amount of capital and doesn’t create an excess of local employment opportunities, the continent has become a magnet for the land-grabbing and predatory resource exploitation techniques employed by many foreign investors. Africa’s insufficient manufacturing and agro-processing sectors only exacerbate the situation.

However, there are signs that things may be changing. The inaugural Africa Share Value Summit in 2017 prioritized the need for companies to remodel their ways of doing business to incorporate an emphasis on creating shared value for the populations they work with. Doing so would reduce the need for charity and would address the root causes of societal issues, rather than simply papering over them. One such success story is the mobile money app M-Pesa, which has transformed the Kenyan economy and facilitated the conduction of transactions for millions of everyday citizens, maximizing financial inclusion in the country.

A win-win situation

It isn’t just the workers who benefit from profit-sharing schemes – although they certainly do, according to numerous studies. One decades-long survey from the United States found that employees who participated in ownership of their company enjoyed, on average, a 33% wage increase and a 100% hike in their household wealth.

It’s telling that roughly one half of the 100 best companies to work for (as compiled by Fortune magazine) offer their employees some form of stock ownership or profit sharing, while another recent survey found that almost three-quarters (72%) of respondents would prefer to work for a company which provided those kinds of initiatives.

On the other side of the coin, businesses can also prosper by bringing their employees into the fold. A comprehensive study of the 800 firms which applied for that aforementioned Fortune list found that those companies which offered such benefits to their workforce were twice as likely to keep them. Meanwhile, their return on equity was an impressive 12% higher than their peers, underlining how the situation is a win-win for all concerned.

A brighter future for African investment

So why isn’t the practice more widespread? In developed countries like the US, executive greed and deep-seated corporate cultures are significant barriers, but these are less prevalent in Africa. However, the continent faces its own problems, such as informal employment and corruption of governance. While hugely challenging obstacles in their own right, the model proposed by firms like Yabiso could be the key to overcoming these obstacles by handing the power directly to the people, rather than the government.

And foreign direct investment (FDI) has its own role to play in this. Although FDI into Africa has been forthcoming for decades now – albeit at a lower rate than the rest of the world – much of that activity has been self-serving for the companies involved, disregarding the prosperity of the territory and the peoples that they purport to support. Istead, a new culture of generating so-called “Quality FDI” – greatly supposed by profit-sharing models – must be further encouraged.

Rather than simply looking after their own interests, this type of FDI would demand that investors are intrinsically linked to the host economies they engage with, forcing them to see local labor and resources as a driver of revenue, not costs. In this way, they could bring value to the community in the shape of employee opportunities and the transfer of technological expertise, thereby enriching the local population rather than exploiting it.

With China an ever more engaged player in African FDI – its investment totals shot up by 50% between 2011 and 2016, which is a far bigger increase than any other nation – it seems as though the stranglehold of the status quo may finally be broken. Whether China will reveal itself as a force for good for the African people remains to be seen, but if it (and other investors) follow the blueprint of Gertler’s Yabiso, the continent may finally benefit from the quality FDI that it deserves and so desperately needs.



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