Robert Johnson, best known as the
founder of Black Entertainment Television and majority owner of the NBA’s
Charlotte Bobcats, has recently considered building hotels along the coast of
Liberia. "It has beautiful beaches," he says. "They could have ecotourism, but
they need help building roads and power supplies." He is also eager to invest in
the rubber, timber and diamond industries that have been the country’s
mainstays—and filled the coffers of local warlords during the 1990s. He has even
spoken with Delta about establishing direct flights to the country.
As recently as a year ago, Johnson knew little about this
nation of 3.2 million people that was settled by former American slaves in the
1820s. But he has since committed about $3 million of his wealth to help the
Liberian economy rebuild following two civil wars. This venture would qualify as
philanthropic, were it not for president Ellen Johnson-Sirleaf’s ambitious plans
to reform her country through entrepreneurship. At the Clinton Global Initiative
Summit last fall, Robert Johnson (no relation to Ellen) heard her make a plea to
private investors. Johnson agreed to launch an investment fund, and has raised
$30 million—largely through partnerships with the U.S. government’s Overseas
Private Investment Corp. and the U.S. Agency for International Development, but
also with private capital.
Johnson expects to make his first placements this fall. He will
continue to seek investor capital, which he will use to provide financing in the
range of $50,000 to $500,000 to Liberian entrepreneurs who present viable
business plans— in a manner akin to microfinance, but with larger sums.
Some Western investors believe Rwanda and Nigeria are also good
ground-floor bets for the intrepid. Robert Fogler, a partner in the law firm
Kamlet Shepherd in Denver, became interested in Rwanda after hearing president
Paul Kagame speak about the need for investment. So three years ago he started a
private equity fund, Thousand Hills Venture Fund. He invested half of the $1
million fund in 2006 and plans to launch two new funds later this year. Robert
Levitt, chief investment officer of Levitt Capital Management in Boca Raton,
Fla., used to primarily buy base-metal companies in Canada, but now has 7.5
percent of his clients’ global asset allocations in African companies traded
locally or in London, Toronto or Johannesburg. When he went to the Nigerian
capital of Abuja earlier this year, the country’s 12 central bankers sought him
out for a meeting and painted a picture of a region with improved financial and
political stability.
After traveling and seeing Indian, Chinese and Western
companies expanding there, he asked himself, "Why don’t I just buy the African
company?" Levitt says.
The fact that this region suffers from a long track record of
instability causes apprehension for these investors. Rwanda and Nigeria now have
governments that support election reform and have attempted to fight corruption,
but they still rank toward the bottom of Transparency International’s 2006
corruption list—142 and 121, respectively, of 163. (The report omitted Liberia
in 2006 because the methodology requires at least three contributing sources to
a country’s rank, which it lacked.) While Liberia’s latest war ended four years
ago, ex-rebels remain at large and cities are congested by refugees who fled to
the countryside.
John Patterson, an investor in Fogler’s Thousand Hills fund,
has traveled to Africa four times in the past 14 months and believes Fogler is
using a sound strategy of investing in small companies that aspire to have a big
impact. For example, Rocket 2020, one of the companies in the portfolio,
provides business services and package delivery to rural areas.
Johnson is determined to see the businesses he funds succeed.
"If we’re not successful at the entrepreneurial level, how can we expect the new
government to be successful?" he says. He projects returns ranging anywhere from
10 to 30 percent. However, investors have to do their part to help development.
"For a grand outlay of just $2,000, you can send a kid in Liberia to college or
build a school using modular housing," he says.
Elizabeth Harris is a staff writer for Worth.
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