5.26.2014

Mo Ibrahim: "If you want to make money, go to Africa"

Interview: Daniel Ammann & Simon Brunner,credit-suisse.com, 06.08.2013
Mo Ibrahim: "If you want to make money, go to Africa"As a mobile communications pioneer, Mo Ibrahim became a billionaire. Now he sponsors a prize to reward African heads of state for exceptional leadership. The award carries a higher monetary award than the Nobel Prize
Mo Ibrahim, few people know Africa as well as you do. How great is its economic potential?

Mo Ibrahim: I like to say, "If you want to make money, go to Africa." And that's not an emotional or political statement. We're talking about facts. Just look at the World Bank data. The return on capital is higher than almost anywhere else. It doesn't take a genius to recognize Africa's potential. The continent is open for new services, for trade, for large infrastructure projects – and it is rich in raw materials.
So what does the continent need in order to prosper?
Capital. And that's also why the return is so high. The demand for capital is huge, the supply limited.
In western countries, there's a wide gap between Africa's reputation and the reality as you describe it.
For my generation, the image of Africa was shaped by Tarzan movies. Tribal people living in the jungle, not wearing much in the way of clothes, eating each other. We got the message: This is cannibal country.
That was in the 1940s and '50s...
But the only thing to have changed since then is the cast of characters. When people in the West hear or read about Africa, it's usually about civil wars, such as the ones raging now in Somalia or Mali, or about famine. In the holiday season they get those cards with touching images, the children's faces with the huge eyes. People think to themselves, those Africans can't do it alone. They're poor. They're sick. They're undernourished. And the children can't go to school. Of course, the relief organizations have the best intentions, but they're not exactly doing justice to the reality of Africa.
The negative image sticks to Africa like glue.
Exactly. Even when it comes to African leaders, people in the West still think of the horrors of the past 50 years: Idi Amin, Mobutu Sese Seko, Sani Abacha and all the other kleptocrats. People don't realize that there are amazing heads of state here in Africa. Who knows about Joaquim Chissano in Mozambique, Festus Mogae in Botswana or Pedro Pires of the Cape Verde Islands? These men are heroes. They are our role models. We have to make them better known – to Westerners and to our own people. The Nobel Prize is awarded to outstanding scientists, and that's great, but nobody explicitly recognizes outstanding African leaders.
And that's why you initiated a prize that awards more money than the Nobel Prize? The Mo Ibrahim Prize for Achievement in African Leadership is given to an outgoing head of state or government, who receives 5 million US dollars over ten years upon leaving office and then 200,000 US dollars per year for life.
The prize is intended to acknowledge exceptional achievement. If a head of state manages to free hundreds of thousands of people from poverty, improve the health and education systems, promote democracy and – very important – leave office peacefully and on schedule, you have to appreciate that. I never tire of saying it: These people are heroes. But nobody knows about them!
How are the heads of state evaluated?
My foundation worked with Harvard University to develop the Ibrahim Index of African Governance. It examines 88 statistical indicators, in categories from rule of law to political participation to sustainable economic opportunity. Simply put, it is a comprehensive data set that lays out in great detail how well each country in Africa is governed. With this wealth of data, we can evaluate the performance of the individual countries and their leaders and rank them in order.
Speaking of "good governance", in your own companies, corruption was never an issue. How did you manage this amid a swamp of corruption?
First of all, you must take a crystal-clear stance against corruption, one that your employees understand and support. I was certain of one thing: Bribery hurts the country, the company and its stakeholders. Anyone who engages in bribery puts the company's future at risk, because sooner or later these things always come to light.
What concrete steps did you take to guard your billion-dollar enterprise against corruption?
We put in place a system that promotes clean business dealings. A major problem with bribery is that the people at headquarters don't know what's happening in the field. When they visit their outposts, they're assured that everything is in proper order. At Celtel, my African telecommunications firm, we solved that with a rule that any expenditure over 30,000 US dollars had to be approved by the full board of directors. Every single one. Then if somebody pressured one of our employees for a bribe, he could say that he had to get it approved first. When word got around that this is the only way we do business, there were no more attempts to apply pressure.
What was it like to put this measure into practice?
The hardest part was being able to reach the entire board of directors quickly. I told each board member, "Give me your private phone number and your fax number, your wife's number, the phone and fax at your vacation home – and if you're having an affair, I need that person's number too." This was not always well received.
CEOs often complain that corruption is part of life in certain parts of the world and that they can't do anything about it on their own.
The business side tends to see itself in the role of victim. I disagree. It is just as involved as the government and has to be punished if bribery happens. It doesn't do any good to say "The government is corrupt, that's how the system works." No. It's critical for companies to understand that they can be part of the solution. The business world is part of the system – and capable of changing it.

You have high expectations for corporations.

Ultimately, business must always promote freedom, the rule of law and the protection of property, because corruption and nepotism hurt corporations.
You founded two corporations and sold them for more than 4 billion US dollars in total. In each case, the employees benefited too, because they held shares. What's the advantage of this?
Two things are important here: fairness and incentives. A company's employees must view themselves as partners; it's their company too. This creates completely different dynamics and attitude. What better motivation could there be? Sometimes, shareholders are skeptical about a high rate of employee participation. We tell them, you never lose if the employees have a financial interest. The pie just gets bigger. It's a win-win situation.
Apart from the internal mechanisms, how important is a liberal environment for doing business?
Freedom is fundamental if firms are to prosper. Just as important are clear rules and their enforcement. There has to be the right balance between a liberalized economy and a good amount of regulation.
What are the fundamental preconditions for doing business in a developing nation?
There have to be clear and fair laws and legal certainty. The laws can't change from month to month. Also, the judiciary must function well. It has to be completely independent, or else even the best laws don't help. And finally, justice must be swift. If a court takes ten years to come to a decision, it's of little use. By then, one of the parties involved is bankrupt.
Is Africa still poor because these preconditions have not been met?
To a certain degree, yes. In fairness, it must be said that the rule of law has made great progress in many African countries. Nowadays, I'd rather go to court in Africa than in Russia or China. The judiciary is certainly not perfect, but it's also not as bad as people outside Africa like to think. Many courts are reasonable. But it's true that without good government, Africa will not make progress.
What role should development aid play for Africa?
I am convinced that the continent can do this on its own. We don't need help, and we don't need development money. What we need is capital. Last year, about 50 billion US dollars of foreign direct investments came in, and we could have used about 200 billion US dollars. Don't get me wrong, I have nothing against humanitarian aid and what it can do after a tsunami in Asia, a tornado in the United States or even a civil war in Africa.
What's your opinion of microfinancing?
Microfinancing is good for promoting small initiatives, such as giving a seamstress the opportunity to buy her own sewing machine. It doesn't create thousands of jobs, but for that woman it can mean a huge improvement in her situation. It's like an orchestra, where every instrument has a part to play.
You have a degree in engineering and you run mobile telecommunication companies. How important is the mobile phone for Africa?
It would be impossible to overestimate its socioeconomic and political significance. It's immense. Africa is the world's second largest continent, and yet its population had long been technologically isolated. Very few people could afford a land line. And if they did have the money for it, they had to wait for years to get it, because the state monopolies operated so inefficiently. Almost nobody had a television. People had access to very little information about the world, or even about their own country. The telecommunications industry brought a revolution. It made an active, informed civil society possible – and it created wealth.
Wealth?
Mobile banking – as in transferring money using a mobile phone – fundamentally changed Africa. For you in Switzerland, it's normal to have a bank account and make transactions online or in a local branch. And you have a variety of credit cards. Until a short time ago, none of that was the case in Africa. Banks had branches almost exclusively in the major cities, and they served a small circle of business customers and rich members of the elite. Imagine a business that had to get along without financial service providers!
And so, mobile banking ...
... gave millions of people access to a bank. Now they can send and receive money with minimal transaction fees. This has brought lasting improvement to people's lives. A woman whose mother lives in a village several days' journey away can send her money within seconds. A farmer no longer has to make the trek to town simply to order seeds. Two moneychangers in a border region want to complete a transaction with Ugandan shillings and Tanzanian shillings? Thanks to the mobile phone, they know the exact exchange rate instantly. This is highly efficient and builds prosperity.
What do you see as the future of such mobile services?
Africa today is the leader in mobile banking. The future of retail banking will be mobile, even in Western countries – it's simply faster and more practical. Africa is very advanced when it comes to mobile telecommunications. Celtel did away with roaming fees ten years ago. Is there a mobile network in your area that offers the same rate for domestic calls and international calls to neighboring countries?
What else can we learn from Africa?
(laughs) I don't know whether I'm in a position to answer that. The West likes to tell us what we need to do. We can all learn from each other, but we shouldn't be telling each other what to do.
The mobile phone is used for many different purposes in developing nations. Which of these have you not anticipated?
I've already seen services that help expose corruption. If an official solicits a bribe, you can take a picture and send it to a certain place to report him. Or there's this app for personal safety; if you're attacked, the app sends a text message to all the mobile phones in the area and to the local radio station.
You mentioned that mobile telecommunications also have political effects.
In repressive regimes, the rights of citizens are restricted. They can't communicate freely, express their opinions, assemble in public. In those countries, the government often controls the police, the military and even the media. Mobile phones have made a difference.
In what way?
It has become more difficult for regimes to hide what they do. If something happens, the news spreads like wildfire. Also, nowadays people can exchange information freely and organize resistance away from the state's watchful eye. The mobile phone played a central role in the "Arab Spring." In the past, we lived in the dark, so to speak. My generation had only one daily newspaper, one radio station and one TV station – and they all belonged to the government. Now we have turned on the lights. The mobile telephone has given society a tool for freedom, for resisting oppression.

Profile

Mo Ibrahim was born in Northern Sudan in 1946, the son of a cotton trader, and was educated in Egypt. He worked for the Sudanese telephone company, earned his doctorate in Britain and then was employed by British Telecom in its new telecommunications branch. In 1989, Ibrahim founded his own consultancy company, which he sold in 2000 for 618 million US dollars. In 1998, he founded Celtel, a pan-African telecommunications company, which he sold five years later for 3.4 billion US dollars. Today, his activity is mainly philanthropic, through his Mo Ibrahim Foundation. The foundation publishes an annual report on governance in Africa (the Ibrahim Index of African Governance) and recognizes outstanding heads of state and government with the Mo Ibrahim Prize for Achievement in African Leadership. His daughter is active in his foundation; his son is an actor.

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