Heirs Holdings TheAFRICAPITALIST QUARTER 4 • VOLUME 1 ISSUE 1

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“Nobody is going to develop Africa except us.” Tony O. Elumelu, MFR, commits to Africapitalism™

Africa has emerged as capital- that those value-added processes ism’s final frontier, a region brimming happen in Africa, not through na- with resources, talent, untapped tionalisation or government policies, potential and truly emerging mar- but because there is a generation kets. Indeed, investors have come of private sector entrepreneurs who to regard Africa as a land of limitless have the vision, the tools and the op- opportunity: a billion consumers in portunity to shape the destiny of the need of everything from sophisti- continent. cated banking products and mobile Africapitalism™ is not capitalism phones to such basics as canned food with an African twist; it is a rallying and drinking water. cry for empowering the private sector Too often, African development to drive Africa’s economic and social is seen through the lens of aid, re- growth. source deals or geopolitics. However, Africa’s time has come. Africa true growth and economic develop- has as much economic potential as ment in Africa will only be achieved the BRIC countries which have seen with private sector commitment to their fortunes rise dramatically in the economic transformation—one that last 10 years. Our markets are open seeds new businesses, puts eco- and billions of dollars in investments nomic wellbeing within the reach of are flowing into Africa, which today millions, and helps solve our most yields the world’s highest returns on pressing social problems. We call this investment. Private consumption is Africapitalism™. booming, accounting for two-thirds Africapitalism™ is an economic of the continent’s GDP growth. Our philosophy that embodies the private consumer market ranks among the sector’s commitment to the econom- world’s largest, filled with people ic transformation of Africa through who, like the rest of humanity, want investments that generate both eco- to use ATMs and join Facebook. nomic prosperity and social wealth. African banks have been pivotal We see Africans taking charge of the in this renaissance. The continent’s value-adding sectors and ensuring leading banks began as single-nation Africapitalism™, continued from page 1 The AFRICAPITALIST institutions that now infuse capital TEF bridges investing and philanthro- QUARTER 4 • VOLUME 1 ISSUE 1 into neighbouring economies, com- py in a unique way, producing a new pete for customers by introducing development model for the continent. CHAIRMAN: Tony O. Elumelu, MFR new products and services, and facili- My approach might be called “philan- EDITOR-IN-CHIEF: JeNika P. Mukoro tate trade and remittance payments thropy with a kick.” PROJECT DIRECTOR: Diane H. Fusilli between countries. This financial in- As a 21st century catalytic enter- MANAGING EDITOR: Lola Okusami frastructure is necessary for integrat- prise, we are oriented towards long- ing Africa and facilitating intra-Africa term investments rather than grants, THE AFRICAPITALIST trade, an essential ingredient for eco- which we consider only as a last resort. This newsletter is published quarterly by nomic development. The Foundation, although indepen- HEIRS HOLDINGS LIMITED I know this from experience. United dent, works closely with Heirs Hold- 1, MacGregor Road, Ikoyi, Lagos, . Bank for Africa (UBA), from which I re- ings, the proprietary investment firm tired as Chief Executive last year, has I also founded, to harness the power SUBSCRIPTIONS: played a prominent role in enhancing of private enterprise to create sustain- To subscribe to THE AFRICAPITALIST Newsletter, Africa’s business prospects and ex- able, measurable and profitable solu- please email your request to panding investments. UBA has grown tions. In April 2011, Heirs Holdings and [email protected] or call +234-1-277-4641. into a Pan-African financial services TEF set a new precedent for impact company operating in 20 countries investing in Africa when they made an Copyright © 2011 Heirs Holdings Ltd., as to across Africa as well as the Middle East, impact investment in Mtanga Farms, a material published in THE AFRICAPITALIST. Europe and the United States. farming operation at the heart of Tan- All rights reserved. While successes like these contrib- zania’s national initiative to combat ute to an increasing sense of confi- food insecurity. Mtanga Farms Lim- dence in the private sector, Africapi- ited is a mixed arable farming business talism™ cannot take root unless more operating in the Southern Tanzanian is done to foster business growth. Highlands. The deal marked the first Captains of industry and government time an African-funded philanthropic leaders must work together, learn organisation and investment firm en- from each other and build strong re- gaged together in impact investing, lationships. an approach that, unlike traditional Our business leaders must build grant-making, uses for-profit methods companies that capitalise on their to solve intractable social and environ- knowledge of local and regional mar- mental problems—in this case, agri- kets while competing in the global culture development. arena. ’s Silicon Savanna, for ex- TEF is working to cultivate the en- ample, holds lessons for Nigeria’s ICT tire business cycle—from supporting industry, and financial services inno- business interns and future entrepre- vations can be introduced to banked neurs to founding startups, backing and unbanked populations across the small firms, and promoting national continent. and continental companies. The aim is Our political leaders must create an to encourage firms at the pinnacle of enabling environment for these busi- the business cycle to contribute to the nesses to thrive. Government policies growth of those that are struggling must provide incentives for invest- to gain a foothold. More than almost ments and protection for pioneer in- anything, Africa needs a new genera- dustries. In addition, we must attempt tion of entrepreneurs who can drive to solve a host of challenges imping- economic growth. ing on growth and competitiveness Our success—and Africa’s enrich- —commodity price volatility, climate ment—lies in our own hands. Nobody change, corruption, intra-regional is going to develop Africa except us. trade barriers, poor infrastructure, and We must build the capacity of a new security. Africa’s renaissance lies in the generation of Africapitalists to deliver confluence of the right business and goods and services to a continent of political action. consumers, expand operations be- In 2010, I established The Tony Elu- yond our borders, and open avenues melu Foundation (TEF) primarily to of opportunity for millions. Africa de- enable the African private sector to be mands this if we are to own our future. a catalyst for economic development.

THE AFRICAPITALIST • www.heirsholdings.com Impact Investing in Africa: The Case of Mtanga Farms

Mtanga Farms, a mixed farming opera- could result in substantially higher sales government. tion in the highlands of southern , and make a significant impact in a region The deal could benefit more than will soon begin producing several varieties suffering from food insecurity. 200,000 smallholder farmers. Improved of seed potatoes, a product with strong lo- “This investment represents a paradigm seed potatoes have proven capable of in- cal demand among smallholder farmers in shift for philanthropy and investing in Af- creasing yields threefold. a country that has not seen varieties free of rica,” says Tony O. Elumelu, Founder of TEF. “This inaugural impact investment is one viruses and pests for more than 30 years, “We seek to use impact investing to drive we really wanted to get right to properly thanks to an impact investment by The African economic growth from within by signal to other African investors how they Tony Elumelu Foundation (TEF) with Heirs investing in businesses that generate so- can deploy capital to achieve direct eco- Holdings Limited, both based in Nigeria. cial and financial returns.” The investment nomic and social value,” says Dr. Wiebe Boer, This investment, which is Africa’s first marked the first time an African philan- the Foundation’s chief executive. such cross-border deal, will allow Mtanga thropic organisation and an African invest- “We chose agriculture because of the to pioneer a seed potato industry, bringing ment firm jointly undertook an impact in- importance of the sector as a means to cre- agricultural development benefits to area vestment, an approach that uses for-profit ate jobs and enhance rural incomes — but farmers—and an opportunity for Pan-Afri- methods to solve pressing social and envi- also because of the reality that African in- can innovation transfer for future agricul- ronmental problems. vestors are not yet fully on board with the ture investments on the continent. “So far, the investment is going in ac- scale of investing required to responsibly TEF’s inaugural impact investment has cordance with our plans,” says Sam Nwanze, commercialise Africa’s agriculture sector. brought both financial and operational sta- chief investment officer at Heirs Holdings. Agriculture is not a development sector, it’s bility, which has allowed for the diversity of “We have finalised the strategy for the next a sector with significant commercial oppor- regional crops and the pursuit of partner- planting season, procured new equipment, tunities, and we want to make that clear.” ships with governmental and development acquired more land to expand farming op- He adds: “Our choice of Tanzania was agencies in an effort to dismantle bureau- erations, and set up a cold room for storage.” partly because East African agriculture is cratic barriers to efficient farm production. He adds: “We’re also making progress in more advanced than that of West Africa, Mtanga also plans to join in regional efforts renegotiating terms for debt financing.” providing an opportunity for Pan-African to overhaul marketing and retail operations During the next planting season, Mtan- innovation transfer when we take lessons in the food economy. ga will grow its livestock operation and and skills from East Africa to agriculture in- What makes the Mtanga impact invest- build on improvements in crop yields. vestments that we make in West Africa.” ment stand out from other investments is Mtanga is now working with the Tan- its promise to deliver both commercial and zanian government on new seed varieties For more information, please visit social returns. Local farmers stand to profit and is seeking to commercialise the seed www.tonyelumelufoundation.com from higher yields of a popular crop, which potato operation in partnership with the Interns Make Impact in Africa’s Executive Suites

EARLIER THIS YEAR, 21 of the world’s with strong management teams. brightest young graduate business “AMIP opens a pipeline of high-qual- students from top business schools in ity future managers and executives to Africa, North America and Europe — in- African businesses facing tough chal- terns in the African Markets Internship lenges, putting the world’s best young Programme (AMIP) — built the institu- business minds in contact with leaders I was impressed with the AMIP program as tional capacity of African-owned and in the African private sector,” said Tony it is a great way to tap into international MBA -operated businesses, giving them a leg O. Elumelu, Founder, The Tony Elumelu expertise and ways of operating without hav- ing to spend an arm and a leg. The program up on the competition. Foundation. allows companies to explore ways they can im- Working in the executive suites of The programme also enables host prove within a summer and plan for the months fast-growing African companies in Ac- firms to establish business relationships ahead. It is also a great way for businesses to cra, ; Lagos, Nigeria; and , in multiple regions of Africa, which can network and ultimately gain an international Kenya, the interns, now referred to potentially lead to new partnerships “network of partners, vendors and potential cli- as associates, rewrote business plans, and even future deals. ents. fine-tuned corporate strategies, paved Participating schools included Har- the way for launching new products vard Business School, Harvard Kennedy The value of the program is its ability to bring and participated in high-level decision School, Stanford Graduate School of world-class thinking and potential best prac- tices to local African organisations with the making that contributed to the firms’ Business, Wharton School of the Univer- potential to grow into big companies. By doing success; all while gaining experience sity of Pennsylvania, MIT’s Sloan School so, companies can plan ahead of time and even growing business in fledgling markets. of Management, Yale School of Manage- reorganise in order to be more attractive to in- A Lagos host business was even able to ment, London Business School, INSEAD, vestors, potential customers or employees. leverage its associate’s banking experi- IESE, Lagos Business School, Strathmore ence to close a multimillion dollar deal. Business School, and the Ghana Institute Also, the interns work on anything from a small “The value of the programme is its of Management and Public Administra- product launch to structures within the com- ability to bring world-class thinking and tion. pany based on the assignment. The program potential best practices to local African On average, this year’s associates had therefore allows a company to address a very specific problem it needs solved within a two- organisations with the potential to grow five years of work experience at institu- month period that might have been getting into big companies,” said Joshua Wanya- tions such as KPMG, Lehman Brothers, put on the backburner for a while. ma, Founder and CEO of Nairobi-based and the African Development Bank. Pamoja Media, a host firm. “By doing so, During the programme, 21 AMIP as- Most of the internships I have been involved companies can plan ahead of time and sociates worked in 11 host companies with address needs within service delivery. This even reorganise in order to be more at- in Lagos, Nigeria; Nairobi, Kenya; and Ac- is the first one whereby the intern was coming tractive to investors, potential custom- cra, Ghana. They worked in various sec- in on a more strategic goal to help with systems ers or employees.” tors and industries, including outsourc- and getting a business plan done around a new He added: “Most of the internships I ing support, media, publishing, private product. have been involved with address needs equity, agribusiness, advertising, philan- The contributions were meaningful in terms of within service delivery. This is the first thropy, health care, mobile technology, getting some systems in place which had been one whereby the intern was coming in and oil and gas. taking a while to be enacted due to the busy on a more strategic goal to help with AMIP associate Michelle Larivee, a schedule management had. The intern was systems and getting a business plan graduate student at the Wharton School able to work, make recommendations and start done around a new product.” who worked at A24 Media in Nairobi, the process on enacting the changes once ap- Launched in June, AMIP places busi- said: “I gave them a formal business plan proved. We found great value in that. “ ness students from the continent’s top and execution strategy and got them to schools, along with their counterparts really sharpen their strategy and focus Joshua Wanyama CEO, Pamoja Media, Kenya from the finest schools in Europe and on profit, whereas up to now they were the United States, in African-owned focused on revenue. This changed their small, medium and national enterprises mindset and should provide the build-

THE AFRICAPITALIST • www.heirsholdings.com ing blocks for a long-term focus on com- of TEF. the strongest management programmes in petitiveness.” AMIP, which has proven popular with Af- Africa.” Several associates were offered perma- rican businesses, will be expanded in 2012 Host companies for the 2012 pro- nent employment and consultancy con- to include nearly double the amount of as- gramme must meet the following criteria: tracts, while one was offered a partnership sociates, who will work in twice as many medium-scale, African-owned and -oper- and equity in a host firm. regions. ated business, revenue of at least US$1 mil- The first cohort ended on a high note as “Next year, we hope to enlist 40 associ- lion per year, three years of operations, and Harvard Business School professor Michael ates to work in seven cities across all regions the ability to assign a senior level manager Porter, who is considered the father of mod- of sub-Saharan Africa: Lagos, Accra, Nairobi, to supervise the associate on a project of ern business strategy, delivered a lecture on Kigali, Dakar, Douala and Lusaka,” said Efe strategic importance to the business. “Creating Shared Value” to the associates, Osagie Odeleye, who manages the Lead- key business leaders, young professionals ership Development Department at TEF. For more information, please visit and entrepreneurs from the Lagos commu- “We’re targeting Ivy League schools and www.tonyelumelufoundation.com nity. Professor Porter is the Founding Patron tier-one schools in the U.S. and Europe, and

The recruitment process was amazing. In fact, it is the most interactive re- cruitment process I have ever gone through. … It also tested for key qualities and attributes in a fairly objective manner. I enjoyed it.

As abundant as opportunities are in Africa for small but growing businesses, the human talent to harmonise these opportunities and create value in a sustainable manner has usually been scarce. The Tony Elumelu Foundation was able to bring “together young, agile and talented MBAs from around the world to fill this gap. During the 10-week internship, I worked on the Federal Ministry of Agriculture’s account at Doreo Partners, and the team drafted a transformation plan for the Ni- gerian agricultural sector. When implemented, this program will create over one million jobs in the next four years. This would be a great relief to Nigerians, and I feel proud to be part of the process.

The strength in the diversity of the team of interns cannot be overemphasised. It created a great networking opportunity and a bond that broke through racial and religious barriers.”

Ayodeji Balogun AMIP Associate MBA, Lagos Business School

The Foundation was able to match all the interns with organisations that gen- uinely appreciated and valued our experience, opinions and work.

For me, personally, the internship changed my life! As someone new to the conti- nent, my internship at the Entrepreneurs Ecosystem opened my eyes to the trans- formative nature of the private sector growth in Africa while also affording me an incredible opportunity for mentorship as I was able to work quite closely with the “CEO, Tokunboh Ishmael, who took a personal interest in my development and saw that I felt challenged and rewarded by my work.

Unlike many other internship programs, Alitheia Capital encouraged me to be cre- ative and allowed me to work on projects outside of my scope of knowledge. I think this program can be what you make of it. There is a lot to learn here if you want to learn it! I know I learned more working with Alitheia and the Entrepreneurs’ Ecosystem for three months than I did in my last two years working for industry.”

Anna Mira King AMIP Associate Fels Institute of Government Studies, Farayi Chipungu The University of Pennsylvania AMIP Associate,

Afri-Pay Launches U-Mo, Delivering Instant Mobile Money Services to Banked and Un-Banked Customers

U-Mo, one of the first mobile payment services in Nigeria to account offered to unbanked, under-banked and banked custom- receive approval from the Central Bank, was launched by Afri-Pay ers. U-Mo customers will not have to open formal bank accounts. Ltd. in November 2011, and will play its role in financial inclusion by Heirs Holdings invested in Afri-Pay because U-Mo meets the cri- putting sophisticated financial services within the reach of millions terion of bringing both economic and social benefit to Africans. of Africans, especially those without formal bank accounts. Economists say adding mobile phones in a typical developing The mobile payment service is country boosts growth in GDP per not only considered innovative but person. According to a 2009 Econo- will be speedy and a cinch to use in Afri-Pay Ltd., on mist magazine report, incomes in far-flung places. U-Mo – its tagline is rural households that used mobile “Your mobile … your money” – brings November 24, 2011, money increased by 5-30%. instantaneous mobile money prod- Mobile payment services could ucts and services not just to cities but launched U-Mo, a mobile spark a new wave of economic de- to remote parts of Nigeria, even small velopment. U-Mo enables users to villages, making money transfers, and payment service that send money to other people who thus business transactions, feasible receive a text message containing a wherever mobile phone service is enables anyone with a code that can be used to withdraw available. cash. And there’s an added conve- U-Mo is said to have become the mobile phone to conduct nience: people who work in cities choice of discerning mobile phone real-time financial will not have to travel to deliver subscribers due to its ease of use and money to their families in their vil- the simplicity and elegance of its plat- transactions. This service lages. form. Money transfers can be made The Consulting Group to As- simply by typing a U-Mo account could spark a new wave of sist the Poor predicts that by 2012, number and personal identification there will be 1.7 billion people with number into the mobile keypad. A economic development in mobile phones but no bank ac- text message notifies the user that counts, and that 20% of them will the transaction has been completed. Nigeria. be using mobile payment systems. Money transfers take place on the Africa has the world’s fastest rate spot regardless of whether the recipient has a traditional bank ac- of mobile phone subscriber growth. For many Africans, mobile count. phones are not a luxury item, but a means to do business. In June Customers will be able to use U-Mo to withdraw cash from 2011, the Nigerian Communications Commission said that there ATMs, purchase airtime, pay bills, pay for goods and services on were 5.5 million landlines in Nigeria. At last count, the country had the Internet, pay merchants, and pay salaries. It differs from mobile 90 million mobile phone subscriptions. banking because with mobile banking, a customer has a formal ac- count at a bank. But a U-Mo account will be a phone-only virtual For more information, please visit www.afripayonline.com

THE AFRICAPITALIST • www.heirsholdings.com Transcorp Deal Signals Long-Term Investment Strategy for Heirs Holdings

On September 16, 2011, the shareholders of Transcorp unanimously endorsed the appointment of Tony O. Elumelu, MFR, as Chairman of the Board. How will this affect the investment plans of Heirs Holdings, which acquired a significant stake in Transcorp earlier this year? Sam Nwanze, Chief Investment Officer of Heirs Holdings, and Obinna Ufudo, President/CEO of Transcorp, have the answers.

What is Heirs Holdings’ long-term investment strategy and keeping corporate overheads low. The support from the centre in- how does Transcorp fit into your overall plans? cludes business strategy, branding, communications, strategic HR, procurement, treasury management, legal advisory and internal SN: In the long term, we want to have viable investments or busi- audit. Most importantly, we are strengthening the quality of our ness in our identified sectors. We want to see these businesses grow team with strategic additions and also optimising existing staff. into well-established regional and global players. As a conglomer- In terms of subsidiary management, we have hired a CEO fo- ate, Transcorp was set up by the founders to create strong local cused on our Hilton Hotel franchise and are about to commission companies that could play on a global scale. This creates the right Benfruit Nigeria Limited, the first orange juice concentrate produc- platform for us to execute our long-term strategy as an investment tion plant in Nigeria. And we are in the process of hiring a CEO for company in sectors that coincide with Transcorp’s focus areas. our oil and gas play. The overarching intent is to diversify our earn- ing potentials for shareholders’ benefit. How will Mr. Elumelu’s reappointment to Transcorp’s board benefit key stakeholders? How is Transcorp better positioned to compete in Nigeria’s— and Africa’s—increasingly competitive economy? SN: Mr. Elumelu has demonstrated his ability to transform and turn around businesses and take them from being local players OU: We now have a lean organisation that is more focused on the to global institutions. Turnaround, transformation and growth are activities of the operating entities in terms of maximising share- the key elements required to drive Transcorp towards achieving its holders’ returns through further reduction in operating costs while aspirations. Mr. Elumelu is a value creator with a solid track record. harnessing new revenue streams. Nigeria is Africa’s largest market, His reappointment to the board will see stakeholders getting what and we have a deep understanding of Nigeria’s business terrain. they had hoped for in the setting up of Transcorp and much more. We see great opportunities in the key sectors of agriculture, en- ergy and hospitality, and have aligned our corporate strategies to What other changes have been made in Transcorp’s manage- these opportunities. We see the nexus between corporate growth ment and in business operations? and societal development and this is reflected in our diversified shareholder base of nearly 300,000 Nigerians of every strata. So, I OU: Essentially, we are building a lean holding company structure am convinced that we are a company well positioned to take ad- with two main focuses: subsidiary support and subsidiary manage- vantage of the continent’s immense potential. ment. We are focusing on harnessing synergies across subsidiaries and For more information, please visit www.transcorpnigeria.com supporting each subsidiary in delivering enhanced value, while Heirs Holdings

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