Investment: Africa

Not so dark continent

31 March 2007

The Cardoso Hotel will be unrecognisable by the time he’s turned it five-star and developed the site next to it. Bottled water is so in demand that ‘you can get payback in a year or two’; there are plans for plants in Kenya, Sudan, Angola and Equatorial Guinea. And all this is just the start: he says there are a score of other deals on the table and, better still, he plans to pay for all of them in cash, which in his case seems to be raised at will. His last fundraising round, he claims, took only three days and ‘no broker needed’.

It’s big talk — but it makes some sense. Debt is cheap for Western companies, but in much of Africa corporate lending is done at what Lenigas calls ‘credit card rates’. Before Lonrho stepped in, Swissta was paying 22 per cent on its debt. Get rid of that kind of burden, says Lenigas, and businesses that seemed to be struggling suddenly look viable.

But what of corruption, a constant of African business that Tiny allegedly managed to Lonrho’s advantage? That ad for Nigeria on the Central Line platform could well have added ‘home to the planet’s greatest fraudsters’ to its list. Not a problem, says Lenigas. There are ‘so many good deals around in Africa there’s no need to do the dodgy ones’. When he’s asked for money he asks for a receipt; if a deal can’t be done cleanly in two weeks, he says he won’t do it.

Lenigas makes investing in Africa sound easy. Corruption? Just don’t pay bribes. Crappy infrastructure? Just buy your own airlines. Poverty? It’s on the way out. Insanely high interest rates? Just pay cash.

Can it be that straightforward? Maybe. Lenigas is keen to be an acceptable face of Western capitalism in Africa — Tiny’s Lonrho having famously been referred to by Edward Heath as the ‘unpleasant and unacceptable’ face. Lenigas talks of involving community and government partners at every turn, and of a plan to provide Swissta water at cost to new mothers and children. But he also comes with a large dose of brashness and front — an echo of Tiny, perhaps, but maybe no bad thing. However much Africa might be growing and modernising, doing business there is not for the faint-hearted. Lenigas has quite a job ahead of him if he really wants the new Lonrho to hit the scale of the old. The timing is good — there’s plenty of investor money around keen to find exposure to Africa. If he does the right deals and gets the right management, he’s in with a chance. Lonrho, like Nigeria, is more than what you think it is.

Merryn Somerset Webb edits MoneyWeek.