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TEDGlobal 2014

Sangu Delle: In praise of macro -- yes, macro -- finance in Africa

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Views 971,344

In this short, provocative talk, financier Sangu Delle questions whether microfinance — small loans to small entrepreneurs -- is the best way to drive growth in developing countries. "We seem to be fixated on this romanticized idea that every poor person in Africa is an entrepreneur,” he says. "Yet, my work has taught me that most people want jobs.” Delle, a TED Fellow, makes the case for supporting large companies and factories — and clearing away the obstacles to pan-African trade.

- Investor
Sangu Delle is an entrepreneur and clean water activist. A TED Fellow who hails from Ghana, he sees incredible potential in the African economy. Full bio

Traditional prescriptions for growth
in Africa are not working very well.
00:12
After one trillion dollars
in African development-related aid
00:18
in the last 60 years,
00:22
real per capita income today
is lower than it was in the 1970s.
00:25
Aid is not doing too well.
00:30
In response,
00:33
the Bretton Woods institutions --
the IMF and the World Bank --
00:34
pushed for free trade not aid,
00:38
yet the historical record
shows little empirical evidence
00:42
that free trade leads to economic growth.
00:46
The newly prescribed
silver bullet is microcredit.
00:50
We seem to be fixated
on this romanticized idea
00:54
that every poor peasant in Africa
is an entrepreneur.
00:58
(Laughter)
01:02
Yet my work and travel
in 40-plus countries across Africa
01:05
have taught me that most people
want jobs instead.
01:10
My solution: Forget micro-entrepreneurs.
01:15
Let's invest in building
pan-African titans
01:19
like Sudanese businessman Mo Ibrahim.
01:22
Mo took a contrarian bet on Africa when
he founded Celtel International in '98
01:27
and built it into a mobile
cellular provider
01:32
with 24 million subscribers
across 14 African countries by 2004.
01:36
The Mo model might be better
than the everyman entrepreneur model,
01:44
which prevents an effective means
of diffusion and knowledge-sharing.
01:47
Perhaps we are not at a stage in Africa
01:51
where many actors and small enterprises
leads to growth through competition.
01:54
Consider these two alternative scenarios.
01:59
One: You loan 200 dollars
to each of 500 banana farmers
02:03
allowing them to dry
their surplus bananas
02:09
and fetch 15 percent more revenue
at the local market.
02:11
Or two: You give 100,000 dollars
to one savvy entrepreneur
02:16
and help her set up a factory
that yields 40 percent additional income
02:22
to all 500 banana farmers
and creates 50 additional jobs.
02:27
We invested in the second scenario,
02:33
and backed 26-year-old
Kenyan entrepreneur Eric Muthomi
02:36
to set up an agro-processing
factory called Stawi
02:40
to produce gluten-free
banana-based flour and baby food.
02:44
Stawi is leveraging economies of scale
02:50
and using modern manufacturing processes
to create value for not only its owners
02:53
but its workers, who have
an ownership in the business.
02:58
Our dream is to take an Eric Muthomi
and try to help him become a Mo Ibrahim,
03:02
which requires skill, financing,
local and global partnerships,
03:08
and extraordinary perseverance.
03:13
But why pan-African?
03:16
The scramble for Africa
during the Berlin Conference of 1884 --
03:19
where, quite frankly, we Africans
were not exactly consulted --
03:24
(Laughter) (Applause) --
03:28
resulted in massive fragmentation
03:35
and many sovereign states
with small populations:
03:38
Liberia, four million;
Cape Verde, 500,000.
03:40
Pan-Africa gives you one billion people,
03:43
granted across 55 countries
with trade barriers and other impediments,
03:46
but our ancestors traded
across the continent
03:50
before Europeans drew lines around us.
03:53
The pan-African opportunities
outweigh the challenges,
03:56
and that's why we're expanding
Stawi's markets from just Kenya
03:59
to Algeria, Nigeria, Ghana,
and anywhere else that will buy our food.
04:03
We hope to help solve food security,
empower farmers, create jobs,
04:07
develop the local economy,
and we hope to become rich in the process.
04:11
While it's not the sexiest approach,
04:15
and maybe it doesn't
achieve the same feel-good
04:18
as giving a woman 100 dollars
to buy a goat on kiva.org,
04:20
perhaps supporting fewer,
higher-impact entrepreneurs
04:24
to build massive businesses
that scale pan-Africa
04:28
can help change this.
04:31
The political freedom
for which our forebearers fought
04:34
is meaningless without economic freedom.
04:38
We hope to aid this fight
for economic freedom
04:43
by building world-class businesses,
04:46
creating indigenous wealth,
04:48
providing jobs that we
so desperately need,
04:50
and hopefully helping achieve this.
04:53
Africa shall rise.
04:57
Thank you.
05:00
(Applause)
05:02
Tom Rielly: So Sangu, of course,
this is strong rhetoric.
05:09
You're making 100 percent contrast
between microcredit
05:13
and regular investment
and growing regular investment.
05:16
Do you think there is
a role for microcredit at all?
05:20
Sangu Delle: I think there is a role.
05:23
Microcredit has been a great,
innovative way
05:25
to expand financial access
to the bottom of the pyramid.
05:28
But for the problems we face in Africa,
05:32
when we are looking
at the Marshall Plan
05:34
to revitalize war-torn Europe,
05:36
it was not full of donations of sheep.
05:37
We need more than just microcredit.
05:39
We need more than just give 200 dollars.
05:41
We need to build big businesses,
and we need jobs.
05:43
TR: Very good. Thank you so much.
05:46
(Applause)
05:49

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About the speaker:

Sangu Delle - Investor
Sangu Delle is an entrepreneur and clean water activist. A TED Fellow who hails from Ghana, he sees incredible potential in the African economy.

Why you should listen

Traditional aid and microfinance platforms have good intentions, says Ghanaian investor Sangu Delle, but they largely haven’t worked. This TED Fellow proposes a different way: investing in pan-African entrepreneurial titans. Through Golden Palm Investments, the investment company he founded, Delle focuses on supporting smart businesses in Africa with big ambitions. GPI focuses on high growth industries and has funded promising startups like SOLO Mobile in Nigeria, mPharma in Ghana and Stawi Foods in Kenya. Because instead of lending small amounts to 500 farmers who’ll each make a small percentage more as a result, he’d rather lend a huge amount to one world class company with the ability to employ 500 people — and perhaps many more. Africa has a market of one billion people and, with more high-impact businesses, could quickly outpace other emerging economies, he says.

Sangu is the author of the upcoming book, Seeding Growth: Africa’s Youngest Entrepreneurs. He is also the co- founder of cleanacwa, a non-profit in Ghana that supports water and sanitation as basic human rights, and that is currently serving about 120 villages. In 2014, Delle was named one of Forbes magazine's “30 Most Promising Young Entrepreneurs in Africa.” 

More profile about the speaker
Sangu Delle | Speaker | TED.com