The Nigerian economist, banker, investor and philanthropist, Tony Elumelu, speaks about the need for Africans to chart and lead their own destinies, noting that “Africa is capitalism’s next frontier”. He tells John P. O’Malley how his private Foundation helps to train, encourage, and mentor talented young entrepreneurs and business minds from across the continent.

In January, the Tony Elumelu Foundation hosted Dr Rajiv Shah, administrator for the US Agency for International Development (USAID) at an event in Lagos. Designed to highlight new opportunities for growth and development in Nigeria, the meeting initially seemed like a simple exercise in public relations. As the first ever African to be appointed as a key advisor to USAID’s Private Capital Group for Africa, Elumelu was careful to thank the US government for engaging private sector leaders in the Nigerian economy in recent years. But when he declared that “it is time for the dialogue around development to change from charity to job creation,” there was a feeling that Elumelu had articulated what many in Nigeria, and across Africa, still today feel about development aid.

I begin my conversation with the Nigerian economist, banker, investor and philanthropist by asking him about the change in attitudes in recent years surrounding foreign aid to African countries: specifically Nigeria. “Rajiv Shah’s visit to Lagos was very meaningful for Nigeria, because it signaled the US government’s willingness to consider alternative approaches to development. We are now in a position in Nigeria, and across Africa, where we are fully engaging the private sector to facilitate lasting societal and economic transformation rather than short-term financial gain,” Elumelu tells New African.

According to the USAID website, foreign investment in African projects has risen rapidly over the last number of years. In 1990 net direct investment stood at just $1.5bn

on the entire African continent. In 2010 that figure reached over $20bn, 82% of that coming from the private sector, significantly shrinking the level of funding from donor countries and development institutions. Elumelu believes this flow of capital represents a golden opportunity to enhance the strategic relationship between private sector investment, and development assistance.

“Foreign governments are starting to realise what we in the African private sector have known for a long time: that Africa’s entrepreneurs hold the key to unlocking sustainable economic growth. The private sector can pave the way for long-term economic development. This creates social value for Africa, by Africans. I see this as one of the fundamental principles of Africapitalism.” Elumelu repeats this catchy marketingmeme several times throughout our interview. If you have not come across it before, don’t be too alarmed.

It is fairly self-explanatory. He claims that the phrase “is not just an African brand of capitalism”. But it is hard to see how it is anything other than that. I am a little sceptical myself: so I ask him to elaborate on its meaning. “Africapitalism is a philosophy that promotes the idea that Africa can truly become transformed as a continent. It calls for long-term investing in Africa by Africa’s own private sector as a means to solving the continent’s most pressing challenges. It’s also an ideology that believes in a model of growth that is all-inclusive.

“While it does look at GDP figures, social wealth, and long-term investment in the private sector, Africapitalism is also about setting the agenda in the economy, and getting others to follow. This then gives more potential for creating long-term economic prosperity and social wealth simultaneously.” While it appears that “Africapitalism” is nothing more than a corporate marketing idea – privatising businesses to make them more profitable is standard for all capitalists regardless of where they are situated – it is nevertheless a very clever one.

As one of Africa’s most recognisable business faces, Elumelu has used this form of branding to sell various business ventures to the international community. At the 2013 World Economic Forum in Davos in Switzerland – along with the president of Rwanda, Paul Kagame; the former US assistant secretary of state for African affairs, Jenydayi Frazer; and the investor and philanthropist, Nicolas Berggruen – Elumelu launched one such initiative: the East Africa Exchange. This focuses on establishing an auction facility and spot trading for agriculture and non-agriculture commodities in East Africa. It also aims to strengthen the position of farmers across Africa, says Elumelu. “The East African Exchange will provide farmers in the region with access to storage and credit. It will also support crop aggregation and allow farmers to be more effective market players, and obtain better prices, helping them integrate with the global market. Essentially the Exchange will also reduce the layers of brokers and middlemen. The end result will be that farmers will increase their share of created value.”

Elumelu became a prominent name on the Nigerian banking scene in 1997 when a number of investors acquired the mediumsize Crystal Bank Limited, which at the time was struggling to turn a profit. The first step in trying to change this was to quickly give it a new name: Standard Trust Bank (STB). Elumelu, who up until that point was executive director at Continental Trust Bank Limited, was made CEO of the newly renamed STB. For the next few years, he worked hard on making STB a success. By 2005 it was rated in the top five largest commercial banks in Nigeria. Around this time the banking sector in Nigeria was undergoing serious reforms. These were led by Prof Charles Chukwuma Soludo, who went on to become the governor of the Central Bank of Nigeria. In July 2004, when the reforms began, Nigeria had 89 banks with 3,300 branches.

By December 2005 – through various mergers and acquisitions – the number had been reduced to 25. Elumelu was involved in one of the largest mergers that took place during that period. He joined together STB and the United Bank of Africa (UBA), keeping the name of the latter. From this point onward, UBA’s growth rate was phenomenal. In the space of just a few years, it transformed itself from a medium-sized Nigerian financial institution, to a highly competitive international bank: with 20 pan-African branches, and further operations in the US, UK, and France.

Elumelu admits that the success of this merger would not have been possible without the reforms implemented by the Nigerian government at the time.

“The banking reforms in Nigeria led to a growth in credit in the private sector – particularly in the retail segment – which benefited from an up to 40% increase in credit. The government also increased the efficiency of service delivery through the use of technology: such as ATMs and e-banking, improving the competitive landscape, which lowered interest rates.

“To a certain extent, these reforms also changed the face of banking in Nigeria, creating a middle class in our economy. Today banks can now participate in much larger transactions, like high-level lending. Expanding operations have also meant increased employment.”

But these initial positive developments, says Elumelu, were stunted by a mixture of problems in the Nigerian banking sector, as well as the onslaught of the global financial crisis in 2008. “We now know that some banks took risks without having proper risk management structures in place. This and other factors contributed to the financial collapse. But the restructuring under Sanusi Lamido Sanusi is now serving to bolster the sector.”

Despite these minor setbacks in the industry, when Elumelu retired as CEO of UBA in 2010 – due to a rule which limits bank chiefs to serving just 10 years in Nigeria – he had built a very successful business: which employed over 10,000 people, served over 7 million customers, with an asset value worth $12bn.

Within weeks of stepping aside from his position as head of UBA, he then founded the Tony Elumelu Foundation: an Africanbased, and African-funded, non-profit philanthropic organisation, which helps to train, encourage, and mentor, talented young entrepreneurs and business minds from across the continent. By encouraging a number of steady internship programmes, as well as funding various grant schemes, the foundation tries to match the best talent with some of the fastest growing companies in Africa.

Another key aspect of the foundation is its policy and dialogue programme. This is intended to work with political leaders in key African countries “with a view to improving and helping them create a better business environment,” says Elumelu. “At the Tony Elumelu Foundation, we believe that by helping various governments in Africa to work with the business community, foreign investors, and the rest of the world, we can create a better business environment that will encourage investors to do business in the region.

“We believe ultimately that the future of Africa lies in our ability to invest in Africa. You cannot create entrepreneurs in an environment where you do not allow the private sector to prosper.”

While Elumelu is enthusiastic about his achievements to date as a philanthropist, he reminds me that he is first and foremost an entrepreneur. In 2010, at the same time that he began his foundation, Elumelu also set up Heirs Holdings, a pan-African investment company that pumps capital into bourgeoning areas of the economy.

The key sectors it has invested in so far include financial services, power, oil and gas, hospitality and real estate, agribusiness, and healthcare. In less than three years, just some of Heirs Holdings achievements include: the acquisition of Nigeria’s largest gas-fired electricity plant, in partnership with the multinational General Electric; the takeover and turnaround of the Transcorp Hilton in Abuja, which is now the most profitable of the Hilton group’s global franchise; as well as the development of Nigeria’s first concentrated juice production facility, through Elumelu’s agribusiness division. Agriculture currently accounts for 40% of Nigeria’s GDP. With a growth rate of 6% per year since 2009, it has become one of the fastest-growing industries in the non-oil sector of the economy. As a member of the Agriculture Transformation Council, and chairman of the Fertilisers Producers Association of Nigeria, Elumelu believes there is vast room for improvement to increase productivity in this area.

“I would like to see agriculture move away from a peasant occupation to one that is commercially viable. I don’t want it to become a government handout subsidy business, but for it to generate profit, to economically empower the people who are working in that sector. “I’m also very happy that President Goodluck Jonathan is interested in seeing agriculture as a sector that will create a major source of revenue for Nigeria. Agriculture employs a lot of our people, and it is the surest way to economically empower them.”

While Nigeria has seen a steady economic growth rate of approximately 7% every year for the last decade, it is also faced with other figures it may not be so proud of. It still has some of the worst human development indicators in the world. Nor is it on track to meet most of the health and education Millennium Development Goals.

Does Elumelu see growth rates, and GDP figures, eventually correlating with a rise of living standards: including a right to free education for people across Africa’s most populous nation?

He responds by saying education is a topic “outside of his area of focus”. However, Elumelu does have something to say on the rise of wealth:

“I am optimistic that the positive trends we are seeing will continue, and I expect improved living standards in the near future, not just in Nigeria, but across Africa. It will be a natural progression to see African investors and African corporations taking the lead in Africa’s economic transformation. But our governments must also create the right environment for development that will sustain future generations.

“A thriving private sector can create added value for Africans in all key sectors of development, which will in turn contribute to rising living standards across several indices: from education and healthcare, to fiscal investment and public policy. But it really is time for Africans to chart and lead their own destinies.”

When Elumelu started his banking career in the mid 1980s, Nigeria was under the strict control of military power.

He says the transition to democracy since 1999 has opened up a new path of possibilities, particularly for foreign investors – who find it easier to do business in a country where they know political stability is guaranteed.

“The democratic transition in Nigeria has done a lot to create an enabling environment for entrepreneurs, and it’s getting better as time progresses. The number of conflicts on the continent has decreased, and democracy is spreading: leading to improved governance and better confidence in African nations. People are gradually beginning to realise that Africa is growing, and getting more confident about making investments at home, rather than abroad.”

My allocated time with Elumelu is almost up. He tells me he has to move on to another appointment. Before we conclude our conversation, I ask him one final question: given the recent signs of growing economic prosperity, where does he see the fate of the African continent in the next two decades?

“Several African countries are among the fastest growing economies in the world. Sub-Saharan Africa’s regional debt-to-GDP ratio is extremely low. Africa is also blessed with abundant natural resources, and a young vibrant population. Africa and Asia were the only regions that continued to grow at rates of 5 to 7% in the face of the global financial crisis. To borrow a cliché: Africa is capitalism’s next frontier.”