Last week Elon Musk confirmed his intention to buy social media app, Twitter. He is willing to commit about $43b (sh158trillion) to do the deal.
To put this in perspective, the GDP of Uganda is about $30b.
"Musk who is the richest man on the planet, was born in South
Africa but has lived in the US since he went to university there. I saw him
referred to last week, as the richest “African American”, which made me do a
double take, but the logic is sound...
Musk in November last year was declared the richest man in the
world with a net worth of $300b, the bulk of his fortune due largely to his 17
percent stake in electric car maker, Tesla.
This story got me to thinking, “What would it take to get
Elon Musk to invest in Uganda?” Not because I have any particular liking for
the man, but one because he has his roots in Africa and because if we could
coopt his mobilization skills we might be better off for his presence here.
I soon had to disabuse myself of the illusion. This is why, in order of increasing importance (maybe).
1.
Who will he partner with
While governments like to believe they are the main drivers
of investment in a country the truth is businessmen look to their fellow
businessmen on advice on whether to invest or not in a certain locality.
While governments like to push the high returns of investment
one can make in a country, the businessman is more interested in the risk to
the loss of his capital. Is the politics stable? Is the legal environment predictable? Can I get financing in country? Or if I source it outside the country
how easy is it to repatriate, not only to pay shareholders but my financiers as
well?
Given the size of Musk it may take a billion-dollar
opportunity to just whet his appetite, the problem is there is only one
enterprise of that size in this economy, so he does not have much of a
reference point.
And often times while such investors can go it alone they will
be comforted if some local businessman can have a sizeable stake in the
enterprise, to spread his risk. Businsessmen
understand the power of numbers. There needs to be enough company in a country
for the inevitable run ins with the government. If you are alone however big
you are, you can be isolated and frustrated.
2.
Why Should he care
Related to the first point it is local entrepreneurs that
are willing to forgo massive returns elsewhere to invest at home. They have an
emotional attachment. So a local investor will brave inadequate transport
networks, intermittent power and corruption to invest at home. Musk has no
emotional attachment to Uganda so that is that.
He has just broken up with his latest girlfriend, so who knows?
3.
We seem to have serious governance issues
In recent weeks the headlines have been captured by the
questionable deal done by one Vinci Coffee Company Ltd (VCCL) and the effect it’s
going to have on the coffee industry. The government has signed off on the deal
but the noise being made around the deal might mean its dead on arrival.
Opposition to investment plans by local communities is not
unique to Uganda, but if even the government is split on a deal (collective
responsibility be damned) potential billionaire investors will wonder what will
happen when they get the concessions they need to make the investment viable
get shot down by the chattering masses.
People like Musk don’t accumulate the billions they have by
being casual about the odd dollar or so, they get to where they are by watching
every penny.
4.
Where is Uganda?
I left this for last although in Musk’s calculations it will
be at the top of the list. For a man with a net worth ten times the size of the
Uganda economy. As pointed out above, for an investment to make sense for him it
will most definitely have to be a billion dollars and even then it would be a
stretch.
A billion-dollar investment even with an unrealistically generous
50 percent return on investment would amount to less than 0.2 percent return on
his total portfoilio. Uganda would have to bend over backward – maybe give him
all of Lake Victoria for him to even go beyond the cover page of such a
proposal.
But maybe all may not be lost. Its possible that Musk is
invested in some venture capital or hedge funds so that is how we might get a
bit of his money to our shores.
But who cares anyway whether Elon Musk invest in Uganda or
not? The point is the same criteria he will be looking to tick off are the criteria
investor local or foreign would be looking at. How do we stack up? Not very well
given the cowboys we are attracting to our shores.
