Jun 18 2007

Investing in Africa: “Charity has its limitations”

Category: Uncategorized<ADMINNICENAME> @ 5:58 PM

A friend who recently visited East Africa examining prospects for investment sends me some fascinating reflections on options open to people of good will who want to assist Africans in imaginative ways. Here’s an except from his letter, with name of country deleted:

“Which brings me to another paradox I wrestle with. There’s investment and
there’s charity. Is there an in between? Can I feel as good investing in [a certain African country] as I would donating money to an orphanage in [the same country]? Will I feel guilty if I do too well in investing? If I’m only willing to donate 10k but am willing to invest 100k for a reasonable return, isn’t [the country] better off with the
investment? I think so. Some speak about social entrepeneurship as filling the
void between charity and investing. Not sure thought what social investing or
social entrepeneurship is.

One can imagine drawing a continuum of investing in poverty stricken countries.
On the extreme hard radical right, you have vulture investors who buy defaulted
debt of deeply impoverished countries and then litigate in international courts
for recovery against the limited cofers of these countries. Such has happened to
many countries including congo and zambia. On the other side of the spectrum are
“social entrepeneurs” who’s url end in “org”. Deeply subsidized microlenders who
distribute profits to back to the country might be an example. But an org is an
org, and I don’t consider them investors, social or otherwise.  What I’m looking
to do is more “com” than “org”, but I want to be comfortable that my investments
are helping the country (and not just a select few entrepenuers). Since [the government] has stated that private sector investing is a key foundation of development, I feel I can invest and still feel that my activity is springing from my
charitable side and not my profit maximizing side. I’m doing good, even if I do well.

I still believe in charity. Investors will never replace doctors without
borders. Likewise you can’t charge market rates for water for poor villagers.
Education and healthcare when not donated, have to be heavily subsidized for the
poor.  But charity has its limitations. And where there are limitations,
strategic investment can fill the gap.”

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