By Michelle Morgan-Nelsen
Africa is an economy in waiting, which some say has the potential to leapfrog developed economies. Nigerian economist and philanthropist Tony O. Elumelu believes that the private sector’s role in solving social issues will be key to Africa’s economic success. In this vein, we asked Elumelu – chairman of Heirs Holdings, an African investment company – about shared value, the management strategy where companies create profits by addressing social problems that intersect with their business, and how it might help kick-start Africa’s growth.
And to learn more about how business’s potential to catalyze both social and economic growth in a fledgling economy, Elumelu will also be speaking live on a panel of shared value experts and investors on May 13.
Shared Value Initiative: What does the success of shared value look like at Heirs Holdings? Tell us your favorite shared value story or example.
Tony O. Elumelu: The shared value concept to us at Heirs Holdings is synonymous with Africapitalism, which we practice and strongly advocate. Africapitalism is a call on the private sector to invest in Africa for the long term in key sectors of the economy that have the potential to create financial prosperity as well as social wealth. This is the philosophy under which we operate, and influences both the sectors we focus on, and the investments we make.
In 2011, we invested in agriculture in Benue State [Nigeria], which is considered the food basket of the nation. This is a part of the country that yields a significant amount of Nigeria’s produce, including citrus fruits. Yet, despite the high demand for fruit juice, Benue had never successfully established the capacity to convert the raw produce to a consumer product that had a ready market. In the meantime, Nigeria continued importing tons of fruit juice concentrate to serve the growing middle class population.
We invested in a local juice concentrate plant supplying makers of fruit juice, which is the first of its kind in Nigeria, and this is already having a positive and measurable impact on the community.
We purchase oranges, pineapples and mangoes that previously couldn’t be sold and would be left to rot on the ground—as much as 60 percent of the production was lost every year. We’re empowering the community, from farmers to the many that are directly and indirectly employed by our activities, and we’ve introduced technology to the country that hitherto never existed—that to us is truly shared value.
SVI: Why is shared value one of your priorities as the leader of your company?
TOE: Shared value is a priority to me as the Chairman of Heirs Holdings because I believe that economic prosperity and social wealth must go hand in hand for maximum impact. Success cannot be measured purely in economic terms, and our investment activities aren’t strictly driven by profitability—though our ultimate responsibility to our shareholders remains creating economic value for them. We believe that a shared value approach accomplishes this mandate as it sets the stage for continued wealth creation over the long term.
Heirs Holdings is an African proprietary investment company that not only practices Africapitalism, but also commits to active management of our portfolio companies, to ensure the growth and preservation of our investments. This underscores the importance of sustainability, which we believe is paramount for lasting development and growth on the continent.
SVI: What are the most innovative opportunities that you see for shared value in your investments?
TEO: The shared value concept is easier to implement in companies dealing in consumer goods or operating in socially-oriented sectors, like agriculture. It becomes more difficult to integrate shared value in a resource extraction business or a utility. However, we have done just that through some of our most recent transactions.
One of our most well-known investments is the Transcorp Ughelli power plant, based in the Niger Delta, which will more than double its generating capacity within three to five years. The plant is the largest gas-fired power generating facility in Nigeria, and we have a direct supply of natural gas to power it. This also gives us the unique ability to convert excess natural gas for industrial use—a novelty in a country that has been flaring gas for decades.
Our investment will create unprecedented access to electricity in the community, improve healthcare and education outcomes, and give Nigeria the ability to power industries, which has an uncommon multiplier effect in a fast-developing nation like ours. Furthermore, through the transfer of skills and knowledge, we will educate our own people to deliver for the long term.
Watch Tony Elumelu speak more to business’s role in kick-starting Africa’s economy on a panel of investors the Shared Value Leadership Summit this May 13 from 8:30am-10:30am EST at http://sharedvalue.org/livestream. Follow the conversation on Twitter @SVInitiative and #SVInvest.
Michelle Morgan-Nelsen is senior manager of communications at the Shared Value Initiative.