Profitability is one of the clear measures of success. But what should business people do with their profits? MSafiri’s business columnist Nkem Ifejika applauds those entrepreneurs who are willing to reinvest their profits to help others on their way
Profit is a wonderful thing. Businessmen and women find it life-affirming, a sign that things are going well, a universal signifier of progress in enterprise. Profit is a chance to expand, to explore, and to gamble with calculated, minimal risk. Sometimes, profit is avoided or masked by businesses, usually as a way to hide from the taxman. But this is not sustainable. The taxman cometh.
One of the paradoxical characteristics of the Great Recession (has it ended?) was the contrast between government and corporate coffers. Governments were broke, but the recession didn’t totally deplete corporate coffers in the manner of the 1930s’ Great Depression. In fact, this time many companies were sitting on vast reserves, while treasuries were seeing their balances tilt ever deeper into the red.
The big question for a profitable business is always what to do with that extra money. Plough it back in the enterprise? Sit on it? Buy long-term bonds? Let’s make a short leap from businesses to individuals. Africa has business people with vast amounts of excess wealth. All one need do is look at one of the many lists constantly being released to realise that, although there are many poor people on the continent, there are also plenty with more than a few cowries to rub together.
These elite of the elite face the same dilemma as their counterparts in other parts of the world – now that I’ve acquired my private jet, my yacht, my numerous cars and houses, what do I do with all this money? What do I do with the profits from my successful businesses? The solution is simple: help your fellow African with the purchase of the proverbial non-leaking boat and some fishing nets without gaping holes.
Private equity has its eye on Africa. And who can blame it? But what aspiring African entrepreneurs need is venture capital and angel investors. They need people who’ll look beyond the red tape constraints imposed by banks and traditional lending institutions. Only about 20 per cent of African families have bank accounts, according to the African Development Bank. And of these, how many do you think would be eligible for loans to start businesses? Exactly right – not many. The good news is that there are individuals who recognise what is needed and are putting their excess funds to better use.
Tony Elumelu of Nigeria is a self-confessed ‘Africapitalist’. The meaning of this word is still evolving, but it has ‘Africa’ and it has ‘capital’, which is about all you need to know. On 1 January 2105, the Tony Elumelu Foundation Entrepreneurship Programme was launched and started asking for business ideas to invest in. The fund is a whopping US$100m, and the aim is to create 10,000 startups over the next ten years. The knock-on effect of such ventures could well exceed billions of dollars.
Progress in Africa will not be solely dependent on government policy. It will require entrepreneurs who’ve already walked on hot coals to help others do the same. Profit for its own sake isn’t always edifying, but profit with a greater purpose is good, and does good.