George Soros: Why the Billionaire is Investing in Africa
George Soros is one of the world’s most famous billionaires. Forbes says he is one of the 30 richest people in the world and, indeed, his presence is seen and felt in many countries. He has earned a reputation as a specialist in making a profit, a businessman (he owns many companies). He is also a philanthropist, and perhaps more than any other billionaire, Soros has been the most successful at combining all his business activities with his philanthropy such that the two combine, acting in tandem. Africa is a particular example of the success of his formula.
The George Soros Foundation is one of the main investors in LeapFrog Investments, a private equity firm, whose specialized funds have also attracted JP Morgan, AXA, AIG, Swiss Re, Prudential, and other major institutions, recently announced that it is raising $400 million to make socially responsible investments in Africa (and Asia as well). LeapFrog has acquired a minority stake in Africa Finance Business Mauritius (AFB), an active financial start-up in four African countries.
AFB Mauritius provides solutions that enable mobile phone users to access insurance products, savings and credit, LeapFrog operates in Kenya, Ghana and Zambia and boasts more than 300,000 customers. LeapFrog Investments, in 2014, acquired a majority stake in the Kenyan company specializing in health insurance, Resolution Insurance, for 19 million dollars. Specializing in financial services in Africa and Asia, LeapFrog invests primarily in companies active in the areas of insurance, savings, pensions and payments services and usually with customers who earn less than 10 dollars a day.
Ethiopia is one of the fastest growing countries in the world. Before China announced that its growth would be no more than 7%, Ethiopia was the second fastest economy. Now, at 8%, it may well be the fastest. Rather than looking at Africa as a ‘basket case’, it is time to consider its investment potential and George Soros has pointed the way. Not because he is a humanitarian but because he is a billionaire, who, above all else, wants to make a profit.
The best way to invest is through specialized funds and instruments. Ethiopia issued a dollar-based bond to finance its ever-larger agricultural production, power generation and transportation infrastructure including the 6,000-megawatt Millennium Dam hydroelectricity project on a Nile river tributary. Deutsche Bank and JP Morgan are involved, offering a ten-year bond yielding 6.75%. Ethiopia has been Africa’s fastest growing economy for the past few years; it follows in the lead of other African countries that have issue similar bonds (Eurobonds), which thanks to the perception of high risk also offer high returns.
Soros and other billionaires have taken notice.Ethiopia’s energy plans will cost about $ 25 billion. “For this ambitious plan, the idea is to fund at least 50% from our own funds. The remaining funding will take the form of grants, soft loans and commercial loans from various investors.” Said Azeb Asnake, director of the Ethiopian Electric Power (Source:Ethiopia eyes extra 12,000 MW in power projects by 2020, Reuters, June 8, 2015).
Ethiopia’s bond is based on its ambitious development goals. It wants to raise at least $50 billion by 2020. Dams and power generation are key given their crucial role in agriculture; it also plans to become an electricity hub, selling power to its neighbors.
Soros is a master of financial speculation, one of the alchemists of finance. He has often speculated on currencies, achieving great profits for himself and leaving turmoil behind. Therefore, he is not really a ‘bleeding heart’ liberal humanitarian. If Soros is getting involved in Africa, it is because he knows that he can profit from it.
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Soros uses his Soros Fund Management LLC. Currency speculation is the main source of his fortune (earned him about $ 30 billion). He is now devoting some of it to Africa. The Soros fund management invests in the capital of the largest global multinationals. Soros Fund Management LLC maintains control of large shares in large corporations who profit from investments in foreign countries. Soros has invested in Dow Chemical Co (NYSE:DOW)and Monsanto Company (NYSE:MON), which offer products and services with applications ranging from industry to agriculture, biotechnology, food industry and many other sectors of the economy.
The fund also has interests in the energy sector, with about two million shares of Energen Corporation (NYSE:EGN), a natural gas company. PDC Energy Inc (NASDAQ:PDCE), which owns one million shares, is another one of his major investments as well as aid. Moreover, Soros makes no pretense that while it helps to create a positive image, his philanthropy – acting via the Soros Foundation and promoting human rights, dignity and law, in order to help countries to achieve positive goals of progress. In turn, he secures benefits that mature in the longer term.
The aid organization helps to facilitate a favorable investment climate in the ‘targeted’ countries, improving the investment climate and creating the financial and physical infrastructure to facilitate investment.
Correction: In the original version of this story, we reported LeapFrog Investments is a private equity firm largely owned by Soros and JP Morgan. Leapfrog is owned by its partners. The George Soros Foundation and JP Morgan are two among many investors in the funds set up by LeapFrog. We need not mean to imply that an investment in a fund implies the ownership of the business. We have corrected this mistake and apologize for the error.
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