Attracting investment into an African business is challenging. Attracting long-term investment is doubly challenging. Most investors prefer a three-year exit strategy because there is simply no way of predicting political stability in a continent where civil war and military coups are commonplace.
Julian Ozanne founded his African sustainable forestry firm, the New Forests Company (NFC), four years ago as an investment proposition that showed a 10-year negative cash flow.
“It’s been damn hard raising capital,” says Mr Ozanne, who puts the launch of the business down to a combination of hard work, luck and a good proportion of investors who are committed to the community focus of the business. “If we simply cut an African forest down and told investors they would make money in three years, most would be much more likely to invest,” he says.
Mr Ozanne’s UK-headquartered firm is fully operational in Uganda and Mozambique with Tanzanian operations soon to be launched in November. The company has a general expansion strategy across the eastern seaboard of Africa, which offers attractive shipping routes to Asia’s growing markets.
Political and relative macroeconomic stability, available land and a good business opportunity for forestry are the factors that determine the NFC expansion plans. “I would be very reluctant to go into any country with civil war, untransparent business processes or a history of illegal logging because that would present a reputational risk for us,” he says.
For a business that depends on the ability to source large tracts of arable land, negotiating skills with governments and communities are key. Mr Ozanne was raised in Africa and was African bureau chief for the Financial Times during his former career as a journalist. “It would be a lot harder without the links to Africa that I have; but it’s not only about contacts, it’s about understanding the business culture,” he says.
Mr Ozanne is so entrenched within the business community that he sits on a committee of business advisers to Uganda’s president Yoweri Museveni.
“I don’t believe African governments can afford to offer subsidies but what they can do is make the massive changes still required to improve the business climate. There are endless delays in Africa with work permits, licences, import permits and so on,” he says.
In recognition of NFC’s contribution to Uganda, the firm was named Investor of the Year by President Museveni for effectively creating a forestry industry where one did not exist. “It was recognition of NFC’s rural job creation, which is the best kind as it can halt the huge rural drift to the city which is happening all over Africa,” says Mr Ozanne.
The award was also recognition of the NFC’s contribution to education and health initiatives. Mr Ozanne sees no conflict between commercial pressures and the aims of the company’s community programmes, which he considers an investment in the business. But he does see an inherent conflict between Africa’s future development and the West’s new environmental consciousness.
African presidents view the environmental philosophies of the West as a neo-colonial poverty trap, says Mr Ozanne. “It’s no longer about religion, civilisation and exploiting African resources, but rather about telling them what they can or can’t do to lift their citizens out of poverty, by white people who have already raped their natural environment.”
To some extent Mr Ozanne feels the NFC picks through the middle of this dichotomy – but it remains a continuous challenge.
NEW FORESTS COMPANY
Global staff: 2000, including 80 permanent employees
Business activity: Sustainable forestry, commercial timber, sawmill and energy-forestry operations
Global footprint: 12,000 acres planted by end of 2009 in Mozambique
15,000 acres planted by end of 2008 in Uganda