Lord Cairns has a CV that conveys both extensive experience in the private sector and a long-held interest in Africa’s development: he has served as chairman of Actis Capital LLP, CDC Group and BAT Industries, as well as chairman of the Commonwealth Business Council and the Overseas Development Institute. As such, his view on lifting the world’s poorest countries out of poverty comes as no surprise: “Until there are more businesses that really add value in the countries, then development is not going to occur.”

Lord Cairns was unimpressed by the much-hyped Africa Commission report. While the report “had a few nice things to say” about the private sector, he says, most of the focus was on the public sector and little tangible private-sector assistance was offered apart from investment climate facilitation, which “could be potentially useful”.

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Aid can impede

This is the wrong approach, Lord Cairns believes. “Aid has its place in providing infrastructure, healthcare and education but it can be very, very dangerous and in many cases will destroy market-pricing mechanisms and make it impossible for the private sector to grow.”

In trade terms, he says, aid is often “an impediment to doing what needs to be done”. Lest there is any confusion about where he stands, he continues: “It’s a sop. It’s not the answer. It may be part of the solution but it is not the whole solution.”

His clarity and candour are backed up by the fact that he is willing to put his money where his mouth is. After years as an investor in Africa through Actis Capital and CDC, he is now serving on the board of Celtel International.

Celtel’s footprint

Celtel calls itself an African success story – and why not? A pan-African mobile communications group with operations in 13 countries on the troubled continent and licences that cover more than a third of the population, Celtel has pumped more than $75m in investments into Africa since beginning mobile phone operations there in 1998.

Not short on ambition or nerve, Celtel’s self-confessed goal is to create mobile networks in Africa that are technologically on a par with those in Europe and North America. The company’s footprint extends to places that many other investors fear to tread: it even operates a network in Sudan under the brand name MobiTel.

In April, Celtel signed up its six millionth mobile customer. Of this milestone, chief executive Marten Pieters said: “We have accelerated our rate of growth following the successful rebranding last year, which underpinned our premier position across sub-Saharan Africa. We are the market leader in most of the countries in which we operate with the most noticeable growth being in the Democratic Republic of Congo.”

The “rebranding” was a reference to the name-change in January 2004, when the original holding company, MSI Cellular Investments, became known as Celtel International.

A much larger change occurred in March of this year when Celtel’s board of directors agreed to a $3.4bn offer for the company from Kuwait-listed Mobile Telecommunications Company (MTC). As part of the deal, MTC takes over 85% of the issued capital of Celtel upon closing and will get the remaining 15% within two years.

Strong synergies

MTC brings to the table a market capitalisation of $7bn and 3.4 million Middle Eastern customers. At the time of the deal, Saad Al Barrak, MTC’s vice-chairman and managing director, commented: “Our acquisition of Celtel will give MTC the largest regional footprint in the Middle East and Africa. Together, MTC and Celtel will leverage the strong synergies, shared cultural values and heritage which exist between the Arab world and sub-Saharan Africa.”

Mr Pieters said that the acquisition would provide the necessary resources for his company to build up its infrastructure, support future growth and pursue new licenses as part of its ambitious African expansion programme.

Apart from the competitive advantages that the deal offers Celtel, tapping into Middle Eastern wealth to support African development is no small achievement. Celtel had previously relied on European and American funds for developing Africa’s telecom infrastructure.

“There is some pride in getting $3.4bn of Middle Eastern money to come into these parts of Africa,” Lord Cairns says. “I suspect many selling shareholders will want to reinvest in these countries.”

Underlining the company’s commitment to Africa, shareholders agreed to forego $18m to give to the 3500 Celtel employees in Africa who, unlike the senior management and shareholders, would not have gained anything from the acquisition. This translates to roughly two months’ salary for every year of employment at Celtel.

Celtel will remain a separate entity within the MTC group and retain its existing head office and management structures both in Amsterdam and in each of the 13 African countries of operation. It will also keep its recognisable brand name. Following the acquisition, shareholders appointed a new board of directors, which includes Lord Cairns as deputy chairman.

New confidence

These developments at Celtel come at a time when international attention is focused on Africa in a new way and when there is reason to hope that the situation could improve, at least in some places. “I’m more confident today than at any stage in the past 30 years that [African] countries are being run in a way which will allow private-sector development to lead the process of getting out of poverty,” says Lord Cairns. He is most hopeful about countries such as Ghana, Mozambique and Tanzania, and calls Botswana “a shining example”.

But any seasoned Africa-watcher must become accustomed to disappointment and Lord Cairns is no different. Kenya, for one, has been a let-down. “Hope of a new dawn there has disappeared,” he says flatly. And he has few kind words for the government of Kenyan president Mwai Kibaki: “There is a cadre of businessmen in Kenya who get on with things but, in terms of government, it is the most disappointing. This government functions less well and is every bit as corrupt as the previous regime,” says Lord Cairns.

Success factor

Much hinges on the ultimate success of the regional hegemon, South Africa. “Africa will not work unless South Africa works,” Lord Cairns says. And is it working? More or less, he suggests. “While growth has been disappointing and income disparity and unemployment are too high, by and large South Africa is a story that is getting better and better.”

It can also be said that Africa will not work unless the private sector works. In this, Celtel is doing its bit, most crucially by playing a pioneering role in countries that receive very little investor interest. “Celtel has provided a wonderful example to the whole of the financial community that if you provide the right service you can be very successful in Africa,” he says. Among Celtel’s countries of operation are Chad, Congo-Brazzaville, the Democratic Republic of Congo and Sierra Leone.

Is there anywhere in sub-Saharan Africa where Celtel or Lord Cairns would not venture? “I have not been tempted to touch Equatorial Guinea,” he says. Well, not yet anyway.