Bob Geldof’s African fund shows good timing
Tiring of sex, drugs and rock’n'roll, 1980′s rock icons have found a new thrill — private equity. First, U2′s Bono became a partner in media investor Elevation Partners. Now, Bob Geldof is looking to raise $1 billion for an African private equity fund, to be called 8 Miles.
Geldof’s connection with the continent goes back many years. Since organising the Live Aid concert in the mid-1980s, he has campaigned for increased aid and debt forgiveness for African nations. His political contacts should help open commercial doors.
The musician’s fundraising effort also coincides with a flurry of renewed interest in Africa. The latest cheerleader is Jim O’Neill, Goldman Sachs’ chief economist and inventor of the BRIC acronym. He reckons Nigeria, Africa’s most populous country, could rival the economies of Canada, Italy or South Korea by 2050.
Of course, Africa has consistently defied the investment optimists. Conflict, corruption and poverty have made the continent a no-go area for Western businesses and investors for many decades. But there are plenty of encouraging signs. Real gross domestic product rose 4.9 percent per year from 2000 through 2008, more than twice its pace in the 1980s and 1990s, according to the McKinsey Global Institute.
China is part of the explanation. Its hunger for commodities has sparked a flurry of investment in African resource and infrastructure projects. But, other industries have also been on the receiving end of big international investments. HSBC is set to follow the lead of UK rival Barclays and buy a controlling stake in a South African bank. India’s Bharti Airtel has just spent close to $11 billion buying telecom group Zain Africa.
Geldof will need to make sure that 8 Miles’ investments are cleaner than clean. Given his profile, any hint of dodgy practices at a portfolio company could scupper its prospects. What’s more, new European Union rules on investment funds could make investing in some African markets difficult.
This isn’t the only fund looking to take advantage of Africa’s economic development. But it will be one of the biggest and best connected. Geldof looks better placed than most to be the person to make African private equity work.