Name: Fortune Global Forum 2023: A New Outlook For Africa
Uploaded: 2023-11-29
Duration: 16 min 7 s
Description: Dr. James Mwangi, Group Managing Director and CEO, Equity Group Holdings; Executive Chairman, Equity Group Foundation In conversation with: Hala Gorani, International Correspondent, Journalist, and Author

Dr. James Mwangi, Group Managing Director and CEO, Equity Group Holdings; Executive Chairman, Equity Group Foundation In conversation with: Hala Gorani, International Correspondent, Journalist, and Author

Fortune Global Forum 2023: A New Outlook For Africa 

Conferences

Dr. James Mwangi, Group Managing Director and CEO, Equity Group Holdings; Executive Chairman, Equity Group Foundation, Hala Gorani, International Correspondent, Journalist, and Author

OK, the world's population continues to grow and shift depending on region. Notably, more than half of the global population growth between now and 2050 is expected to occur in Africa. Uh But even before that point, by 2040 Africa will be home to the world's largest working age population according to uh work done by our knowledge partner mckenzie and company. Uh right now in Africa, at least 345 companies have annual revenues of 1 billion U US dollars. Collectively, they produce revenues of more than $1 trillion. And despite a recent economic slowdown in Sub Saharan Africa, the International Monetary Fund is predicting a rebound in 2024. Now, that's a lot of statistics to digest. But what they point to is that Africa is a major opportunity that can't be overlooked joining us now to get to the heart of it all is James Mwangi. He is group managing director and CEO of integrated financial services institution, equity group holdings. He's also executive chairman of Equity Group Foundation, the company's social arm leading the conversation is international correspondent and journalist Hala Gorani. Please welcome them to the stage Thank you, Doctor James Mwangi. Thank you so much. We've been having such an interesting discussion backstage and I want to tease out some of the wider themes. Uh We're talking about Africa. Um We're talking about opportunities in Africa, the demographics, the adoption of new technologies, the leap frogging into the future. If for those uh listening to you today in your capacity as the CEO of equity group holdings. Why is Africa an opportunity? Thank you very much, Africa is an opportunity in a multidimensional way. The first one is the opportunity for productivity gains using technology and deployment of its population uh constituting of a mean age of 18. Uh So that's essentially in areas like agriculture, mining and manufacturing. Then Africa is likely to improve technology and the skill and energy of young people. The second one is the potential of Africa to contribute significantly to the issue of global food security. And that is the investment opportunity. Um Given that it has 65% of unutilized Ala Bullard. The third one is uh the huge endowment the continent has in strategic green minerals and essentially to deal with uh the climate action. Uh the technologies involved in uh clean energy, Africa has a huge role to play. And so we see that as um an opportunity to catalyze the transformation of the African continent through investment. To me, those are the big ones, but lastly is the issue of population. Um World Bank IMF predict that Africa will be home to 25% of the world population by 2050. That means a market shift, Africa will have the capacity then to be a big market. If at that time, one of every three people in the labor market will be African, then there will be a significant purchasing power. I want to talk a little bit about your personal story because it is so inspirational. You've been uh at equity group holdings for 30 years. But when you started out as a young boy and you credit your mother, you say your mother is the one who brought you to the school when you didn't have a pair of shoes to wear. And the school principal didn't want to admit you into that school. And you credit your mother for giving you that for pushing you to get that education. How does your personal story and your tremendous success today? How does that inspire younger people in Africa, do you think? Yeah, it's true that having lost my father as a toddler and my mother being widowed at 38 on the eve of dependent, a mother who had not received formal education, the insight that education was the only tool that you could empower me with. Um inspires a lot of young people on the need to pursue education as a means of bettering themselves and as a means of accessing opportunities. But I think it's what I've done with that education uh maybe in developing the financial sector of, of most people say we democratized financial uh services in Africa through in crucial that it became uh low, low margin, high volume to allow the population to access financial service that inspires most people. And lastly is the issue of a business model that uh uh is built on shared prosperity. 2% of our total revenue goes to the foundation, that foundation then has to its um name 60,000 scholarships um in secondary in secondary schools, 25,000 scholarships in university and about 1000 scholarships globally. I think people see this and see um what the private sector that is conscious and aware of the structure of society and the need not to leave anybody behind. And those scholarships, a few 1000 of them are medical school scholarships. 1800 of those who have gone to university have done medicine. And as a result, we have created a franchise for them where in just four years, we now have uh 100 and two hospitals and medical franchise and those hospitals are seeing an average of 90,000 patients per month. So it's a financial didn't exist before it has existed because of this scholarship. We now have the largest health outpatient health franchise in eastern central Africa. So we talked about the opportunities of Africa. What are the challenges? Of course, um Africa uh Brewry is an emerging market and it has uh constant uh head weeks of global economic shocks like today, Africa is going through the challenges of debt uh simply because of um uh the strengthening of uh uh us dollars. Uh uh So the second aspect uh that uh Africa goes through is the issue of infrastructure. But for the private sector, I see that as the opportunity we are saying uh the the infrastructure to enable business has not evolved the level of the Western world. So the cost of doing business is slightly higher. But that is the opportunity to develop that infrastructure. I found how the way you manage the company, the group out of the pandemic to be one of the most inspirational uh aspects of your leadership if I may. Um you actually cut shareholder dividends so that you could continue to offer affordable loans to your customers. As you like said, I've managed this group for 30 years and customers have always stuck with us. But this one unique opportunity. We asked ourselves, how do we ensure the businesses and our customers survive the global health pandemic? And uh we, we withdrew dividend for two years, saved. How did they react? By the way, I had a very good conversation with the shareholders because uh they, they, they were uh we were withdrawing $30 million to give it to the customers in form of accelerated um support. We supported 100 and 16 hospitals with P pe S all the hospitals that were dealing with pandemic cases. We supported them for three years with the P pe to the exclusion of government and sponsors. So that really made a huge difference. But for our customers, we gave them uh lonely payment breaks for up to four years, depending on how they are were affected. Eventually, most of them survived because of that and paid back the loan and now they are paying back the ruins. So one statistic I have read about micro finance is that female borrowers repay 100%. Yeah, equity has maybe the best loan repayment record in eastern central Africa. 54% of our customers are women. So it is it does that square with your statistics, the 100% repayment of female, it may not be 100%. It may be 9890. Is it higher than men? It's broadly higher than we've got 98%. We'll take that. So talk to us a little bit about the high volume smaller loan model. Why does that work for your market? Essentially, we looked at Africa and so affordability was a major challenge to finance inclusion. And we felt the only way we could really have a model that could accommodate majority of the population was addressing the issue of access affordability and quality and affordability. We felt there were two ways of dealing with it, uh ensure it's a high volume so you can take a low margin but also use technology to reduce the cost of operation to date. When we started 30 years ago, only 4% of Kenyans had bank accounts today, 90% of the population is included and 60 equity holds 60% of all the bank accounts. Because of that model, I want to talk about the climate challenge as well because it's affecting Africa deeply. Could you expand on that? Yeah, Africa, because of its location is significantly affected by climate change. Uh 60% of livelihoods in Africa are extracted from nature. So when nature is affected, then essentially that affect 40 to 50% of the GDP of African economies is built on nature capitals and again when they are, they are affected. But I think the most affected one are the small scale farmers and uh these are the biggest effect is because of climate change. We have seen significant droughts in France going together as we speak today. Uh Kenya and the Horn of Africa is going through an nino season that has really had devastating France, but that is following five seasons of drought. So you could imagine the lad is bare and then sudden uh uh this uh so essentially that has devastated effect on small scale farmers. And lastly is the issue of livelihoods at business when businesses are built on nature capital and then those capitals are destroyed. Then businesses are equally affected because of cost structure. We were talking backstage about the brain drain and for instance, in the Middle East, it's happened quite a bit, especially in the Levant where there are trained, professionals, engineers and doctors, they don't find the opportunities at home. They end up leaving. You said that's something that Africa is also suffering from. How do you prevent that? How do you attract back? The best brain brain brain has been a big challenge to the African continent because of more local opportunities in the developed world. So when you sponsor our people to the developed world to get education, they are reluctant to come back. But is when particularly areas like health doctors and nurses, you end up losing them particularly to Europe from where they have a shortage. So essentially what we are trying to do at the moment is to try and create opportunities in Africa and together with our partners, we have developed the African recovery and resilient plan. This is a plan to see the transformation of Africa through concerted efforts uh through partnerships and collaborations. Um basing uh the plan on what the competitive advantages of Africa and hopefully that will spur an opportunity for knowledge, for skill, for experience, for technology transfer, which will then be sorry to jump in. How do you attract back? I think there are 2 50% just about of, of for other equity. What we have done is to set aside um uh $7 billion to fund those in the diaspora who would like to come back home to set businesses. So we are facilitating them. We have um partnered with the development banks uh who are syndicating another $24 billion. And so essentially, once you take the financial burden from them, given the environment and the opportunity, then we are hoping that they will bring back their businesses and in the process, they will not only come back but they will come with the experience, the knowledge and the technological know how of helping to start off for uh manufacturing the African continent. And just correct me if I'm wrong. The statistic is 60% of those who you who scholarship, the sorry 60% of those benefited from the scholarship program return to. We have 1000 students we have sent to global universities and after 10 years, we only receive about 60% back. We don't mind them staying out for five years, 10 years to acquire the skills, the competences and global templates. But after that, we want to persuade them uh that they are of age and they have what it takes to come and spa uh development on the African continent. Remember Africa sells on low materials in of commodities. So we are now saying you have the skills to convert these uh uh low materials into finished product and create jobs for the millions of people. So if we give them capital, they have the entrepreneur skills and managerial skills. And uh the Reba is available. We think that is the way before we invite the international community, we invite the sons and daughters of Africa back because they have what the international community will be bringing back. All right, we've got to wrap it up. Thank you so much, Doctor James Mohan. Really a pleasure and an inspiration to be talking to you today. Thank you. Thank you for having me.