Move over BRICs. Africa is currently one of the fastest developing regions in the world, with six of the world’s top ten fastest growing economies hailing from the continent. As economies reach GDP growth rates of 6 and 7 percent, the continent finds itself in need of an influx of foreign investment, venture capital, and smart public-private partnerships to build the infrastructure needed to sustain such growth.
Lagos, Nigeria is a case in point. Quickly becoming one of the largest cities in Africa, Lagos is an urban hub plagued by traffic congestion and a country undergoing rapid urbanization.
Over multiple interview sessions, wrangling with phone connections between the United States and Nigeria, the Diplomatic Courier spoke with Danladi Verheijen, the Managing Director and Co-Founder of Africa-based venture capital firm Verod Capital. Here’s what he had to say about transportation, development, and Nigeria’s future.
[DC:] Why did you choose to start Verod Capital?
[DV:] I started the firm with a previous business colleague of mine, and we started it simply because of what we felt was an abundance of opportunity for investment in Africa, opportunities for employment, and to add value to our country.
[DC:] What is your vision for Nigeria especially and for Africa as a whole? And how do you see using Verod Capital to achieve this?
[DV:] Verod Capital is set up to be the premiere investment vehicle in this region, as well as an investment vehicle that is really on the ground, has a lot of local knowledge, and learns from society in terms of investment opportunity and integrity. Over the past couple of years, we have proven our investment abilities. We have had a number of successful years across the industry, and we have truly differentiated ourselves as a group that is able to find interesting companies.
Nigeria has a population of 160 million people—so one in six Africans are from Nigeria, as are one in seven black people walking around on Earth. It is a huge economy that has been growing at 6 to 7 percent per annum. So it is a country with a lot of influence in Africa, and a country with a lot of promise and potential for the future. Unfortunately, we suffered through a couple decades of military rule and not the best government. But that is changing now. So for me and other young Nigerians, it is a much brighter future for Nigeria.
At the same time, changes that are occurring across Nigeria are also occurring across the African continent. It is hard to generalize, but there is a great deal of socio-economic growth across the continent. This is seen in how Africa has six of the ten fastest growing economies right now—it is driving global income. Countries have a much better debt-to-income ratio than other nations; governments are investing more in infrastructure.
You can see that the future bodes quite well for Africa, and Nigerians are really playing a leading role in developing that trend.
I quit my job to work in Nigeria. I joined up with this idea fully believing that we can be part of this change. Nigeria has had a democratically elected government for only two years—one full cycle of being a democracy after being ruled by a military junta. We are part of the energy of change. Ten years later, we are at Verod doing exactly what I am passionate about—finding great companies or great ideas, funding them, finding the right management, and growing these companies into large enterprises. We are increasing employment, and adding value to the local economy.
[DC:] The Guardian ran an article in 2011 about Lagos’ Eko Rail project announcing your company’s plan to invest in the light rail system. Are there any updates on the development of that?
[DV:] The project is ongoing. As you know, infrastructure projects are very long-term projects. The government is currently building the first of seven railroads across the city of Lagos. Lagos is projected to become the third largest city in the world by 2015, and of the top twenty largest cities, Lagos and Karachi are the only two cities without some kind of rail system. It is a infrastructure project that is required—if you have been in Lagos, traffic congestion is everywhere.
So the government is setting up an ambitious project through a public-private alliance, and the first line to open is the Blue Line. This public-private partnership sets it up so that the government builds the tracks and the infrastructure, and the private sector brings in the trains and manages the concessions for different projects along the system. We have set up a highly credible international consortium, and today we are the leaders for this alliance.
We are going through the process now of negotiating concessions with the government and basically, they intend to build five more tracks into services in a couple of years. It is very exciting. It is a groundbreaking project—the largest public-private partnership in the state of Lagos.
[DC:] Do you see more public-private partnerships like this as the key to further development in Africa?
[DV:] It is really the best of both worlds. The government does what it does best—providing infrastructure and regulating different businesses. The private sector brings a much more profit-oriented mindset, and focuses on making businesses run properly and efficiently.
Governments have not always been the best manager of businesses, but now we are seeing a trend of governments and the private sector coming together. We think that will solve problems a lot better. Now not only are these enterprises being run by the private sector more efficient—and therefore, provide better service to the public—because they are in private hands, they attract a lot more foreign investment. In Eko Rail alone, we have had interest in over $1 billion dollars of investment. It is astounding.
[DC:] How do you see mobile technologies changing socio-economic relationships on the ground in Africa?
[DV:] This comes back to the lack of infrastructure. One infrastructure project that has really been lacking is telephone lines. Now they are putting in copper lines and trying to have a couple different organizations compete. Nigeria got its first mobile phone network installed in 2001, when the government privatized that sector. We went from having almost 600,000 landline phones to over 100 million mobile phones today.
The amount of money that has been spent on communications, on ICT, has just been unbelievable. I believe we have been the third fastest growing mobile phone network after China and India for several years. It just goes to show the adoption rates are something that no one ever expected.
Now mobile phones are not just for the rich. It is actually growing small business. A repairman can leave a number behind and get a call when something needs to be fixed, rather than spending the time to drop by occasionally. A farmer can call ahead and negotiate a price with a customer, rather than having to travel three days first. The efficiency this presents is fantastic.
Mobile technologies are making trade and communications across the continent far easier than it was in the past. The best way to highlight that is through a few examples. For instance, mobile payments—if you go across Africa, there are very few places where a credit card can be used. With the exception of South Africa, there are no credit cards, no Paypal accounts, no electronic payment mechanisms. Mobile banks are now giving people the ability to pay for bills and services, and collect or transfer money between individuals. This is a huge leap forward for facilitating commerce and trade across the continent.
This is the same around the world, it is just unfortunately that development in Africa is several decades behind. With these technologies, we can catch up.
[DC:] What do you believe must happen in Nigeria, both in the short term and the long term, for development to continue there?
[DV:] I think it is happening! I am one of those who sees the glass full all the time, I am a general optimist. There are problems in Lagos, in Nigeria, in Africa—just like there are problems everywhere else. It is very easy to dwell on those, to only pick on the negatives, but not give credit to the positive developments.
On the positive side, there is significantly more development now. We have a government that is a lot more attuned to the needs of the people, and is more focused on building infrastructure and delivering social services than before. Anyone who has been to Lagos in the past ten years will let you know that the city is cleaner, the traffic in the north is better, there is more power and light in cities. There are a lot of positives.
Now, it is not heaven—we will always shake our head at how much money is being spent on certain things and complain that it could be used more efficiently. But I do not think Lagos is very different in those problems from any other country in the world. And the benefit of a democracy now is that we can ask those questions publicly. Fifteen years ago we could not. We were under a military dictatorship, and if you asked those kinds of questions, you might spend a couple nights in prison. So things have changed, and they all bode well for the future.
If you look at Africa macro-economics, six of the ten fastest growing economies in terms of GDP growth are from Africa. Compare many nations globally that are struggling with debt-to-GDP ratios against African countries. I believe the U.S. is at an 80 percent ratio, while many African countries are at 40 percent, and several others are far below that. The continent has several countries that are in excellent positions fiscally, and this is mostly thanks to several World Bank deals from the last decade that relieved the debt of many African countries. They are fiscally strong; they have cash coming in from commodities; and these governments have more cash to spend on these projects we have been discussing—infrastructure, social services, education. There are many changes in education for women and individual rights, and this all bodes well for a much more prosperous continent. It is a positive spot in the world and an evolving story.
This article was originally published in the Diplomatic Courier’s July/August 2013 print edition.