Today is Facebook's IPO, and Rich Lowry is not impressed:
Facebook is the world’s foremost purveyor of information you shouldn’t care about. Facebook founder Mark Zuckerberg is to uselessness what Henry Ford was to the automobile. He has mastered it on an industrial scale and is riding it to a vast fortune. At more than $100 billion, the valuation of Facebook equals the annual GDP of Morocco or Vietnam, countries that don’t top anyone’s list of economic powerhouses, but do actually produce some things of value.
Can 900 million people, the roughly one-eighth of the planet that uses Facebook, be wrong? If they are passing around photos of pets in party costumes, telling us whether they are having a good or bad hair day, and playing the farming-simulation game FarmVille, the answer is, “Why, yes they can!”
So where should you invest your money instead? Walter Lamberson proposes Africa:
Facebook will invest some of its windfall to create growth for its shareholders. But will the investment be productive? Facebook is being forced public by SEC regulations and the desire of some early investors to cash out; founder Mark Zuckerberg has made clear his company doesn’t need the cash. As such, financing growth for Facebook probably means investing in some combination of server racks in Oregon, lobbyists in Washington, and ergonomic keyboards, massage tables, and sushi in the California headquarters.
That contrasts greatly with the landscape in east Africa. As a financial adviser and consultant to small and medium-sized companies in the region, I meet daily with companies that can offer investors attractive returns—and provide market-based solutions to problems in sectors from energy to horticulture. We’re currently supporting a network of health care providers who will offer ordinary Kenyans low-cost, high-quality outpatient care. Most of the other companies we work with have revenue models that are simpler and, perhaps, lower risk than Facebook’s. Yet they can’t raise capital.
So why isn’t the world investing in Africa? Part of the answer is that it is. The surprise of the last decade is how much opportunity there has been to invest in Africa, and how well Africa has weathered the recent financial storm. With growth rates around 5 percent annually, Kenya’s economy is expanding significantly faster than Western economies. Last year, private equity investors raised more than $600 million to invest in East Africa’s growth.
On the other hand, we are not past the sense that charity is the best way to send money to Africa. Aid-oriented grants and micro-loans are the world’s conventional offer to African entrepreneurs, and they are literally not taking care of business. The “middle market” in many emerging economies generates most new jobs, yet these small and mid-size enterprises are too big for the lauded microfinance revolution, and too small for traditional banks chasing real estate projects. The companies I work with don’t need $300—they need $300,000.
Another obstacle are continual fears about “risk”— a word often applied to earnest African businesses, but not to JP Morgan. A man I know has built a brand manufacturing lotions and cosmetics from local aloe vera plants, but because he’s based in the much-maligned Democratic Republic of Congo, it’s all but impossible for him to break through to investors and grow. Even companies in east Africa’s comparatively advanced tech scene have a hard time raising smaller amounts of capital. But they deserve the chance to be productive—remember, it only took $18,000 in capital to start Facebook.