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Brain power key to wealth creation
Publish Date: Apr 21, 2008
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ReNaissance Financial Holdings Group is a financial services company. Its subsidiary, ReNaissance Capital, operates in Uganda. The group’s chief executive officer, Patterson Timba, talked to Sylvia Juuko about using intellectual capacity to grow wealth in Africa

QUESTION: What makes Uganda a viable investment opportunity?
ANSWER: We believe we are an African business and any part of Africa is an investment destination. ReNaissance is trying to build its business across sub-Saharan Africa. We have a South African hub in Zimbabwe and we are creating an East African hub in Uganda.

Uganda offered more growth prospects for us. We found it a lot more welcoming from an investment perspective. It’s also got an excellent human resources pool. The education system is almost similar to Zimbabwe where both tend to produce trainable graduates. The absence of certain sophistication within the financial sector also attracted us here to provide a platform where we could complement efforts by institutions like the Capital Markets Authority (CMA).

Does Uganda or Africa in general have what it takes to generate capital?
Yes and no. Capital already exists within the region. What is absent is knowledge. There is a huge amount of cash in Africa that moves in the informal system. Ways could be found to harness that kind of money into a coordinated investment environment.

Over the years, the CMA has done a lot. If we are to regenerate wealth in Africa, we need to address the issue of intellectual capacity. What needs to take place now is complementary activities/education by companies regulated by CMA. As ReNaissance Capital, we need to include model public awareness campaigns. From a government perspective, we need to introduce financial literacy in our schools not only in Uganda but in every sub-Saharan African country. It’s only in Africa where you meet an MBA graduate who doesn't know what a bond or share is. Those of us with the knowledge carry the burden of disseminating it. That is one way of ensuring long-term sustainability of our businesses because we are growing our market. Once we embrace financial literacy, we can harness resources through the capital market, which can finance infrastructure development.

Don’t we also need incentives to grow capital markets in the region?
There are two schools of thought. Some are proponents of incentives. I am not a strong proponent of incentives for the capital market. Capital markets provide efficient and appropriately priced access to any shares. But to grow capital markets, I would argue more for education. There are instances where countries have given massive incentives with 10 years of tax holidays. However, when the tax holidays expired, the companies packed up and moved on. Incentives by themselves will not complete the job. If we provide education and a knowledge base, what more incentives do you need? I would pay more attention to the issue of exposure more than incentives. If a guy is ignorant of capital markets, they would be ignorant of incentives.

How about high-yield seeking international capital flows, aren’t they a boon for African economies?
Capital is flowing to emerging markets but some countries are attracting more volumes than others. However, capital follows where there is basic infrastructure. International capital alone will not develop your core infrastructure. You have to take the lead as a country to put in place an environment to attract capital. High yields are a function of supply and demand. Over time, those yields will become like any other yields in the world. We need to encourage African businesses to invest in Africa. We need to bring African businesspeople to Uganda. The Ugandans in our African operations also need to get exposure and then return to implement the skills and knowledge. This will change the mindset that as Africans, we can do things for ourselves. While this is not an overnight issue, we should make a conscious decision now. You may not see the progress in the next two or three years because it’s about changing a whole cultural mindset of the people, but I believe we will get there. ReNaissance Capital also writes a lot of research notes to bring exposure. If such articles prompt someone to call and ask questions, then you’ll know that if you convince one person, they will convince another 10. That’s why it’s important to broadcast information.

How have you managed to run and sustain your business in Zimbabwe?
It is good to attract western investment into Africa but it’s more critical to have African investments. This is because the way African investors assess risk in an African country is different from how the whites do it. Because Africans live there, they understand the culture and therefore what is perceived as high risk is probably medium risk to them. Because of the local knowledge, you are in a better position to manage that risk.

Yes Zimbabwe has problems but we will get out of those problems and when we do, we need institutions to take the country forward. It also is an issue of what you think capital is. We place higher value on intellectual capital than monetary capital. Monetary capital pursues human capital. Your risk management systems have to be up to scratch and your decision making processes quicker. Zimbabwean companies do not have the luxury of having three or four board meetings or spending a month before making decisions. In our environment, decisions are mostly instant because in that inflationary environment if you delay an investment decision by two days, it’s probably doubled in Zimbabwe dollars. The situation has sharpened our analytical skills.

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