Should you follow Bob Diamond into Africa?
The former banker’s new African venture is not without risk, but he could be riding a rising tide
BOB DIAMOND’S whirlwind return to the City – he plans to float a cash shell, possibly before Christmas, to buy up banking assets in Africa – tells us a good deal about his state of mind, and the direction that hot investment cash looks set to take next year.
The former Barclays boss, 62, is reportedly still “hurt” by his unceremonious ejection from the bank following the Libor-rigging affair. But he has spent the intervening 18 months productively, setting up Atlas Merchant Ventures, which he likes to describe as an old-style merchant bank.
The plan is to strike a series of collaborative deals with partners that focus on Africa, where Diamond’s family foundation is already active. The first of these, Atlas Mara, is with the Uganda-based billionaire Ashish Thakkar.
Diamond may feel he has everything to prove in London, but his choice of market for Atlas Mara’s debut will surprise some nonetheless. Although widely credited with transforming Barclays Capital from an insignificant institution to a global investment bank, he hardly enjoys the best reputation in Britain. Indeed, the papers still like to trot out former Business Secretary Lord Mandelson’s description of him as “the unacceptable face of banking”.
What Diamond’s return to the City really reflects, however, is one of the Square Mile’s great trump cards over Wall Street: its rapidly solidifying status as the financial “capital” of the Bric countries – and, increasingly, of the emerging African “lion” economies too. If Diamond wants to build a banking empire in Africa, he needs to factor in London.
Reports suggest the venture has quickly secured backing from big investors: around £150m is already in place. That may have something to do with his astute choice of partner.
Still only 32, Thakkar enjoys something like rock-star status in Africa, where he is celebrated as the continent’s only young hotshot to make the Fortune’s influential “40 under 40” list.
The British-born entrepreneur has had a singular life. He emigrated with his parents to Rwanda as a child, survived the genocide, dropped out of school, and was living out of a suitcase selling computers by the age of 15. From such small beginnings he has built a giant conglomerate, Mara Group, which now has technology, manufacturing, agricultural and property operations in 19 African countries.
The need to recruit Thakkar speaks volumes for the way business still gets done in Africa. An adviser to the presidents of both Tanzania and Uganda, he is supremely well-connected with government and local business. “Business at the end of the day is about people and relationships,” he told Forbes in a recent interview. “We are very good at developing both.”
A source close to the fund-raising suggests that Atlas Mara’s first move will be “to take control of an African bank and grow around it”. Diamond recently met senior officials in Nigeria, fuelling suggestions he may begin his African odyssey there. But Thakkar’s connections in East Africa – not to mention his transnational empire-building credentials – will certainly come in handy.
It’s easy to see why Diamond thinks the sub-Saharan banking sector has potential: only a quarter of the region’s one billion population holds a formal bank account and fewer than 5 per cent of Africans have a credit card. What little action there is remains dominated by a few regional groups (Standard Bank, Ecobank and Nigeria’s United Bank for Africa).
Given the upward trajectory of Africa’s growing middle-classes, there’s clearly room for a thrusting newcomer.
So should you rush to grab a slice of the action when Atlas Mara makes its debut?
The fundamental investment story seems sound enough and – as the architect of Barclays Capital – Diamond has proven his ability to grow a banking business rapidly. But the model of using a cash shell model to buy up assets in emerging markets is controversial.
There have been some successes, but the spectre of Bumi Plc – the scandal-ridden Indonesian coal-mining giant created from a cash shell launched by Nat Rothschild in 2010 – looms large. Having raised $1 billion in a London IPO, investors took a hiding when it turned out the business wasn’t quite the gem it was cracked up to be, and Rothschild fell out spectacularly with his partners.
Diamond must hope his own venture more closely mirrors Rothschild’s second vehicle, Vallares, which has performed better with its bet in the Kurdistan oil sector.
There are sizeable risks, then, in following Diamond as he begins his putative comeback. But given the scale of the underlying opportunity in Africa – and the burning desire of a stubbornly proud man to reclaim his good name – this looks like one venture worth watching. ·