Aid or Technology?

Interesting debate at a recent technology conference held near Arusha in Tanzania. It’s always good to hear positive stories, such as the tale Alieu Conteh, who built Vodacom Congo from the ground up during a period of intense civil strife in the DRC. It’s also good to hear some of the echoes of arguments of Bill Easterly:

“What man has ever become rich by holding out a begging bowl?” asked Andrew Mwenda, an Ugandan journalist and social worker, now a research fellow at Stanford in California.

Mr. Mwenda argued that $500 billion in international aid over 50 years had achieved nothing in Africa and that the persistence of African poverty could be explained, in part, by aid. Charity, he said, had “distorted the incentive structure” and had persuaded the brightest Africans to work for corrupt governments. He called upon African entrepreneurs to build African businesses and the American investors in TED’s audience to finance them.

Mr Conteh’s story is moving and nearly heroic:

In 1997, Mr. Conteh recalled in an interview, he heard Laurent D. Kabila, then the country’s president, deliver a speech in which he called upon his countrymen to rebuild Congo’s infrastructure after the 30-year dictatorship of Mobutu Sese Seko. Mr. Conteh, who had no experience in telecommunications, said he was inspired. He decided to build the nation’s first GSM (Global System for Mobile communications) digital network….

Mr. Conteh said he went, cap in hand, to the minister of communications to ask for the country’s first GSM license. In January 1998 he got it — but he first had to pay the government a license fee of $100,000. Over the years, and with little explanation, he said, the government, which is often terribly short of money, increased the license fee, first to $400,000, then $2 million.

Since, at first, no Western investors had any faith in the country’s mobile market, Mr. Conteh said he wrote the first checks to the government. And he paid $1.5 million to Nortel, the telecommunications equipment provider, to help create his network. To help raise the money, he had to sell his coffee trucks. In February 1999, Mr. Conteh introduced the Congo Wireless Network, with just 3,000 subscribers.

Throughout the early days of his company, Mr. Conteh faced challenges unknown to Western businesses. Once, after equipment providers declined to send engineers to Congo during a dangerous time in the country’s unending civil strife, he encouraged the citizens of Kinshasa, the capital, to collect scrap metal and weld them into a cellphone tower.

In 2001, he sold 51 percent of the company to Vodacom, South Africa’s largest mobile service provider, to get the capital to expand the mobile network to millions of Congelese.

By the middle of 2006, Vodacom Congo had more than 1.5 million subscribers, according to Vodacom’s annual report. Today, Mr. Conteh says, the company he founded has more than three million subscribers who have spent, on average, around $50 for a handset and who prepay about $2 for every five minutes of talk time. He says a recent offer for his shares valued Vodacom Congo at more than $1.5 billion. (He refused to name the interested party.)

Nonetheless, Mr. Conteh (whom I found charming, modest, hugely amused by his own travails — and very shrewd) turned down the offer. “My goal was never to become the richest man in Congo,” he told me. “I would like to create the country’s first stock market. Then I would like to float 20 percent of my share in a public offering, so that the people will see the company as theirs.”

I don’t know what the answer is for Africa. Asking entrepreneurs to take risks such as Mr Conteh took is probably not a viable strategy. But 50 years of history have shown us a lot of things that don’t work — there’s no reason to repeat the mistakes of the past.

Thanks, Caitlin, for the reference.