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Article III: Wextrust Capital and Social Ventures: The Good, the Bad and the Ugly by Brian Ray Dinning, Social Venture Lawyer

Article 3:  Social Ventures:  Wextrust Capital – The Good, the Bad and the Ugly

By:  Brian Ray Dinning, JD, LLM and Social Venture Lawyer

July 1, 2012

 

My aunt and uncle were Christian missionaries in Africa and my family performed missions work in South Africa for over 35 years.  Brought up in a dynamic faith-based household, I was always taught that we must care for orphans, widows and the poor – and that everyone is born with a purpose in life.  As unlikely as it might sound, by the age of 10, I knew I wanted to be a lawyer, and I also knew that one of my purposes in life was to help people in Africa. It wasn’t until much later in life that I understood how I might combine those two ambitions.

 

I’ve been a practicing lawyer for 22 years and, up until recently, I’ve had a spotless record, full of accomplishments and commendations that have brought me and my family a great deal of pride.  I have had the privilege of traveling to Africa over 60 times, and in 1992 through 1994, I helped my professor write a legal textbook on how nonprofit organizations can do for-profit social ventures, which is the foundation of the modern day social venture or social entrepreneurship project.  This work resulted in the legal treatise entitled, “Michael I. Sanders, Partnerships and Joint Ventures Involving Tax Exempt Organizations” (Wiley & Sons 1994).

 

I started doing work for clients in Africa in 1994 and have been working on social venture projects in Africa ever since then.  These were missions-type projects where we would help build a church or community center, help with clean water, renewable energy, organic food and more.  In this work, I realized that the local people of Africa had dreams to become something more, to be connected to the world that existed beyond the boundaries they were confronted by – to also ensure that their children had a future.

 

So, I believe that I was blessed with the talents, ability and vision to look for innovative ways to help the local people in Africa to create jobs, income and a future.  This was – plainly stated – to look at their natural resources (land, water, wildlife, mineral rights etc.) and help them locate the tools (people, money and education) to help them maximize those resources – by building a tourism lodge, starting a micro business or starting a minerals project.  This way, the local people could achieve sustainability – meaning they could feed their families, afford to send their children to school and have clean water.  More importantly, they could provide a future for their children.

 

In 2003 and 2004, Dr. William Brown, a Fulbright Scholar and Ph.D Professor, brought an innovative film crew to work with Earth Conservancy to produce two award winning HIV/AIDS education films with local actors in the local African language for audiences in Kenya and Tanzania. This was done in conjunction with the United States Department of Defense. The films focused on the true-life stories of soccer stars who helped promote the message of education, testing and awareness of HIV/AIDS.  Traveling by jeep, from village to village throughout Kenya and Tanzania, these award-winning films were touchingly, often projected on bedsheets that had been sewn together by those eager to help.  The films won awards at the Houston WorldFest flim festival and, more importantly, the films achieved the goal of education young people about HIV/AIDS.

 

The local people we were trying to reach in Africa were intelligent and kind, but also very isolated from the more sophisticated abstractions we’re accustomed to. At one point when the film was being shown to a Maasai community in Tanzania, there was a scene where a lion appeared on screen. The lion is the mortal enemy of the Maasai people who traditionally raise cattle. The crowd screamed in terror and one Maasai warrior jumped up and threw his spear through the screen in order to save his people from the lion, simultaneously comic and courageous.  Earth Conservancy stills works in Tanzania and I am working on the establishment of proposed social ventures with Dr. Steven Kiruswa, Ph.D – a Maasai warrior himself.

 

In 2002, my law firm was sponsoring The Shakespeare Theatre season of productions in Washington, DC.  I was asked to represent the firm at a gala banquet for the Shakespeare Theatre in Washington, DC.  There I dined with Justice Ruth Bader Ginsberg, Justice Rehnquist and the newly-appointed Head of Africa at USAID, Constance Newman, now Assistant Secretary of State for African Affairs.  Ms. Newman was fascinated by the social venture model of partnering for-profit and non-profit companies together to promote community-based projects in Africa.  Ms. Newman asked that I meet with her staff at USAID and provide power point presentations and keep her updated with any progress.  This was exciting, important people were interested in our work in Africa and I felt like I was making progress.

 

In 2003 and 2004, I was practicing law and working as a consultant for social ventures in Africa.  Working in this capacity, helping the local people of Africa in stewarding their natural resources and talents for job creation is immensely fulfilling, indeed, a life-altering vocation.  My job as a consultant for social ventures in Africa was similar to the work I did at law firms but I would be helping destitute people in Africa by helping to locate community projects, drafting business plans, helping find social venture partners, and assembling management teams to help implement projects.  It was a big undertaking, but I was happy to take it on, and even now, I’m still happy I took it on.

 

Over the years, with Earth Conservancy, I met and worked with a hard-working group of people in South Africa who had three projects:  a mining project, a farming project and a beautiful nature reserve.  All three projects were structured as social ventures to provide jobs and a minimum of 10% of the income to the local community according to the business plans.  All three social venture projects had great potential.  The projects were organized under the social venture name of Sunpoints Southern Africa. The challenge was to find a financial partner who had similar values and charitable inclinations toward the local community who would be interested in funding these social venture projects. However, this was in the early stages of the social venture movement so venture capitalists and bankers did not necessarily have the best interests, or even any of the interests of Africans in mind – they would be looking purely at the profit-making potential of these social ventures.

 

In 2003, these three projects were presented to a venture capital firm based in New York and Colorado. After a short power point presentation, the venture capital firm agreed to fund the three projects for a total of $3.5 million.  With this funding commitment and an excellent team of people working on the three social venture projects, the projects were started in January, 2004.  Starting the projects meant that the South African social venture team had to sign contracts to purchase and develop the projects based upon the funding commitment, conduct due diligence, expend funds to acquire rights such as bonding of the mining project or a downpayment on the game reserve real estate, create business plans and start the operations and management of the projects.  This was an exciting time as these projects were designed to create hundreds of jobs and 10% of the potential profits of these three projects were designated for the local people.

 

Because circumstances generally change, by March, 2004, the venture capital firm told Sunpoints Southern Africa and the social venture project partners that they were delayed in their funding commitment, which was potentially disasterous because funds had already been committed and contracts signed.  Sunpoints then began to search for a replacement financial partner and in April, 2004, Sunpoints and the social venture partners were introduced by a lawyer to Joe Shereshevsky, COO of Wextrust Capital.

 

Wextrust Capital was, at that time, a company that claimed to have approximately $1 billion of real estate and assets and it purportedly owned and/or managed large office buildings around the United States.  After discussing the funding predicament, Joe Shereshevsky stated that Wextrust was interested in becoming the funding partner for the social venture projects after a due diligence trip to see the projects firsthand.  After visiting the projects and meeting the South African social venture partners, Wextrust Capital committed to providing bridging capital to fulfill the failed funding commitment from the first venture capital firm.  At that time, on or about June, 2004, I was asked to work in the office of Wextrust Capital to help oversee these three initial social venture projects as the liaison between Wextrust Capital and the social venture partners in Africa.  The social venture partners and I were happy because the projects were saved and could now proceed with a new funding partner.

 

Unfortunately, our celebration was short-lived.  By the end of 2004, I had witnessed enough of Wextrust Capital to know that they were not the appropriate financial partner for the social ventures and I had to separate myself completely from them.  When I told the Board of Directors of Wextrust Capital that I was not going to work with them anymore, Joe Shereshevsky was furious and he began to bad-mouth me to my business contacts and the social venture partners in Africa.  I asked Joe Shereshevsky if Wextrust Capital was going to honor their commitment to the local community and Joe Shereshevsky stated, “No, we are the major shareholder and we do not agree with giving 10% to the local community.”  Devastated, I said, “the 10% to the local communities is in all of the written business plans, financial projections and was discussed in all of our meetings.”  I was told, “Wextrust has millions of dollars in the bank and you can try and sue us but you will lose.”   Because of the significant financial, tax, legal and social transgressions I witnessed by Wextrust Capital, I told all of the South African social venture partners that it was better to give up everything including all ownership rights and projects to Wextrust Capital because you do not want to be in business with them now or in the future.

 

In March, 2005, after resigning from Wextrust Capital at the end of 2004, I was asked to fly to Chicago to meet with the Board of Directors.  At that meeting, they offered me a seat on the Board of Directors, up to 10% ownership in Wextrust Capital and increased compensation and benefits.  I immediately refused. I sent my feelings on this debacle to Joe Shereshevsky via email. [1]   Although I very much wanted to share my reasoning with the world, I was obligated not to disclose this information, even though it hurt me dearly not do so, through attorney-client confidentiality rules.

 

After the Wextrust Capital scandal erupted, I asked the Virginia State Bar if I could disclose the information so that the investors could possibly recoup some of their investment.  I was told that I could only disclose the information if requested pursuant to a court order.  I would have gladly given the information to the government but I was never asked to testify or provide any information or documents.  Most of the social venture partners in South Africa including myself and many other innocent parties lost everything in those three projects including our time, money and ownership.  The local community was also robbed of their benefits of the three projects.

.

It was an immensely difficult and often acrimonious time, and after being ridiculed by Joe Shereshevsky, losing three social ventures that were near to my heart, and in which I had staked  my time, reputation, effort and money, my parting words to Joe Shereshevsky were: “I expect to see you in five years on trial for $100M of fraud.”  Joe Shereshevsky laughed at me and insulted my capacity as a lawyer.  He also likened the South African social venture partners to “stupid monkeys” and the local community as “useless and deserving of their station in life.” It could hardly have been an uglier situation.  Later, I would learn that thousands of other people would lose up to $255 million to the fraud and malicious actions of Joe Shereshevsky and Wextrust Capital.

 

It is well documented that the substantial fraud of Wextrust Capital occurred from mid-2005 to 2010 or so – thankfully after my departure.  In reflecting on that time, I wish that someone would have asked me about those times as my testimony along with the good social venture partners in South Africa may have been able to help in the Wextrust Capital investigation.  Furthermore, I may have been able to shed some light on where or with whom some of the assets were held as a group of us hired a private investigator to follow up on the fraud committed by Wextrust Capital against us in April, 2008.  However, I was never asked to provide any information and I could not offer the information under the guidance of The Virginia State Bar and attorney client confidentiality rules.

 

In order for social ventures to work properly, the financial partners must have some social motivation for helping the local communities wherein they work.  Furthermore, social venture policies, procedures and goals for helping the local people should be agreed upon and documented by all social venture parties.  Social responsibility is not only good business but it is an absolute must if we are to help the 400 million poverty-stricken people of Africa who live on less than $1.25 per day.

 

In my experience, the social venture partners and the local community are the “good,” Wextrust Capital and Joe Shereshevsky were the “bad” and the terrible acts of fraud, deceit and thievery done to the general public by Wextrust Capital are the “ugly.”  I wish I could say that this was the only bad experience I had with financial partners for social ventures in Africa but that is, unfortunately, not the end of the story.

 

Article 4 is entitled, “Cocaine, Ecstasy and Swingers, Oh My:  Social Ventures in Africa.”

As a footnote, the name “Pure Africa” was created by the first venture capital firm and me.  It was taken by Joe Shereshevsky and used without our permission.  The “Pure Africa” entities that were established by me and others in 2006 and beyond have no affiliation or relation in any way to Joe Shereshe


[1] See email dated March 27, 2005 from me to Joe Shereshevsky, COO, Wextrust Capital detailed my basic reasons for separating myself from them, which is attached hereto at the link below.

Article 3 Wextrust Departure Reasons

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Article II: Social Ventures in Africa: What Can Go Wrong? By Brian Ray Dinning, JD, LLM

Article 2:  Social Ventures in Africa:  What can go Wrong?

By:  Brian Ray Dinning, JD, LLM and Social Venture Lawyer

June 29, 2012

Sometimes committing your life to a worthy cause like social ventures comes with many challenges and obstacles such as:  differing world views, different goals and objectives (especially from banks and investors who have financial goals rather than the founders and social venture partners who generally have charitable and social goals as well as financial goals), the unpredictable nature of people and a limitless host of other complications and factors.  Business and social ventures are hard work – let alone business and social ventures in Africa, where resources, personnel and supplies can be scarce and corruption, violence and theft are rampant.

 

The US Government published that over 50% of all businesses started in the US fail within the first five years.[1]  New Venture Lab – Equipping Christian Entrepreneurs, quotes interesting statistics from Harvard Business School noting that the failure rate of businesses can be as high as 95% (depending on how you define failure).  Their website, quoting a Harvard Business professor, provides:

 

“Most companies fail. It’s an unsettling fact for bright-eyed entrepreneurs, but old news to start-up veterans. 

 

But here’s the good news: Experienced entrepreneurs know that running a company that eventually fails can actually help a career, but only if the executives are willing to view failure as a potential for improvement.

 

The statistics are disheartening no matter how an entrepreneur defines failure. If failure means liquidating all assets, with investors losing most or all the money they put into the company, then the failure rate for start-ups is 30 to 40 percent, according to Shikhar Ghosh, a senior lecturer at Harvard Business School who has held top executive positions at some eight technology-based start-ups. If failure refers to failing to see the projected return on investment, then the failure rate is 70 to 80 percent. And if failure is defined as declaring a projection and then falling short of meeting it, then the failure rate is a whopping 90 to 95 percent.

 

“Very few companies achieve their initial projections,” says Ghosh. “Failure is the norm.”[2]

 

 

While this is the reality for businesses in the United States, a University of South Africa study indicates that the rate of small business failure in South Africa can be as high as 80%.[3]  MIT and other business schools note that the failure rate of social ventures will likely follow that of other for-profit businesses.

 

The challenge is to continue working to improve the lives of the 400 million people living on less than $1.25 per day in Africa regardless of past failures or challenges.  As Nelson Mandela states, “The greatest glory in living lies not in never falling, but in rising every time we fall.”  Quoting Vinod Khosla, billionaire venture capitalist and co-founder of Sun Microsystems: “There needs to be more experiments in building sustainable businesses going after the market for the poor. It has to be done in a sustainable way. There is not enough money to be given away in the world to make the poor well off.”[4] Researchers on social ventures at Duke note that: “We live in an age in which the boundaries between the government, nonprofit, and business sectors are blurring. This blurring results from a search for more innovative, cost-effective, and sustainable ways to address social problems and deliver socially important goods, such as basic education and health care.”[5]

 

Furthermore, Dees and Anderson realize that social venture projects and social entrepreneurs focus on the social impact of social venture projects and business-minded people focus on the financial returns thereby creating complexity.  “It is extremely hard to make strategic decisions about resource allocation or practical cost/quality tradeoffs when the social impact of these decisions is nearly impossible to measure in an efficient, timely, and reliable fashion.  It can become all too easy to focus too heavily on the more familiar, tangible and straightforward economic measures of success.”[6]

 

Businesses including social ventures fail for many reasons.  A New York Times columnist notes the top 10 reasons for small business failure:

 

“1. The math just doesn’t work. There is not enough demand for the product or service at a price that will produce a profit for the company.

 

2. Owners who cannot get out of their own way. They may be stubborn, risk averse, conflict averse — meaning they need to be liked by everyone (even employees and vendors who can’t do their jobs). They may be perfectionist, greedy, self-righteous, paranoid, indignant or insecure. You get the idea. Sometimes, you can even tell these owners the problem, and they will recognize that you are right — but continue to make the same mistakes over and over.

 

3. Out-of-control growth. This one might be the saddest of all reasons for failure — a successful business that is ruined by over-expansion. This would include moving into markets that are not as profitable, experiencing growing pains that damage the business, or borrowing too much money in an attempt to keep growth at a particular rate. Sometimes less is more.

 

4. Poor accounting. You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time. Why? For one thing, it is a common — and disastrous — misconception that an outside accounting firm hired primarily to do the taxes will keep watch over the business. In reality, that is the job of the chief financial officer, one of the many hats an entrepreneur has to wear until a real one is hired.

 

5. Lack of a cash cushion. If we have learned anything from this recession (I know it’s “over” but my customers don’t seem to have gotten the memo), it’s that business is cyclical and that bad things can and will happen over time — the loss of an important customer or critical employee, the arrival of a new competitor, the filing of a lawsuit. These things can all stress the finances of a company. If that company is already out of cash (and borrowing potential), it may not be able to recover.

 

6. Operational mediocrity. I have never met a business owner who described his or her operation as mediocre. But we can’t all be above average. Repeat and referral business is critical for most businesses, as is some degree of marketing (depending on the business).

 

7. Operational inefficiencies. Paying too much for rent, labor, and materials. Now more than ever, the lean companies are at an advantage. Not having the tenacity or stomach to negotiate terms that are reflective of today’s economy may leave a company uncompetitive.

 

8. Dysfunctional management. Lack of focus, vision, planning, standards and everything else that goes into good management. Throw fighting partners or unhappy relatives into the mix and you have a disaster.

 

9. The lack of a succession plan. We’re talking nepotism, power struggles, significant players being replaced by people who are in over their heads — all reasons many family businesses do not make it to the next generation.

 

10. A declining market. Book stores, music stores, printing businesses and many others are dealing with changes in technology, consumer demand, and competition from huge companies with more buying power and advertising dollars.

 

In life, you may have forgiving friends and relatives, but entrepreneurship is rarely forgiving. Eventually, everything shows up in the soup. If people don’t like the soup, employees stop working for you, and customers stop doing business with you.  And that is why businesses fail.”[7]

 

 

Aside from the ten reasons noted above, in my experience with social ventures in Africa, the ventures did not work out as planned because of differences in goals and objectives between the partners, tension between the profit-making side and the social aspect of helping people and outlandish, intentional and unprofessional (and sometimes criminal) behavior and actions of others which interfered with, delayed or handicapped the social ventures.

 

Of all the reasons for small business and social venture failure noted above, it would be the outlandish, intentional and unprofessional (and sometimes criminal) behavior and actions of others, which caused our social ventures in Africa to either fail, be delayed or become handicapped.  In order to fully illustrate this point and to tell my side of the story, I will publish this seven part series complete with documents, video, photos, letters and email.

 

In addition to documents, video, photos, letters and email, there are also witnesses to most or all of this outlandish behavior including from the perpetrators themselves.  While some of these people are looking forward to a day in court against me, they will have to take the witness stand (under penalties of perjury) and answer for their outlandish behavior and actions and, hopefully, they will understand how their actions harmed the social venture projects, other investors and donors and the local people of Africa.

 

 

Article 3 is entitled:  Social Ventures in Africa:  Wextrust Capital – The Good, the Bad and the Ugly.

 

 

 

 

 


[1] Small Business Administration

[3] Mabaso, NR, University of South Africa (March 2008).

[4] MIT Entrepreneurship Review: From the Lab to the Land: Social Entrepreneurs Explore Appropriate Technology Dissemination (Nov. 26, 2010).

[5] Dees and Anderson, Duke Social Entrepreneurship: “For Profit Social Ventures,” (2003).

[6] Id.

[7] Goltz, J., “Top 10 Reasons Small Businesses Fail,” New York Times (Jan. 5, 2011).

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Forward to Articles: A New Business Model in a Blossoming Continent by Brian Ray Dinning, JD, Social Venture Lawyer

Social Entrepreneurship in Africa: A New Business Model in a Blossoming Continent

 By:  Brian Ray Dinning, JD, LLM and Social Venture Lawyer

 June 21, 2012

“I’m encouraging young people to become social business entrepreneurs and contribute to the world, rather than just making money. Making money is no fun. Contributing to and changing the world is a lot more fun.”
      

                             – Muhammad Yunus, Founder of the Grameen Bank

 

Social entrepreneurship is a partnership – it combines both social objectives such as feeding the poor, creating jobs, promoting education along with traditional business objectives of profit-making. Traditionally, an investor– like a Mega-Corporation—thinks of a project the same way a predator thinks of its prey. The goal is to extract as much capital as possible with little regard for the well being of the environment in which that capital lives. The new social venture model, recognizing that all boats rise with the tide, hopes to profit while making a “satisfied customer” of the environment. In plain speak, it means if we’re going to make money on business projects in Africa, then we must help the local people to create jobs, receive skills training and partner with the local Africans so that when and if we make profits from helping them develop their natural resources then we all share in those profits.  This is the first principle of social entrepreneurship and the first principle by which I guide my business ventures.

 

I have been privileged to work with social ventures in Africa since 1994 and have visited Africa as early as 1983 to visit my uncle and his family, who served as missionaries in Africa for 35 years. Following in the example my family set for me, I’ve been on three mission trips to Africa. These have been astonishing experiences that have left me grateful and happy to be able to help others. In my life, I’ve been blessed to help feed hundreds of children in Africa and to express my love and devotion to a beautiful people. By getting involved, even taking little steps, we can all touch people, helping to change the course of lives forever.  That is the essence of social ventures and social entrepreneurship – creating sustainability for the business, the employees and the local people – hopefully making a profit while doing good.

 

As you will see in my subsequent Series of Seven Articles, sometimes committing your life to a worthy cause like social ventures comes with many challenges such as: differing world views, oppositional goals and objectives (especially from banks and investors), the unpredictable nature of people, and a limitless host of other complications and factors.  Face it – business is hard – let alone social ventures in Africa – with at least half of all businesses in the United States failing within five years (a Harvard professor notes that up to 66% of all businesses fail from differing viewpoints between people in the start-up process).

 

However, helping those in need in Africa or elsewhere around the world is a cause worth fighting for and an opportunity for social ventures and socially-motivated organizations such as The Bill and Melinda Gates Foundation, Oprah Winfrey or The Grameen Bank to make a tremendous positive impact.  We can all help by getting involved in helping others in your own home, in your neighborhood or city or any other place in the world where people need a helping hand.

 

Africa, once known as “The Dark Continent” is a booming economic giant with abundant natural resources, growing economies and a rapidly expanding middle class. Not surprisingly, the business world is noticing. As Forbes states, “African economies easily rank among the most resilient in the world. In the middle of the 2009 global economic recession, Africa was the only region apart from Asia that grew positively at about 2%.”  And it will get even better in 2012. Africa is favorably positioned to become one of the fastest growing regions in the world, and according to the International Monetary Fund, economic growth across the entire continent of Africa will be an amazing 6% in 2012.

 

Africa remains, however, largely misunderstood.  The media and news networks generally focus their stories on the negative news:  the dictators, conflicts, pirates, health issues and more. This negative bias by the media has led to ignorance on the part of the people of the developed nations of the world to the vast and burgeoning investment climate in much of Africa.  Of course, as noted above, the mega-corporations are all jumping on the bandwagon long before the rest of the world catches up.  This is how the mega-corporations seize their market share and maintain dominance, through recognizing the emerging economies, market opportunities and consumer spending trends before the rest of the of this world, and pouncing.  Currently, much of their attention is focused on the emerging markets of Africa.

 

Africa also has 400 million people living on less than $1.25 per day.  The mega-corporations cannot and should not reap the benefits of the abundant natural resources of Africa without first addressing the heart-felt needs of the local people for nourishing food, clean water, an opportunity for a job and the basic necessities of life. It is this basic principle that separates the social venture and socially-responsible companies from the mega-corporations.  Thankfully, social entrepreneurship is an economic phenomenon that allows the global innovator to recognize an investment opportunity or market trend and capitalize on it utilizing a unique and solidifying arsenal of tools such as social venture capital, new business structures, growing social awareness, social media, non-profit support and grassroots entrepreneurship.  Examining the social entrepreneurship model as it relates to the role of the social entrepreneur in Africa – as an emerging trend in an emerging continent – and discussing the value proposition of the idea of partnering with – or supporting – social entrepreneurs in Africa is the goal of my research and writing.

 

Social venturers or social entrepreneurs see the “greater good” in working on projects that have both a financial and social business purposes.  As stated by some social venture pioneers, social ventures are revolutionary and are here to stay.

 

“Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.”


- Bill Drayton of Ashoka Foundation

 

“Social entrepreneurs have existed throughout history. St. Francis of Assisi, the founder of the Franciscan Order, would qualify as a social entrepreneur — having built multiple organizations that advanced pattern changes in his “field.” Similarly, Florence Nightingale created the first professional school for nurses and established standards for hygiene and hospital care that have shaped norms worldwide. What is different today is that social entrepreneurship is developing into a mainstream vocation, not only in the United States, Canada, and Europe, but increasingly in Asia, Africa, and Latin America. In fact, the rise of social entrepreneurship represents the leading edge of a remarkable development that has occurred across the world over the past three decades: the emergence of millions of new citizen organizations.”


- David Bornstein – How to Change the World: Social Entrepreneurs and the Power of New Ideas

 

“We need to reverse three centuries of walling the for-profit and non-profit sectors off from one another. When you think for-profit and non-profit, you most often think of entities with either zero social return or zero return on capital and zero social return. Clearly, there’s some opportunity in the spectrum between those extremes. What’s missing is the for-profit finance industry coming in to that area. Look at the enormous diversity of the for-profit financial industry as opposed to monolithic nature of the non-profit world; it’s quite astonishing.”


 -Bill Drayton – Ashoka Foundation 

 

Article I in the Series is entitled:  Introduction to my Social Venture Work in Africa.

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Africa must create more jobs to sustain exceptional growth in 2012-2013 and beyond by Ray Dinning, JD, LLM (tax)

See Article By PATRICK MCGROARTY from Wall Street Journal Online

DAR ES SALAAM, Tanzania—Countries in Africa will need to create jobs more rapidly to sustain strong economic growth, as the number of young people in the region rises, a report by leading international organizations said Monday.

The number of Africans between the ages of 15 and 24 will double by 2045, according to the African Economic Outlook released by the African Development Bank, the OECD Development Centre, the United Nations Economic Commission for Africa and the U.N. Development Programme. At the moment, even leading African economies are showing few signs that they are prepared to absorb those youths into the workforce, the report said.

According to the International Labor Organization, the unemployment rate in many African countries tops 20%. In South Africa, the continent’s biggest economy, the rate is 25.2%. And it is worse among young people—60% of the unemployed workforce across Africa is under the age of 24.

AFEMPLOY

“The continent is experiencing jobless growth,” African Development Bank chief economist Mthuli Ncube said in a release accompanying the report. “That is an unacceptable reality on a continent with such an impressive pool of youth, talent and creativity.”

The report forecast that Africa’s economy will grow 4.5% this year and 4.8% in 2013. But much of that growth will be in commodity-rich countries that have seen booming business for their crude oil, like Nigeria and Equatorial Guinea, or coal and natural gas deposits, like Mozambique. The results have yet to trickle down toward broad material improvement for increasingly young populations, which is threatening social cohesion and political stability in countries that aren’t tackling their unemployment challenges, the report said.

To correct the situation, the report recommended that countries encourage rapid private-sector growth, particularly in the informal economy and agricultural jobs that still dominate many isolated African countries.

Improving education is also crucial, the report said, as is expanding countries’ manufacturing and service sectors to wean them off unsustainable proceeds from commodity exports.

“Export diversification beyond raw-material and private-sector development are important to mitigate the continent’s susceptibility to external shocks, but that takes time,” said UNECA’s director of economic development, Emmanuel Nnadozie.

There are signs that Africa is already moving toward diversification, with telecommunications, trade and service sectors growing strongly off an extremely small base, the report said.

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WSJ and IMF Reports 5.5% Growth in Sub-Saharan Africa for 2012 by Ray Dinning, JD, LLM

 

See Wall Street Journal Online for May 13, 2012:

ADDIS ABABA, Ethiopia —Countries in sub-Saharan Africa are expected to register economic growth of at least 5.5% in 2012, compared with 5% last year, driven by new resource exploitation and recovery from drought, the International Monetary Fund said Monday.

In a report, the IMF said that the region’s continued strong performance has been propelled by favorable international commodity prices and increased export diversification toward emerging Asian markets, but it warned that “clear downside risks” remain due to continued global uncertainties.

“Natural resource exports contribute importantly to…budgetary revenues in a large number of sub-Saharan African economies, and demand for these products remains reasonably robust, most notably for oil,” the lender stated. The 44-nation region includes seven oil exporters, defined as countries where net oil exports make up 30% or more of total exports.

But the rate of growth in South Africa and Nigeria, the region’s two largest economies, is expected to slow. In South Africa, growth is set to be held back to less than 3% due to weaker exports to developed markets. In Nigeria, Africa’s largest oil producer, growth is expected to remain largely static at around 7% despite fiscal consolidation.

The IMF also said that growth in middle income economies is expected to remain static or lower than 2011, as these nations tend to track more closely the global economic slowdown. Eleven of the nations included in the survey are defined as middle income, including Botswana, Namibia, Ghana, Senegal, and Zambia.

Countries in East Africa and the Horn of Africa are recovering from the worst drought in 60 years which hit the region late 2010 and early 2011, hurting their agriculture and threatening millions of livelihoods, according to aid agencies. Drought also hit in the Sahel region in West Africa.

Ivory Coast, West Africa’s second-largest economy after Nigeria, was also hit by post-election civil conflict leading to a 5% reduction in its gross domestic product last year, IMF said.

Countries that rely significantly on exports of non-renewable natural resources have grown faster than economies less well-endowed with resources, but have also experienced significantly higher volatility in exports, revenue, and GDP growth, the IMF said.

Countries in sub-Saharan Africa export metals such as copper, cobalt, tin, gold, diamonds and aluminium, as well as crude oil and agricultural commodities like coffee, cotton, tea and cereals.

 

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African Economic Growth Strong for 2012 through 2013 according to Reuters by Ray Dinning, social venture lawyer

(Reuters) – The African Development Bank said on Monday it forecast the continent’s economy would grow 4.5 percent this year and 4.8 percent in 2013, but warned the festering euro zone crisis may hurt demand for African exports.

Africa’s economy grew 3.4 percent in 2011, with North Africa’s economic output expanding 0.5 percent and sub-Saharan Africa growing by more than 5 percent.

“The economic outlook for Africa remains optimistic. Natural resource-rich economies are expected to do better than more mature emerging economies,” AfDB said in its annual African Economic Outlook.

(Reporting by Duncan Miriri; Editing by George Obulutsa)

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Forbes lists “20 most powerful men in Africa for 2012” by Ray Dinning, tax lawyer

The 20 Most Powerful People In African Business 2012

They are the African business leaders, empire builders, moguls and high-flying chief executives of multinational corporations who possess continental clout and wield the most widespread influence in Africa’s business and economic circles.

These are the corporate titans and leaders who set the African economic agenda. Their voices are much listened to within Africa’s business and political circles, and through their resolutions and actions, they shape the economic future of the continent.

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