The Prosperity Paradox
Starving children on street corners. Slums without adequate clean water and sanitation. Hopeless prospects for employment amid a growing youth population. Most of us are moved by the painful signs of poverty we see in poor countries all around the world. According to the World Bank, more than 750 million people still live in extreme poverty, surviving on less than $1.90 a day. We all want to help. But what might seem to be the most obvious solution to these problems—directly assisting poor countries by investing to fix these visible signs of poverty—has not been as successful as many of us would like. You only have to look at the billions of dollars that have been channeled to these problems over the years with relatively slow progress to conclude that something is not quite right. With these efforts, we may be temporarily easing poverty for some—but we’re not moving the needle enough. What if we considered this problem through a different lens? What if, instead of trying to fix the visible signs of poverty, we focused on creating lasting prosperity? This may require a counterintuitive approach, but one that will cause you to see opportunities where you might least expect them. 
In the late 1990s, when Mo Ibrahim first conceived of setting up a mobile phone company in Africa, people said he was, well, nuts. “Everybody said Africa is a basket case,” he recalls now. “It’s a dangerous place, it’s full of dictators, it’s full of crazy people. . . . who are all corrupt.” In fact, people laughed when he shared his idea.
Ibrahim, the former technical director for British Telecom, who was running his own successful consulting firm, planned to develop, from scratch, a mobile communications network in sub-Saharan Africa—where most people had never used a phone, let alone owned one. The African continent, which ranges from the bazaars of Morocco to the big business complexes of Johannesburg, is home to fifty-four countries. The total population of more than one billion is spread over 11.7 million square miles—more than three times the size of the United States. The vast majority of this territory had no existing infrastructure for old landline telephones, let alone the cell towers necessary for a mobile phone company to function. At the time, mobile phones were seen as an expensive toy for the rich, a luxury that the poor could not afford, and, more important, did not need. When many, including Ibrahim’s clients and former colleagues at the major telecommunication companies, assessed the opportunity in Africa, they noted the level of poverty, lack of infrastructure, fragility of governments, and even lack of access to water, health care, and education. They saw pervasive and palpable poverty permeating every aspect of society, not fertile territory for new business.
But Ibrahim, to his credit, saw things differently. Instead of seeing just poverty, he saw opportunity. “If you live far away from the village where your mother lives and you want to talk to her, you might have to make a seven-day journey,” Ibrahim recalls now. “If you could just pick up a device and speak to her instantly, what would be the value of that? How much money would you save? How much time?” Notice that Ibrahim did not say How will millions of Africans, for whom three meals a day is often a luxury, afford a mobile phone? or How can you justify the investments in infrastructure for a market that does not exist? He focused on the struggle to accomplish something important for which there were few good solutions. For Ibrahim, struggle represented enormous potential.
The obstacles were enormous. Creating the necessary cellular network infrastructure was a mind-boggling undertaking—done without relying on support from local governments or from major banks. Raising capital was so difficult that even after he’d proved his business model and reached predictable cash flow in the millions of dollars, banks still refused to lend him money. Ibrahim had to fund Celtel entirely with equity financing, “a first in the telecommunications industry for a company of our size and scale,” he explains. But that, and the many other challenges he faced, didn’t deter him. Where there was no power, he provided his own power; where there were no logistics, he developed his own; where there was no education or health care, he provided training and health care for his staff; and where there were no roads, he either built makeshift roads or used helicopters to move equipment around. Ibrahim was fueled by the vision he had of the immense value of millions of Africans no longer having to struggle to keep in touch with one another. Eventually, he succeeded.
In just six years, Celtel built operations in thirteen African countries—including Uganda, Malawi, the two Congos, Gabon, and Sierra Leone—and gained 5.2 million customers. At the openings of many of Ibrahim’s stores, it wasn’t uncommon to see eager customers line up by the hundreds. Ibrahim’s Celtel was so successful that by 2004, revenues had reached $614 million and net profits were $147 million. In 2005, when Ibrahim decided to sell the company, he did so for a handsome $3.4 billion. In such a short time, Ibrahim’s Celtel unlocked billions of dollars’ worth of value from some of the poorest countries in the world.
But Celtel was just the tip of the iceberg. Today, Africa is home to a sophisticated mobile telecommunications industry, with numerous mobile phone companies (including Globacom, Maroc Telecom, Safaricom, MTN, Vodacom, Telkom, and others) providing more than 965 million mobile phone lines. These companies have not only raised billions of dollars in debt and equity financing, but by 2020, the industry is forecast to support 4.5 million jobs, provide $20.5 billion in taxes, and add more than $214 billion of value to African economies.2 Mobile phones have also unlocked value in other industries, such as financial technology, where companies now use phone usage records as a proxy for credit-worthiness, extending credit to millions of credit-worthy people who historically could not receive it.
It may seem obvious now that mobile phones are ubiquitous all over the world—and all over Africa—but remember that twenty years ago, Ibrahim saw what others did not.
