Can Greed Save Africa?

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Stocks in resource-rich nations such as Botswana, Nigeria, Zambia, and many others are rising to record highs. In recent months, investment bank UBS (UBS) and others have published thick reports on Africa's investing opportunities, hailing as a major virtue the fact that markets there don't move in tandem with those of the rest of the world.

Demand for African stocks is so robust, in fact, that it has created a bottleneck. Because these markets are tiny and illiquid—Zambia's total market value is just $2 billion—foreigners can't pile in all at once. Those who don't want to wait on the sidelines must find their own opportunities away from the stock exchanges. "The private equity skill set is really in demand here," says Gibian. His firm has invested more than $400 million in sub-Saharan Africa this year, vs. $325 million in the previous six years combined.

Of course, these investors may well be courting disaster. International monitors consistently place the region in the lowest tier of their rankings for business friendliness. Some governments, such as that of Zimbabwe President Robert Mugabe, expropriate assets outright, while others bleed businesses dry over time. If those problems don't do lasting damage to an investment portfolio, a commodities crash certainly would. A mass exodus of investors would snuff out Africa's flickering progress in a hurry—not only its GDP growth but also the burgeoning informal economy that isn't counted in official statistics: backyard and roadside businesses that have suddenly arisen to tap the continent's growing income.

Many African leaders have come to regard private investment as the only route to sustainable economic development. "Investors put their money down for what they will get as a profit," says John Agyekum Kufuor, Ghana's President, in his palace in the capital city of Accra: "It's business." Botswana President Festus Gontebanye Mogae even appealed directly to private equity and hedge fund managers during a September trip to New York. Over time, these leaders hope, the benefits accruing from private investment will give locals more of a vested interest in the permanence of historically volatile institutions—governments, currencies, banks—and put sub-Saharan Africa on a path to self-sufficiency. But for that to happen, the region must first prove that it can be hospitable to cold-eyed investors.

Masoud Alikhani is no moral crusader; he thinks the "We Are the World" movement of the 1980s, which sought donations to end African hunger, "made beggars of whole nations." The burly 66-year-old is among the new wave of investors at the tenuous nexus of venture capital and agribusiness in Africa. Five months ago he pitched a large hedge fund in New York on the merits of ESV Biofuels, as his company is called. The fund's partners agreed to take a tour of the facility in January. "We are capitalists and opportunists," says Alikhani. "We are doing this to make money. That's the only way to help."

Mozambique, one of the poorest and most neglected places in the world, seems frozen in time. After wresting independence from Portugal in 1975, the nation was ravaged by a civil war in which more than 1 million of its citizens were killed, maimed, or displaced. An uneasy peace arrived only in 1992. Since then the country has been on the tumultuous path to economic liberalization, alternating between double-digit growth and recession. More than three-quarters of its people remain desperately poor. Yet as Alikhani watches children pick through dumpsters outside Maputo's airport, he sees only upside. "Mozambique," he says, "is booming."

With a degree in agroeconomics, Alikhani seems most comfortable when ticking off facts about crop yields and other arcana. He earned his Wall Street bona fides during stints as a trader at Prudential and Lehman Brothers (LEH) in the 1980s.