Africa Needs Diaspora Capital More Than Foreign Capital

There is an important advantage to having diaspora, rather than foreign, investors in Africa. Unlike foreign investors, diaspora capital can be empathetic. You don’t have to be a central banker to know that foreign capital is fickle and can only be sympathetic, at its best. Empathy ties the condition of the observer with the subject, while sympathy keeps the observer detached from the subject. Simply put, empathy is putting oneself in another’s shoes. It is a shared existence where another’s pain or pleasure becomes one’s own. This subtle distinction between empathy and sympathy makes an immense difference in the world of investments. Often, when the business is detached from the community that hosts its affairs, it leads to abusive and exploitative ventures.

Foreign investors come to Africa purely focused on generating financial returns on their investments – otherwise known as “Alpha.”For many, their pursuit of alpha is the only reason they even looked at Africa. Some might sympathize with the African story but they aren’t necessarily prone to empathize with it.

The detached reality of a foreign investor is best epitomized in the fact that their children’s future is far from their place of profit. Their children don’t attend the African schools that are deprived of public resources due to the foreign investors “aggressive tax maneuvering” or corruption. Nor will the foreign investors’ children be deprived of a stable and prosperous homeland. Their children will only inherit the “alpha” from Africa, but be spared the pains of Africa.

Often a foreign investor’s bottom line is inversely correlated to the plight of the communities they do business in. Africa is simply a place for profit. In practice, foreign capital doesn’t mind propping up inept governments, so long as their return on investment is secured. Foreign capital might even have an interest in keeping inept governments in power, so they can get better deals. If it is not properly guided, foreign capital can be detrimental to a country’s strategic and development interests. This is why countries like the U.S and China established committees to review foreign direct investments into their country.

We want a return, but we won’t ignore entities where the return may not be the highest. Then we put on a second filter, assessing what the entity does for the benefit of mankind in Africa.

Diaspora investors should stand in stark contrast to their foreign counterparts. Their money, though searching for an equally aggressive return on investment can be checked by the plight of the communities they affect—their own. Apart from keeping the profits within the region, diaspora investors come with a healthier framework for investing. It’s best exemplified in the case of leading African American businessman Dick Parsons, former Chairman of Citigroup and Time Warner, who invests in Africa with the plight of it’s people in mind. “We want a return, but we won’t ignore entities where the return may not be the highest. Then we put on a second filter, assessing what the entity does for the benefit of mankind in Africa.” See When diaspora investors see African children, they see themselves and their children, if not their ancestors. Diaspora investors can be empathetic investors.They see the land and communities their children will inherit. Diaspora investors see “alpa” in Africa, but they also see home. It’s time Africa give greater importance to investors who see it as home rather than just a place for profit.