In August 2011 Sir Bob Geldof became the'frontman' for a new $750 million private equity fund for investment in Africa.
The fund has been named "8 MILES", the distance between Europe and Africa.
The fund aims to be one of the biggest private equity funds to be invested in Africa.
The venture will be commercial rather than charitable.
Backing has been secured from the African Development Bank and The International Finance Corporation.
Several other investors are set to sign up.
Of all the imaginable combinations possible, Sir Bob Geldof and Private Equity getting together would have been the very last on the list.
One of the issue that Anti-Crisis Economics has not yet delved into is the effects that wayward investment into Private Equity, Stock Markets, Property Portfolios, Hedge funds etc has affected the developing nations of the world. This is possibly because it is the most difficult to put into words. However Sir Bob Geldof has brought us to this subject sooner than intended.
The problem with investment of savings, with the world banking system as it is today is that, the banking system vacuums up all those savings together and invests that money in whatever is the quickest and easiest way to get a return.
Unfortunately, the quickest and easiest ways to get a return on invested money with the current system are ways that do not generate employment. In fact this is what many of the banks' favourite investments have in common. The costs are low because of the scarcity of any man power. This leaves plenty of 'profit' to pay their own inflated costs...
Using past experience as a guide, the banks involved in lending and the private equity management company will require paying as well as investors in pension funds, and the bank account holders with accounts with the banks.
Basically what I'm saying is, the finance will be too expensive. The people of Africa are going to have to pay all of these costs on top of the actual man power costs of the projects being funded.
Of course I may have mis-understood the intentions of this private equity company. It maybe has no intention of setting up new projects which will be costly in the way of employment. It maybe they intend to use investment to buy up existing business in Africa and put their own label on it as if it had been dreamt up by themselves. Cost cutting measures could then be made to improve profits. Then more leverage from the banks involved could allow for the buyout of an overseas competitor. Then the doors could just keep on opening. I'm not saying this will happen, but its the trade mark of private equity as it stands today.
Sir Bob Geldof may be the one to change the world, but for this to happen he will need to make the banks change the way they invest the savings of the ordinary people of the world before we can begin to bring back the optimism for Africa that Sir Bob Geldof generated in the eighties.
The fund has been named "8 MILES", the distance between Europe and Africa.
The fund aims to be one of the biggest private equity funds to be invested in Africa.
The venture will be commercial rather than charitable.
Backing has been secured from the African Development Bank and The International Finance Corporation.
Several other investors are set to sign up.
Of all the imaginable combinations possible, Sir Bob Geldof and Private Equity getting together would have been the very last on the list.
One of the issue that Anti-Crisis Economics has not yet delved into is the effects that wayward investment into Private Equity, Stock Markets, Property Portfolios, Hedge funds etc has affected the developing nations of the world. This is possibly because it is the most difficult to put into words. However Sir Bob Geldof has brought us to this subject sooner than intended.
The problem with investment of savings, with the world banking system as it is today is that, the banking system vacuums up all those savings together and invests that money in whatever is the quickest and easiest way to get a return.
Unfortunately, the quickest and easiest ways to get a return on invested money with the current system are ways that do not generate employment. In fact this is what many of the banks' favourite investments have in common. The costs are low because of the scarcity of any man power. This leaves plenty of 'profit' to pay their own inflated costs...
Using past experience as a guide, the banks involved in lending and the private equity management company will require paying as well as investors in pension funds, and the bank account holders with accounts with the banks.
Basically what I'm saying is, the finance will be too expensive. The people of Africa are going to have to pay all of these costs on top of the actual man power costs of the projects being funded.
Of course I may have mis-understood the intentions of this private equity company. It maybe has no intention of setting up new projects which will be costly in the way of employment. It maybe they intend to use investment to buy up existing business in Africa and put their own label on it as if it had been dreamt up by themselves. Cost cutting measures could then be made to improve profits. Then more leverage from the banks involved could allow for the buyout of an overseas competitor. Then the doors could just keep on opening. I'm not saying this will happen, but its the trade mark of private equity as it stands today.
Sir Bob Geldof may be the one to change the world, but for this to happen he will need to make the banks change the way they invest the savings of the ordinary people of the world before we can begin to bring back the optimism for Africa that Sir Bob Geldof generated in the eighties.
Imagine this enterprise does make a real gain. Who will be the ultimate beneficiary? The people, the banks? No! It will be whoever own the land there and collects the rents. This has been the case since Babylon and even the most noble hearted miss it each time. True, I expect that land will be mortgaged, so the owner will be owner in name only. And the mortgage interest the owner pays will handed to the banks, as de facto RENT. Look across history to see this repeated in all times and also places. Affirm this, and then see your own complicity even right at home. You too may be an unwitting rent seeker or aspire to it. Root cause.
ReplyDeleteBanks will certainly benefit....They encourage this business because private equity companies can almost guarantee repayments of any debt that is provided by banks......,by putting the risk onto the pension funds which are the private equity firm's investors. Private equity firms generally buy up established businesses with bank mortgages. Unlike the picture painted by the owners of these companies and the financial press who are biased towards the financial industry. Yes, land will also be mortgaged along with the businesses that are bought up....Risking jobs. Owners of land will benefit too if they lease it though if they are African, will be tempted to sell up, meaning Africa is likely to increasingly be taken over by oversees landlords, which is no good for African people.
ReplyDelete......The businesses invested in will suffer, not necessarily from a profit point of view, but from their ability to provide a service.....Private equity companies will reduce the size of the potential market because they raise the costs of the business in the way that a landlord adds to the costs of running a home. The financial press hide the truth on this. Though this private equity firm may invest in Africa, Its unlikely Africans will benefit simply because they will not be able to afford the products or services what ever they may be.
The point you make at the end seems to suggest that we would all like to profit from being a landlord of land or property....or "landlord" of a business (Which is my slightly twisted way of seeing private equity firms..)...
...That would be fine if it didn't increase the costs of having a roof over your head, or the price of the goods you need to survive. Private equity companies along with the banks are increasing the costs of every thing. Any one with basic common sense will calculate that this can only slow down progress (And reverse progress when you account for a growing population, thus a growing demand for homes, goods and services)
These firms do us all damage, but because of their affiliation with the finance industry, they get protection. They get away with the proverbial....See what will be the effect of private equity companies on the British NHS......It's not just finance here...It's going to cost thousands of lives. If the government knows this, which I am sure it does it wouldn't be far off from man slaughter....
.....These private equity firms are not about taking just a few pounds from us all......It's a whole lot more than that. And we, the British go to war all over the world apparently to prevent loss of life and suffering yet our government allows these businesses to inflict suffering on people all over the world which ultimately has the same result.....But all this is hidden by main stream media. For how long?