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Sunday, May 30, 2010
GOOD, TRANSPARENT CHARITY NEXT TO AID - THE RIGHT PORTFOLIO
Too often Western governments have focused on structuring aid in a colder, organized way. Result: the need for organizations that in the end were so structured and bureaucratic that the bulk of aid money ended either in the pockets of corrupted politicians or organizers in the donor countries and/or were used to pay bureaucrats in the aid organizations.
This was the tendency against which Dambisa Moyo was fighting when writing her book on Dead Aid. The Zambian economist indicated that what poor countries actually needed was 'an economy' instead of aid.
But obviously, it is never wrong to help. Transparent, smaller scale and/or leaner aid structures are not bad. One of the largest and most transparent private charities is theBill and Melinda Gates Foundation. The former Microsoft boss created a private charity with some USD 30-35 billion in assets and a focus on charity work in poor countries and in the US where it focuses on educational support to children from poor families.
In the attached video Melinda Gates talks about the Foundations work in Malawi, one of the poorest countries that has been relatively successful in fighting large child mortality. It becomes clear that a grassroots bottom-up approach can still be very meaningful. Philanthropists should therefore continue their work, next to a larger focus of governments on economic support.
Only this portfolio can bring improvements to poorer nations while at the same time fighting corruption. Bringing aid without the economic backbone is giving hope in a hopeless situation. Bringing economic structure without giving hope would create chances but a smaller amount of people that actually believe in that chance creating an opportunity for them selves.
One of the continents to benefit most from this new trend is Africa.
Translating things into your investment portfolio. Or: how to incorporate 'aid' and 'support' in your own portfolios.
The good thing is that we see on the one hand initiatives by institutional investors in the Western World and Sovereign Wealth Funds from the Middle East and Asia that indicate a shift in thinking as far as economic support is concerned. Economic interest in Africa has grown tremendously, not to the least because of its richness in commodities. On the other, we see that not too many Western governments and political parties dare to withdraw aid too much, not even in this period of cost cutting and budget reductions. The combination can only spur growing opportunities for Africa. However, the main pitfalls (corruption and political / country risk) remain and we do have to be careful and ensure that we invest in diversified portfolios. The number of good Africa Funds in the product offerings of investment management firms is still relatively small, but LMG Emerge is working on an online database product that will assist you with your choice.
Principal at LMG Emerge. LMG is an internationally operating independent financial consultancy firm headquartered in Zeist, The Netherlands.
Our clientele consists of institutional and high net-worth private investors (investment advice) and corporates (valuation advice, risk analyses).
Our areas of activity include: Asset Allocation, Selection of Financial Providers/Asset Managers and Emerging Markets advice.