What does Gateway Partners do?
We connect private capital to investment opportunities that we believe are exceptionally attractive across Africa, the Middle East and southeast Asia. We believe these markets are fundamentally attractive for a few reason. One is demographics, with two-thirds of the population under the age of 35, or in Africa’s case, three quarters. We’re also rapidly urbanizing. Across Africa, the Middle East and southeast Asia, almost a billion-and-a-half people will get urbanized over the next 20 to 30 years. If you add the young, growing population with the burgeoning urbanization, you have an increase in consumption and a growth in manufacturing services. Then, if you look at the global economy over the last 20 years, the biggest growth engine has been the trade and investment floors between and across emerging markets.
How important is private equity for Africa?
I think it’s important for a variety of reasons. Africa needs to invest a lot more. It’s estimated that you’ve got to spend another $50 billion a year in building Africa’s infrastructure. If you take the growing consumer, there is a huge opportunity there. Agriculture is also a huge opportunity. So, all of that requires investment. The big challenge that Africa has is its savings rate is very low. The savings rate to GDP ratio across Africa is 15%. In contrast, China has close to 45%. Also the size of the domestic financial sector, once you get outside of South Africa, is very small relative to the investment requirements of Africa.
I’ll give you an example, if you take the entire Nigerian banking system, the combined market capitalization of the top 10 banks, is less than a quarter of the market capitalization of the single largest bank in Indonesia… It means Africa needs foreign capital. Foreign capital takes the form of private equity, foreign markets, bond markets or bank lending. Africa probably needs all of them.
Also, private equity is useful in bringing in potentially an upgradation in management skills, technical skills and technology.
In terms of investment, how does Africa compare to other parts of the world you have worked in , like Asia, the Middle East and Europe?
In a word: attractive. But, it’s not without its challenges and risks. The way I like to look at Africa is this is China 1990. This is India 2000. This is Vietnam 2005. If you were to look at Africa as the great market for people wanting to buy their first microwave, their first refrigerator, their first car, their first apartment, there is a huge underlying market here.
Also, Africa has had the second highest GDP growth of any continent over the last 10 or 20 years. The levels of governance and the macroeconomic fundamentals of Africa are generally improving. In 20 years, Africa will have more people of a working age than either India or China. If you take agriculture, 60% of the world’s uncultivated arable land is in Africa. If you look across the spectrum, there is a huge need. But, it is not without risk because capital markets are not deep and liquid. The quality of governance in some of these companies is not really high. A lot of the entrepreneurs are third generation entrepreneurs. They need to be lifted up and almost mentored.
What do you look for in a company before making an investment?
As Gateway Fund, we look for companies that provide goods and services that cater to the basic needs of humanity in our markets. We don’t like to invest in companies to do caviar. We don’t like to invest in companies that are a bet on the future and no cash flows. We invest in very basic companies – what we like to call Maslow’s hierarchy of needs bottom of the pyramid – food, shelter, clothing, that kind of stuff. If you look at the stuff we’ve invested in: biscuits and buns, convenience stores, cement, optical fiber network, or data which today is basic.
We also look for companies that have good management that we can trust and work with. And we look where we can add value in terms of taking them into new geographies, new markets and new clients.
Aliko Dangote is on Gateway’s advisory board. How beneficial is it having the richest man in Africa part of your team?
It’s huge. He provides insight into how Africa thinks, how Africa behaves, what works in Africa, what doesn’t work in Africa. You can do a 100-year MBA program at any business school and you won’t get that. Then, also, when we look at transactions and understanding whether that makes sense, providing the due diligence on the deal, that helps us as well. Also having somebody like Aliko to help our investee companies go into other markets helps. But I would just hasten to add, Aliko is the star of Africa, but we are also fortunate to have similar high quality advisory board members.
‘Putting Money To Good Work’
Formerly with the British Army, Kenya-based 4G Capital CEO Wayne Hennessy-Barrett speaks about investing in artificial intelligence and fintech in Africa.
CEO of a financial technology credit provider. How did that happen?
I moved into tech and financial inclusion after a career in the military, followed by a period of consulting. As an Infantry Officer in the British Army, I saw extreme suffering and poverty in Bosnia, Macedonia, Kosovo, Iraq, Afghanistan and elsewhere.
In all these places, there were highly capable people who had lost their businesses, homes and, often, entire societies.
They didn’t need more war. What they needed was investment and the opportunity to grow their communities in peace.
This affected me deeply and was, ultimately, the reason I left a military career to try to create positive value.
I wanted to directly address the problems that caused these conflicts: exclusion, injustice, ignorance, fear and a lack of opportunity.
What makes your credit products unique for Africa’s informal market sector?
We design, execute and iterate around our clients’ needs. Credit alone can be highly risky for all parties; we work hard to right-size our loans, and optimize the term and price-point to really boost our customers’ business.
If we can’t provide the right solution, then it’s important to be honest and wait until there is a fit, rather than just lend and risk that business getting into trouble.
What is the investment climate in Africa and how are you invested in the continent?
There are great returns to be had if businesses solve customers’ problems on terms that work for them. I am 100% invested in our operations in Africa. But the African investment climate has its own particular characteristics: business models and execution teams have to be resilient, innovative and robust, and deals will often be smaller than in other markets. Investors need to be as savvy and adaptive to opportunities as entrepreneurs.
Your most regrettable financial decision and lessons learned?
I’ve been extremely fortunate up until now. I took a position on gold in late 2012, believing that quantitative easing in the west would lead to strong prices in physical assets. This wasn’t the case, and 2013 began with some huge exits on the gold market which crashed prices for some time. The lesson is that markets run on sentiment as well as logic, and you have to respect this.
What do you spend your money on mostly?
I believe in investing in quality, whether in a business capacity, or in great life experiences. I love traveling with my family to amazing places and having really special times together.
I’m afraid I’m also a total geek – I love tech and gadgets, but as long as they’re useful and don’t gather dust, I can justify it!
How do you stay financially disciplined?
I didn’t have a lot of money growing up. I was raised by a single mum who worked incredibly hard to try to give her kids the best chance in life. It’s a very common experience echoed by about 80% of our customers. I reflect daily on how lucky I am. I believe in making money, putting it to good work, and enjoying the journey. Living within your means is pretty important to achieving this.
What is the most you would invest in Artificial Intelligence (AI) and why?
AI is both fascinating and immeasurably important. We all need to be active investors here to make sure it goes in the right direction. We have it in our power to design and utilize AI for the betterment of humanity, but these must be designed responsibly from the outset. 4G Capital is continuously evolving its AI to protect the individual and the values that build healthy societies. Our 6% NPL (non-performing loan) rate is under half the continental average in Africa, and a strong indicator of the overall financial health of our client base.
What are your investment decisions for the future?
Any investment is based on a better return for the future. We, therefore, cannot and must not invest in anything which threatens that future. I am very keen on the greentech/cleantech sectors as well as financial inclusion. Keeping a balanced portfolio between hard assets, longer term plays and cash is always wise.
How Cryptocurrency Scams Work
Millions of cryptocurrency investors have been scammed out of massive sums of real money. In 2018, losses from cryptocurrency-related crimes amounted to US$1.7 billion. The criminals use both old-fashioned and new-technology tactics to swindle their marks in schemes based on digital currencies exchanged through online databases called blockchains.
From researching blockchain, cryptocurrency and cybercrime, I can see that some cryptocurrency fraudsters rely on tried-and-true Ponzi schemes that use income from new participants to pay out returns to earlier investors.
Others use highly automatized and sophisticated processes, including automated software that interacts with Telegram, an internet-based instant-messaging system popular among people interested in cryptocurrencies. Even when a cryptocurrency plan is legitimate, fraudsters can still manipulate its price in the marketplace.
An even more basic question arises, though: How are unsuspecting investors attracted to cryptocurrency frauds in the first place?
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Some cryptocurrency fraudsters appeal to people’s greed, promising big returns. For example, an unknown group of entrepreneurs runs the scam bot iCenter, which is a Ponzi scheme for Bitcoin and Litecoin. It doesn’t provide information on investment strategies, but somehow promises investors 1.2% daily returns.
The iCenter scheme operates through a group chat on Telegram. It starts with a small group of scammers who are in on the racket. They get a referral code that they share with others, in blogs and on social media, hoping to get them to join the chat. Once there, the newcomers see encouraging and exciting messages from the original scammers. Some newcomers decide to invest, at which point they are assigned an individual bitcoin wallet, into which they can deposit bitcoins. They agree to wait some period of time – 99 or 120 days – to receive a significant return.
During that time, the newcomers often use social media to share their own referral codes with friends and contacts, bringing more people into the group chat and into the investment scheme. There’s no actual investment of the funds in any legitimate business. Instead, when new people join, the person who recruited them gets a percentage of the new funds, and the cycle continues, paying out to earlier participants from each round of newer investors.
Some members work especially hard to bring in new funds, posting tutorial videos and pictures of themselves holding large amounts of money as enticements to join the scam.
Lies and more lies
Some scammers go for straight-up deception. The founders of scam cryptocurrency OneCoin defrauded investors of $3.8 billion by convincing people their nonexistent cryptocurrency was real.
Other scams are based on impressing potential victims with jargon or claims of specialized knowledge. The Global Trading scammers claimed they took advantage of price differences on various cryptocurrency exchanges to profit from what is called arbitrage – simply buying cheaply and selling at higher prices. Really they just took investors’ money.
Global Trading used a bot on Telegram, too – investors could send a balance inquiry message and get a response with false information about how much was in their account, sometimes even seeing balances climb by 1% in an hour. With returns looking like that, who could blame people for sharing the scheme with their friends and family on social media?
Exploiting friends and family
Once a scheme has started, it stays alive – at least for a while – through social media. One person gets taken in by the promise of big returns on cryptocurrency investments and spreads the word to friends and family members.
Sometimes big names get involved. For instance, the kingpin behind GainBitcoin and other alleged scams in India convinced a number of Bollywood celebrities to promote his book, “Cryptocurrency for Beginners.” He even tried to make himself a bit of a celebrity, proclaiming himself a “cryptocurrency guru,” as he led efforts that costinvestors between $769 million and $2 billion.
Not all the celebrities know they’re involved. In one blog post, iCenter featured a video that purported to be an endorsement by Dwayne “The Rock” Johnson, holding a sign featuring iCenter’s logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited so they appeared to praise iCenter, too.
Fraudulent initial coin offerings
Another popular scam technique is called an “initial coin offering.” A potentially legitimate investment opportunity, an initial coin offering essentially is a way for a startup cryptocurrency company to raise money from its future users: In exchange for sending active cryptocurrencies like bitcoin and ethereum, customers are promised a discount on the new cryptocoins.
Many initial coin offerings have turned out to be scams, with organizers engaging in cunning plots, even renting fake offices and creating fancy-looking marketing materials. In 2017, a lot of hype and media coverage about cryptocurrencies fed a huge wave of initial coin offering fraud. In 2018, about 1,000 initial coin offering efforts collapsed, costing backers at least $100 million. Many of these projects had no original ideas – more than 15% of them had copied ideas from other cryptocurrency efforts, or even plagiarized supporting documentation.
Investors looking for returns in a new technology sector are still interested in blockchains and cryptocurrencies – but should beware that they are complex systems that are new even to those who are selling them. Newcomers and relative experts alike have fallen prey to scams.
In an environment like the current cryptocurrency market, potential investors should be very careful to research what they’re putting their money into and be sure to find out who is involved as well as what the actual plan is for making real money – without defrauding others.
–Nir Kshetri; Professor of Management, University of North Carolina – Greensboro
Hulu Offers Glimpse Of An Edgier Future Under Disney’s Control As Subscriber Count Passes 28 Million
Hulu is poised to enter a new chapter in its history as the decade-old streaming service once dismissed as “Clown Co.” moves to refine its identity among a trio of direct-to-consumer services under the control of the Walt Disney Co.
The streaming service offered a glimpse of what’s to come Wednesday as it announced its programming lineup in a presentation at Madison Square Garden in New York City. Hulu is looking for more adult—and, in some cases, edgier and boundary-pushing—programming, as well as comedies that have something to say, in the mold of its new series Shrill.
The company said its viewer proposition—the ability to watch the stories they love, whenever and wherever they want—is catching on with consumers. Hulu said it increased its total customer base to more than 28 million—26.8 million monthly subscribers and 1.3 million promotional accounts. That’s up from 25 million paid and promotional accounts reported in January.
Hulu’s viewers are 20 years younger than those who pay for cable or satellite TV subscriptions — the median age is 31; and some 21 million have either canceled their pay TV subscriptions or never signed up in the first place.
“Hulu’s continued growth, as well as the shows and initiatives announced today, reflect our deep investment in product, programming, brand, customer experience,” CEO Randy Freer said in a statement.
The venerable Hulu will need to differentiate itself as more than a mere cable substitute, as media giants like AT&T’s WarnerMedia and cable giant Comcast prepare to launch their own streaming services. It’ll also need a distinct identity within Disney, which gained a controlling interest in the streaming service with its March acquisition of 21st Century Fox and plans to launch a family-focused Disney+ in November.
Hulu called in some serious star-power to highlight its original series, including Margot Robbie, producer of the forthcoming series Dollfacestarring Kat Dennings, Mindy Kaling, who’s producing an adaptation of Four Weddings and a Funeral, and George Clooney, who stars in a dark, satirical comedy based on Joseph Heller’s novel, Catch-22.
The streaming service greenlighted Nine Perfect Strangers, starring Nicole Kidman, an adaptation of the New York Times bestseller from Big Little Lies author Liane Moriarty. The series, from acclaimed television writer and producer David E. Kelley and John Henry Butterworth, takes place at a boutique health-and-wellness resort that promises healing and transformation to nine stressed city dwellers.
Hulu is also benefiting from Disney’s decision to end its relationship with Netflix, which had created four well-received series based on Marvel characters.
Hulu will add two new live-action series drawn from the Marvel universe, Marvel’s Ghost Rider and Marvel’s Helstrom, whichare slated to debut in 2020. For those not versed in the canon: Ghost Rider (aka Robbie Reyes) is an antihero, consumed by hellfire and supernaturally bound to a demon. Meanwhile, Daimon and Ana Helstrom are the son and daughter of a mysterious and powerful serial killer. Together, the siblings track down the worst of humanity.
The series join a growing superhero roster on Hulu that includes Marvel’s Runaways, which is entering its third season, and previously announcedadult animated series based on the popular Marvel Television characters Hit-Monkey, Tigra and Dazzler, Howard the Duck and Mental Organism Designed Only for Killing (or MODOK).
Following the success of Hulu’s 2019 comedy slate, it ordered second seasons of Pen15, in whichMaya Erskine and Anna Konkle play versions of themselves as 13-year-old outcasts in the year 2000, and Ramy, a series that follows first-generation Egyptian-American Ramy Hassan on a spiritual journey in his politically divided New Jersey neighborhood.
Hulu confirmed its order for The Dropout, a limited series starring Kate McKinnon, who comically bow-leg walked on stage in heels to talk about her portrayal of Elizabeth Holmes, the founder of the blood-testing company Theranos who is now awaiting trial for fraud.
“Hello advertisers,” McKinnon deadpanned. “I have never been to an Upfront before. If you need the blood of an upfront virgin, I am your gal.”
The service also said it will partner with Vox Media Studios, David Chang’s Majordomo Media and Chrissy Teigen’s Suit & Thai Productions to develop and produce a slate of premium food-centric programming for Hulu.
–Dawn Chmielewski; Forbes Staff
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