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Doing Business : The Steel Plant and the Witch Doctor: A Case Study for Harvard ? : An American in Togo has some novel solutions for the Third World's thorny business predicaments.

June 05, 1990|MICHAEL A. HILTZIK | TIMES STAFF WRITER

LOME, Togo — Here's a case study that won't make the curriculum at Harvard Business School:

A novice executive at a foreign-owned factory here arrived to find his 200 workers lined up outside the gates, refusing to go in. It seems a witch doctor had cast a spell on the grounds by cutting off a chicken head and spraying its blood around the entrance.

The executive put through a panicky call to John Moore, an American who had been running a neighboring steel fabricating plant for six years.

"Well, I didn't have much practical experience, but I told him he had to get another witch doctor to cast a stronger spell," Moore recalls. "Luckily, one of my drivers had a relative who was one, and that's what we did."

Not all the advice Moore offers expatriate businessmen coming to Africa is quite so outre. But being a Westerner in the virtually unique position of owning and managing an entirely local enterprise--rather than an African subsidiary of a large multinational--gives the 51-year-old Moore an unrivaled feel for how to function in what must be one of the most difficult and unusual business climates in the world.

It's not only the vast, often hostile, bureaucracies and almost complete absence of modern infrastructure in sub-Saharan Africa that make business tough. Labor is cheap, but energy is expensive. The currencies are either close to worthless or, like the French-subsidized CFA franc that is legal tender in Togo and 12 other African countries, so overvalued that you cannot hold too much cash, lest you lose a bundle if and when it is officially devalued.

The market is minuscule; a World Bank estimate last year found that the gross national products of all 42 countries of sub-Saharan Africa, taken together, were roughly equal to that of Belgium. That makes much of the strain of establishing business in Africa seem less than worthwhile.

Africa's reputation as a continent of war, disaster and corruption is a great obstacle to attracting new business.

With the 1980s considered a lost decade in terms of the continent's economic development, and with the example of Eastern Europe before it, many governments here are starting to open their doors to the kind of private foreign investors they spent the last 30 years cursing as greedy exploiters.

They should not be surprised if there is no flood of interested parties, despite the proliferation of Western-style investment codes guaranteeing protection from nationalization and the right to send 100% of their local profits back home.

Many Western businessmen consider Africa politically hostile, and with good reason. Even countries with a professed goal of attracting new investors still pay lip service to the old political credos. Just last April, for instance, President Jerry J. Rawlings of Ghana--a country that has been held up by the World Bank as a "model" of progressive economic policy--stunned a meeting of potential foreign investors by launching an attack on capitalist exploitation.

For all that, Moore argues that much of Africa's sour image is unearned. Take corruption: "I tell people that Africa didn't invent it. The rest of the world, in my opinion, is just as corrupt." Here, at least, it's understandable. "In Benin, the civil service hasn't been paid in four or five months. Of course they're going to ask you for a little 'contribution.' "

Moore moved to Togo in 1983 to lease a steel mill the government was trying to divest. Since then he has expanded by picking up steel fabricating plants in nearby Ivory Coast and Benin. He is among the first applicants for space in Togo's latest economic initiative, a free-trade zone where he hopes to assemble steel pylons and manufacture wire, all for export duty free. Last year the three-country group made sales of about $15 million, and Moore is hoping to raise that to $20 million this year and to $35 million in 1991.

Meanwhile he spends a lot of time helping the Togolese promote their country as the best place in West Africa for foreigners to do business--its military government notwithstanding. The government is committed to moving into a free-market economy, he says, and both the bureaucracy and the military keep a low profile.

"The Togolese are lucky to have him here," remarked one Western diplomat. "He's sharp and well-financed, and he's an experienced businessman."

Moore's experience makes him think the free-trade zone idea has been oversold as an economic panacea. Some Togolese officials are predicting it will bring in 15,000 new jobs, a wildly optimistic figure given the fact, among others, that Togo's zone is one of four being proposed for the West African coast alone.

"T hese sorts of initiatives become the flavor of the month," Moore says. And he does not see a lot of eager investors slavering to enter the African market. "I doubt many others will come along after me."

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