“Corporate globalization and
the economic agreements
designed to entrench it
have little to do with trade
– and all but the most ignorant neo-liberal pundits
surely know this.”
Prof David McNally
NEOLIBERALISM:
Is The Republic Really Open For Business?
I
n this very special 2nd quarter edition of The Investor magazine, we capture issues surrounding International Equity Investments and free market economics. It may appear at first glance, that as a nation, we are not connected into the globe and quite
aloof because of institutional classification in the various developmental indices. However, with the gradual evolution of the
private sector and ICT industries, along with the new fibre optic soon to go live, it is just a case of speed of connectivity into the
global network and other developmental ideologies. With this in view, we ask the question: ‘Is The Republic Really Open For
Business?’
Private Equity Firms Are Constantly Seeking
New Opportunities in Developing or Emerging Nations.
This idea is widespread amongst frontier nations,
more so in Sierra Leone. Whilst it is a known
truth that global capital is indeed always on the
lookout for a new home, unfortunately that
home is not always a permanent and happy one.
The Private Equity Investment model
normally works by leveraging debt to
invest in the equity component of unlisted private entities.
In short, the leveraged debt is transferred into the new entity. From an
investment perspective, the entity seeking investment will receive the cash injection in exchange for equity, initially
derived from debt.
It is from this debt-to-equity translation
that most PE Funds seek to make what
they term as alpha returns, in short, over and above normal
average returns in the shortest permissible time horizon.
There is always a conflict between a firm’s intention to maximize shareholders value and at the
same time implement Corporate Social Responsibility (CSR). In the provinces, the Chiefs and powers that be are always
willing to work a deal with foreign investors with some aspect of that
pointing towards CSR, either in the form of a local school or perhaps a
health center thrown in for good measure. A recent example of a firm Dead Hand of The State or Is The Republic Alive And
Really Open For Business?
that has managed to get this balance right is ADDAX Bioenergy.
Central to the way that global investments operate is a
The conflicts begin when certain monetary aspects (customary prac- set of ideas pioneered in the early eighties by Margaret
tices) of the deal are somewhat slow in materializing. Whilst private Thatcher and Ronald Reagan. Their argument consisted
equity firms certainly look for opportunities, we need to understand of a set of guiding principles based on the theory that unthe way in which they work and what it is that they really look for. regulated markets deliver efficiency, growth and prosperity
Most private equity firms by their definition are somewhat a misnomer. for all participants. This ideology forms the basis of neoWhilst the term has equity in its make-up, most often than not, they liberalism, and further infers that the private sector should
are capitalized by debt. Let’s be totally honest with ourselves, nobody play a greater role in the economy as opposed to the state.
will invest into an opportunity unless it has certain characteristics that This ca