Get into the African growth story

One of the most notorious tycoons of the latter part of the past century, RW 'Tiny' Rowland, would surely find a soulmate in David Lenigas, the Australian who runs Lonrho, the pan-African trading company that the late Rowland created and treated as a personal fiefdom.

Six years ago, Lenigas wrested control of Lonrho from Mayfair financier Christopher Mills, an energetic dealmaker, when the company was one step from extinction. The only remaining fixed asset, a £3 million hotel in Mozambique, sat alongside cash of £11 million, giving Lonrho a net worth of barely £14 million.

Schooled in the rough and tumble of the Australian mining industry, Lenigas's transformation of Lonrho has been remarkable - it is hard to exaggerate the strength of the Lonrho brand in Africa. In his six years as executive chairman, he has bulldozed though a bold agenda.

Lonrho was listed on AIM when Lenigas first appeared on the scene, but the company is now a main board listing and the only non-mining UK company to offer full exposure to Africa. "Getting Lonrho back to the big board is my greatest achievement here," he says.

Pleasing as this would have been for big, bad Tiny, Lenigas's ability to do business with African politicians would bring greater satisfaction. This and his view that liberals who abhor the ethical standards of Africa's dictators are ignorant. He says: "In Africa, the most stable countries are run by benign dictatorships. At least you can do business with these people. Look at the number of countries in [sub-Saharan] Africa that are in conflict. Not many. I like dealing with governments. It is the best way of minimising any risk of nationalisation."

The Lonrho board includes Frances Cook, former US ambassador to Burundi, Cameroon and Oman, a woman keenly sought out for her connections and knowledge of Africa. Lonrho deals at government level in much of the continent, and Lenigas is eager to point out that the company has 51% control of all its subsidiaries.

Today Lonrho, effectively a holding company, has five divisions. The most important is an agribusiness, which is responsible for some 51% of group turnover. A new airline that flies between hubs in Kenya, Angola and Ghana contributes 20%, while infrastructure assets, largely consisting of a port facility in Equatorial Guinea, account for some 13%. The balance is spread between hotels and support systems, principally information technology interests.

China takes long-term view

What has changed the continent's outlook is the arrival of the Chinese. China's billions of dollars have fuelled a rapacious push for minerals. China is the new coloniser of Africa, and the weight of its money - together with new oil discoveries - has changed the continent's economy out of all recognition.

And China hasn't just supplied capital. An army of workers has flooded in to build and operate mining and infrastructure projects as well as construct schools, hospitals and other projects in return for mineral concessions. Social tensions are building, but Lenigas says Africans will have to learn to live with the Chinese.

"They are there to stay," he says. "China is the only country prepared to take a long-term view on Africa. It now accounts for between 40 and 45% of all direct investment. That used to be the role of Europe, which now accounts for just 15% of investment - about the same as the US. People who come here for the first time are blown away by the potential.

"Seven of the 10 fastest-growing world economies are in Africa, and the fastest-growing are principally driven by oil. Production in Ghana and Angola, for instance, is growing by 20% a year. Who is building the infrastructure to take Africa to the world? The Chinese."

Lenigas explains that Lonrho is a direct beneficiary of this spending. He says: "Lonrho is the ultimate consumer stock. I sell stuff: hotel rooms, tractors, aeroplane seats, food, IT, port space.

"This year our agribusiness will grow by more than 100%. Two key agriculture belts are on our doorstep: north of the equator, from Senegal to Kenya, and south, the belt that stretches from Angola to Mozambique. Africa has 60% of the world's arable land and 30% of known oil reserves. But it hasn't had the infrastructure to get exports to the rest of the world. Just 1% of US food imports come from Africa. That figure will change because of the Chinese.

"We supply fresh fruit and vegetables to the major supermarket chains in South Africa and about 70% of our perishable goods are exported. The fish side is growing dramatically. We now supply Walmart in the US, and Costco.

"Our total business has been growing by 30% a quarter for the past two years. There are not many companies that can say that."

Spectacular as these figures may be, they are not yet reflected in Lonrho's share price or profitability. The shares, which have been as high as 50p, now languish at around 10p, the level at which Lonrho has made a succession of share placements with its main institutional shareholders.

As a consequence, almost 80% of the company's expanded capital base is held by a dozen or so institutions. The list is headed by Capital Group International - a US investment company that controls some $3 trillion (£1.9 trillion) of assets - which owns 14%. Other main shareholders include various BlackRock funds, which have a collective holding of more than 9%.

In the year to 30 September 2010, Lonrho reduced its losses to some £200,000, compared with £5.3 million the previous year. Profitability now beckons.

Lonrho has a remarkable number of small shareholders, some 21,000. These are primarily people who held shares in Rowland's company and received shares in both the new Lonrho and the platinum side, Lonmin, when Lonrho was split in two in the late 1990s.

Most of these shareholders were originally lured by Lonrho's high yield, but today the company does not pay a dividend and has not declared a dividend policy.

However, the signs are that its extensive programme of raising new equity is largely behind it. Promotion to the market's main board means adequate banking facilities are in place, but the opportunities for new deals and joint ventures suggests dividends are still some way off.

Those 21,000 shareholders have had to accept that Lonrho is now a stock for the patient. However, their faith has the comforting support of the global institutions that have given Lenigas their whole-hearted support.

Africa poised for rapid growth

Africa is home to more than one billion people. By 2050, the population is predicted to rise to two billion, some 22% of global population. Around 128 million households, says a McKinsey report, will have disposable incomes by 2020, when Africa's collective GDP will be $2.6 trillion.

Between 2000 and 2010, GDP across the continent increased by 5.5% a year. Many countries have experienced double-digit growth.

Looking for more insight into the Dark Continent? Take a look at the appeal and pitfalls of the various regions in our focus on mining in Africa.