Risk taking in emerging markets

Risk taking in emerging markets

Pagefield General

For run-of-the-mill business people, emerging markets are nerve janglers.  Unpredictable places where cash spent on gleaming factories, cutting-edge hardware and management training can evaporate as politics change, conflict erupts, partners switch allegiance, or because local habits are just not close enough to symmetry.

Great names have had their fingers burnt in search of rich pickings on the frontier. In 1928, Henry Ford established the prefabricated industrial town Fordlândia (“Ford-land”) in the Amazon Rainforest for the purpose of securing a source of cultivated rubber for the tires on Ford cars, avoiding the dependence on British (Malayan) rubber.  Unfortunately for Henry, amongst other things, none of his managers understood the tropical agriculture and the mission was a failure. In spite of trying again at a different site further down river, he and his gang pulled out nursing bumper losses.

A misadventure, yes, but it is possession of such a willingness to dive into the unknown that can make people great.

Old Henry would be happy, then, to hear of the progress his successors are making in South Africa as this is being written. As reported by Andrew England of the FT in Pretoria yesterday, “…men in blue overalls use pneumatic tools to attach propeller shafts and other vital parts to the frames, gradually transforming them into gleaming Ford Ranger pick-up trucks.” That is local people in Africa building vehicles at a cutting-edge manufacturing site, itself constructed as part of a USD 500 million investment programme.  Soon South Africa will produce 120,000 vehicles a year, and this statistic on its own should be one that run-of-the-mill business people sit up and pay very close attention to.