Reconstructing a warzone

If ever a country presents a challenge to an incoming investor, it’s Afghanistan. After all, it has been in a state of almost constant civil war since the Soviet invasion of 1979. While the Soviet troops left a decade after they arrived, the puppet regime they left behind was soon toppled and the country descended into a proxy war between Saudi Arabia and Iran.

By 1994 the Taliban – backed by Pakistan – was on the rise but it was opposed by more secular forces and ultimately driven out of Kabul when the US, supported by the UK and others, invaded in 2001.

Naturally, this incessant conflict took a heavy toll on the country and its people.

Millions were killed, millions more were displaced – a third of the population are estimated to have fed to Pakistan and elsewhere – and large parts of Kabul were razed to the ground. The international community has spent more than $30bn on reconstruction projects with varying degrees of success since 2002 but, with the last US troops departing next year, the future remains uncertain.

In this context, it takes a big man to step forward with an ambitious development plan. And they don’t get much more formidable than Ian Hannam MSc17(1984). Until September 2012, he was Chairman of JP Morgan Capital Markets and since 1997 he has advised on the listing of 12 large companies in London, six of which entered the FTSE100.

Perhaps equally significantly, given the nature of the terrain on which he is operating, he started out as an engineer working in challenging territories such as northern Nigeria and Oman before joining London Business School, and spent 20 years in the Territorial SAS.

And it is the School that he credits with enabling him to make a career-defining change of direction almost 30 years ago: “I believe it completely rounded me of as a human being, and taught me things which I needed and I didn’t know, such as finance, operations and negotiation. As a result, I saw other opportunities which led me to move to New York and join the training programme at Salomon Brothers.” The seeds of his current venture date back to 2010 when he worked with the US Department of Defence to analyse data prepared by Russian mining experts on the scale of mineral deposits in Afghanistan. The resulting report estimates that Afghanistan’s copper and gold could be worth up to $1.4trn dollars.

In 2010, Ian – who is also a member of the School’s Governing Body and the Campaign Committee – established a company called Centar to invest in the Afghan minerals sector, and it has been awarded preferred bidder status in an official auction for six copper and gold exploration licences via its subsidiary, Afghan Gold & Minerals.
While Centar is designed to make a return for its shareholders, Ian also sees it as a vehicle for giving something back to society. “The people of Afghanistan want to improve themselves,” he says.

“Forty per cent of its population is under the age of 26 and a significant number of them have spent time in Britain or America, and have gone back. They are very sophisticated. They’ve got a culture and a history.

“They may look to Bollywood rather than Hollywood, but they are, in general, moderates. Cricket is very popular and they are also crazy about football. There are now eight teams in a league, and we are sponsoring one.”

Centar currently has around 550 people working in Afghanistan, the vast majority of them – 525 – Afghans. While it has a drilling operation and a mining service company, it cannot proceed at the pace it would like until the country passes a new Mining Law.

“The real problem is that there is so much microscope scrutiny relating to the award of these licenses that every step is painfully slow,” he says. “If it was down to us, we would have liked to be in production and paying taxes by now. That said, tremendous progress is being made. Fifteen world-class deposits have been identified and prioritised, and the first leg of Afghanistan’s first railway line was completed last year.” Ian reckons that if the Mining Law is passed, half the revenue of the Afghan government could be generated from the exploitation of natural resources revenue within ten years. The other half will come from growth in the services
sector, with scope for extensive expansion of the mobile phone and retail markets, as a result of the multiplier effect.

“Traditionally, for every dollar a mining company generates, after it’s paid a dollar in taxes, it creates six dollars through the wider economy,” he says. “Drillers and truckers have to be fed and that, in turn, creates demand for farmers and butchers and bakers, for example.”

For a country that is still very much in transition, it is an inspirational vision.