Tag Archive | Economy

Will increased Private Equity interest in Africa trickle down?

In March, the Carlyle Group launched their first Africa-centric fund. A month later they opened their offices in South Africa and announced plans to expand their team to Nigeria and Zimbabwe. David Rubenstein the co-founder of the Carlyle Group said at a recent conference, ‘I am very bullish on the prospects for Africa. Nothing compares in terms of economic growth as a percentage over the next decade.’ And he is not alone. In June Helios Investment Partners closed Africa’s largest ever buyout fund for $900 million (maximum target investment is $250 million) signaling the growing investor interest for the continent.

These two developments reflect the findings of an April survey from Coller Capital and the Emerging Markets Private Equity Association that showed 38% of limited partners had plans to begin or expand their African investment programs, compared with 15% a year earlier. The Wall Street Journal followed by reporting in July that a record 79 African focused funds were currently making their fundraising rounds. Only a fraction of these efforts are likely to be successful, but clearly there is a growing resource base being put into place for the continent’s most promising endeavors.

But what does all of this mean for African SMEs that could offer so much additional growth and development for so many African countries? What does this mean for the smaller businesses still overlooked by international and local investors? According to Guido Boysen, the CEO of GroFin Africa, ‘The capital needed to drive economic growth in Africa certainly exists, but could be invested in an asset class with a potentially greater impact.’ He argues unlocking the SME segment will remain a challenge until we recognize that many of these entrepreneurs are actually sophisticated business professionals that don’t require as much assistance as sometimes believed. It is also important to recognize that many SMEs out there are actually quite profitable and that there are an increasing number of exit opportunities. He continues, ‘The SME sector is ripe for investment, and the capital exists for this investment to take place.’ Now it is just a matter of closing the gap.

What do you feel needs to happen if we are to get more investor interest for African SMEs?

Rise of the African Entrepreneur

Here is the talk I gave this morning at the Netherlands-Africa Business Summit.

Recently the World Bank reported that 43 per cent of sub-Saharan Africa’s population is between the ages of 0 and 14. That African countries will likely face an increase in job creation pressure is an understatement. Put more simply by the New Vision in Uganda, we are essentially looking at a ticking time bomb. But it would be short-sighted to lump Africa’s youth as part of a growing problem. If anything, this young African generation is part of a new process that breaks down historical barriers and harnesses a new potential to drive solutions.

With every passing minute thousands upon thousands of young people gain access to mobile phones and the Internet. Imagine starting in primary school where you had to share a five year old text book with three other students to ten years later getting instant access to the worlds combined intelligence? These individuals are eager to connect, establish new contacts, exchange information and quite simply learn at a faster rate then ever before possible. Africa now represents the second fastest growing region for the worlds largest social utility Facebook, Asia being the first. Africa’s youth are addicted to information and they guarantee a frightening leap into the information age. The growth numbers we read about every day are staggering for good reason. And its not only about downloading and uploading content, these young people are teaching themselves how to write code, deconstructing applications, creating content and re-purposing tools to do some really cool stuff. One example is iCow, the recent winner of the Apps4Africa competition. iCow is a voice-based mobile application that helps farmers track the oestrus stages of their cows. This application can enable farmers everywhere to better manage breeding periods as well as monitor cow nutrition leading up to the calving day. This will help farmers get the most of their cows and their farms. A pretty useful service if you ask me.

Still in these early days it is not uncommon to meet an entrepreneur who has to travel two hours a day just so he can access the University WiFi network and download content he needs to build his products. On my last trip to Uganda I met Alex, the co-founder of Altoja Computer World, a young software company in Kampala. As a starting entrepreneur he actually had to petition family and friends long enough that they sold a goat so he could buy a computer. Hard to believe his grandmother made such a sacrifice for something she had never seen or could even comprehend. I also meet other young entrepreneurs building early prototypes on open source because it was the only code they had access to. It is not uncommon to hear about people afraid to share ideas because someone else might steal them or to talk about the difficulties in finding the business connections needed to grow and scale their business. Just getting some hardware and software proves to be a significant challenge, let alone the costs of operating a starting business. How do you get a national identity card when you don’t have an address, know your age or have the money needed to open a bank account?

International clients are just too far away. In the struggle to service businesses many try to take a crack at the consumer market. But in most African countries fewer than 5% of the population are actually connected to the Internet, the numbers far from allowing the implementation of viable business models. Many look to innovate on mobile, but unfortunately too many stories of telcos stealing ideas and blocking out potentially competing services keeps bright ideas in their infancy. In turn these telcos stifle innovation and put up a valiant fight to maintain the status quo. Funding is another key issue. Banks do not appreciate the budding tech businesses, micro credit is too small and the private sector investors lack success stories. It is still friends, family and fools tapping into these ideas and offering support where they can. The business is left to a growing network of tech incubators mushrooming across the continent and small venture funds hunting out the diamonds in the rough. These are the practical challenges that make any entrepreneur think twice, but for how long?

Now internet connections are becoming ubiquitous, the mobile web is set to leapfrog African youth into the next century, and their desire for an alternative future is unstoppable. George Ayittey, a Ghanaian economist and the author of several books on Africa, including “Africa Unchained” and the forthcoming “Defeating Dictators in Africa and Around The World” first coined the term ‘Cheetah Generation.’ The idea refers to a new and angry generation of young African graduates and professionals who look at African issues and problems from a totally different and unique perspective. They are dynamic, intellectually agile, and pragmatic. They may be the “restless generation” but they are Africa’s new hope. They take a no nonsense approach to corruption, inefficiency, ineptitude, incompetence or buffoonery. Whereas the older generations (rightly described as the Hippos) constantly see problems, the Cheetahs see business opportunities. More importantly, the Cheetah generation has no qualms about thinking outside the box or getting their hands dirty needed to make it happen.

The potential can be seen in new companies like Cellulant, a mobile commerce business that manages, delivers and bills for digital content and commerce services. Started at the age of 23, Ken Njoroge is now running one of the most respected mid-sized companies in Kenya. One of the first to realize mobile telephony was growing fast in Africa, Cellulant made its mark when on their first day they sold over 16,000 ringtones at a cost of Ksh.75 each. During its first year Cellulant made approximately Ksh.60,000 per month and in 2007 the firm already turned a profit. As of 2010 the firm has over 12 million customers in eight countries across Africa and today has a team of over 90 people. It is not surprising he plans to take Cellulant to the Nairobi Stock Exchange, what could be one of many IPOs to come online in the African space. Ken is only 35 and strongly believes young people are changing the game. He explains in a recent interview, ‘Young people are energetic and they easily learn new things. In ICT where things keep changing we need innovative young people with fresh ideas, who take on new ideas with optimism, unwavering determination and energy.’ Examples like Cellulant are only the beginning. Thousands of young people are starting to see the sheer number of opportunities and are quickly lining up with their ideas on how to solve them. As my friend Alex explains, ‘the jobs that are available are not attractive for someone passionate about software. You could do data entry for 100,000 to 200,000 shilling a month, but this is not the point. We want to build our own business and have a vision now.’

Equipped with unprecedented knowledge the stage is set for an epic showdown that will change the face of the continent forever. A young student equipped with a mobile phone is ready to take on a generation stuck in history, part of a new struggle to convince the older generations they are on to something really really big. Its not uncommon to meet a 20 year old who is building a national database of criminal records for the government police force or for a small team of young developers to be managing a bank’s internal IT system. How can a CEO appreciate the implications when they still print out e-mails and dictate their responses?

The road ahead is a hard one, the will of these young minds will be tested and unfortunately some will fold, but it is the few who refuse to compromise that make the difference. Just ask anyone on the street if there is potential and their eyes will light up as they spew out the opportunities they plan to tackle the coming year. The optimism is overwhelming and addictive. Already diaspora are returning to the continent and setting up shop. They are eagerly tapping into this youthful generation and quietly setting out on their quiet mission to change the world. It would be foolish to underestimate this young generation waiting for their turn at the table.

Crunch your business idea in seconds, check out the new VC4Africa.biz website! :)



Ever go to a website where you had to spend 3-4 hours uploading your business plan? And maybe then you never heard from a real person again? There is probably nothing more frustrating to an entrepreneur. I mean lets face it, time is money and every second you spend on documentation you could spend doing business.

With the VC4Africa.biz Matchmaking platform we do things differently. Using plan cruncher we can get your plan online with a few simple mouse clicks. Any entrepreneur can breeze through the questions (with a Twitter limit of 140 characters :)) and actually have fun selecting the icons. Before you know it you have crunched your business idea into one page and it’s online.

Investors and other members can quickly scan your idea and ask you questions if they need clarification. They can also like your idea and help rank it to the top of the list. We capture all of this activity and interaction. At the end of the day it’s the best ideas and the most serious entrepreneurs who claim the top spot. It is these entrepreneurs that are the most likely to secure investment.

Want to crunch your idea?

Time to recognize Africa’s rising middle class

Middle Classes in Africa is a project created and run by the photographer Joan BARDELETTI, in collaboration with various partners. It aims at understanding and describing who are the middle classes in Africa and the role of this population in the development of the continent. This in-depth project is done through a 20 months and 6 countries photo essay associated with journalism and research publications.

Why middle classes in Africa?

The middle class population in developping countries is growing at fast pace and should reach one billion persons within 20 years*, whereas this population is today a symbol of western countries society. This evolution will lead to important changes since this booming population has stronger economical power and political concerns. A clear reality in China and India, middle classes exist but are not yet obvious in Africa. They are however greatly involved in stakes the continent is at for its development.

Understanding better this population is understanding better the present and future of the continent.

What are the project goals?

* Present a new but realistic vision of Africa to the public of developed countries. Working on Middle Classes to lead the people to question themselves rather to inspire them pity about the continent.
* Explore new ways of associating photo essay and classical research work. Raise concerns on the links between this middle classes population and the african continent development. Place this issue into the agenda of public and private decision makers.
* Ease the dialogue between Africa and western countries.

What is the project about?

Photography

During about 20 months, Joan BARDELETTI will realize a photographic essay on middle classes in various African countries, starting with Ivory Coast, Kenya and Mozambique (3 other countries to be defined this summer will follow). In each country, he follows in their every day life a dozen of persons representing the faces of this middle classes. Working in different areas with distinct stories and cultures allow to highlight the diversity of middle classes situations but also what bring them together.

Research

A specific team of a dozen of experts, both french and african, coming from universities, politics, NGOs, is dedicated to work on this issue. They aim at better characterizing this media hidden population with a particular focus in countries were photo essay take place and a strong link with today events (global recession, elections, …). This work will lead to various publications in 2009 and 2010 and is coordinated by researchers of the AFD (French Agency for Development) and the CEAN (Centre for Study on Africa, part of Sciences Politique Bordeaux).

There is permanent dialogue between the photographer and researchers. These two complementary approachs enhance themselves.

I am excited to see how this project evolves.
Check out the website to learn more!

The media is the oxygen of the body politic

On October 7, 2009, at the Salzburg Seminar on Investment in Media, News, and Information, Amadou Mahtar Ba, the CEO of AllAfrica.com (the continent’s leading news agency) gave a remarkable opening address. Being someone who has worked in the media sector, and in the specific interest to put in place AfricaNews.com as a pan African network of media talent, I find relevance in his words. Please see his speach in its entirety. To learn more about the event please
see the website.

A Pillar in Building Strong Democracies, Economies, and Societies
Amadou Mahtar Ba
Opening Address, Salzburg Seminar

Dear Friends,

I am so glad to be here tonight and to seemany familiar faces and new ones whose
names have been familiar for some time
though we have never met.

Read More…

VC4Africa.com – A new url!

Venture Capital and Private Equity in Africa

Venture Capital and Private Equity in Africa

After a lot of hasstle and wrangle, I am pleased to finally have secured a new url. And I am only so lucky it didn’t cost me thousands of euros to get it !

The Venture Capital and Private Equity in Africa group can now be found on: www.vc4Africa.com
This platform has quickly become Africa’s largest online community of investors and entrepreneurs.
As a community we are dedicated to connecting African SME projects and businesses.


Venture Capital and Private Equity in Afric

Venture Capital and Private Equity in Afric

Trade vs. Aid – FDI in Africa

Yesterday I made a visit to the Afrika Studie Centrum in Leiden, the Netherlands.

I was surprised to find a folder with this map. It really brings a number of things into perspective.

Outside of Morocco, Tunisia, Egypt and South Africa, its clear most FDI is made in energy rich countries.

Many of the countries without these resources are still very much fighting a balance between aid and trade.

I was also surprised to see that aid is still a greater contributor than FDI in a country like Nigeria.

This map clearly shows the amount of work that still needs to be done.

I would invite any other maps or graphs that further tell the story.

FDI in Africa

See a full pdf file from the Afrika Studie Centrum in Leiden, the Netherlands.

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