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Investment Growth and The Challenges for Africa’s Entrepreneurs

There has been an explosion of African startups all over the continent, but international investors are missing out by looking for the same business models that work in Silicon Valley, run by people who speak and act like Silicon Valley. In South Africa, empowerment funds and alternative debt fund structures are dedicated to investing in African businesses. The emergence of National Advisory Boards for Impact Investing in South Africa and social economy policies being developed are all good news for social entrepreneurs.

On the other hand, according to the 2018/2019 report from the Global Entrepreneurship Monitor, African countries such as Angola and Madagascar have some of the highest rates of entrepreneurship in the world. These entrepreneurs often operate on an informal, micro-enterprise scale, however, and their contribution to economic activity is minimal. This is a shame because, with the exception of South Africa, most industrial sectors in Sub-Saharan Africa are not dominated by multinational firms that keep smaller entrepreneurs at bay in Europe or America. The absence of dominant firms offer opportunities for significant growth. Although foreign multinationals have a key role in Africa’s GDP growth, they need to repatriate their earnings which diminishes their contribution to local gross national income (GNI). These businesses are often attracted to the larger, better organized markets on the Continent, where they can readily capture value selling products and processes developed in their home countries. This leads to a scenario where residents in larger African cities have access to much the same products and services obtainable in the developed world, while outside these regions, residents are left to deal with the consequences of commercial neglect.

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Alastair Tempest

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