According to Forbes, Entrepreneurs have a pivotal role to play in Africa’s unemployment crisis. Today over a third of the continent’s young workforce (those aged 15-35) are unemployed. Another third are in vulnerable employment. By 2035, Africa will contribute more people to the workforce each year than the rest of the world combined. By 2050 it will be home to 1.25 billion people of working age. To absorb these new entrants, Africa needs to create over 18 million new jobs each year. But access to financing remains an obstacle, young entrepreneurs often face double digit interest rates from local banks. As Ms Johnson, ex-Minister for ITC in Nigeria pointed out recently: “The biggest challenge for fintech companies today is regulation policy and the fact that many central banks do not innovate and do not understand what it takes to scale and build a technology company.”
And venture capital penetration is still low, although venture capital in Africa is growing, in 2018 venture capitals and funds invested $350m-$700m into mobile tech companies. But 2018 estimates suggest that an additional $725 million of funding is required for the whole continent. To tackle the problem, African countries continue to start new entrepreneurship funds. In July 2017 Ghana launched the National Entrepreneurship and Innovation Plan. The aim is to provide integrated national support for start-ups and small businesses. Almost a year later, Rwanda secured a $30 million loan from the African Development Bank for the establishment of the Rwandan Innovation Fund. This will focus on investments in tech-enabled SMEs. However as commentator Aubrey Hruby of the Africa Center, Georgetown University, points out there are many pitfalls that such government funding face. He warns that as new funds are started, African governments should look to the successes and failures of both global and regional funds and try to replicate best practices and avoid common pitfalls. He advises that African governments should explore copying models similar to Small Enterprise Assistance Funds and the USAID backed enterprise funds which include robust investment selection criteria for funds. African government-backed entrepreneurship funds would operate as fund-of-funds – where a fund invests in another private equity or venture fund rather than directly in businesses themselves – as do many development finance institutions globally.