As usual there was a palpable spirit of optimism at this year’s Africa Business Conference at Harvard Business School. While the facts on the ground may not be as rosy, I did come away with several observations that will be helpful in current tasks as well as in plotting strategy in the medium and long term.
1. Storage and transportation of both inputs and goods for sale are critical to improving farm performance.
2. Institutional Private equity is well entrenched in Africa and the characteristics of a successful deal are increasingly well known. In the second panel on closing the electricity deficit the parameters for funding power projects were clearly laid out:
- A quality PPA deal is required. This is the guarantee of cash flow that investors look for. They’re not all created equal. For example, local currency denomination is a deal killer since it adds currency risk to the equation.
- The PE folks will also need a sovereign guarantee as an indication that the government supports the project.
- As always a strong management team makes the deal much more attractive.
3. Startup capital especially for non-tech ventures is extremely difficult to find. Angel investors and venture capitalists are slowly finding their way to tech-related, high growth startups. For others, it’s tougher but there are a few possibilities:
- Impact investors. If one can demonstrate measurable social benefit in addition to financial returns then a new set of potential investors becomes available. Many impact investors use the IRIS standard to assess social benefit. African companies would be wise to seek out experts who can help the make their case using IRIS
- Multilateral/DFI capital. Organizations such as the African Development Bank and International Finance Corporation sometimes have special programs for ventures with attractive features such as environments sustainability.
- Trade promotion agencies. Agencies such as the U.S. Export-Import Bank can often provide funding or lean guarantees for capital purchases that meet certain requirements.
As always the Harvard Business School Conference showed us an Africa on the move—not without its issues, but with opportunities for businesspeople to benefit themselves, their organizations and the African continent. Successful entrepreneurs will assemble a skilled team that can execute on their vision and achieve financial and social results.