THE COMPLEXITY IN ATTRACTING QUALITY INVESTMENT TO SMEs IN AFRICA

Photo Credit To Frederic Bastiat Institute Photo

It is an undeniable fact that the private sector definition of Africa, is largely dominated by domestic small and medium scale enterprises operations, because its corporate enterprises are largely non-profit making government agencies, along with a few of its developing banks, and multi-national companies. The above scenario and statement is empirically proven by numerous literature that the SME sector is estimated to hold over 80% of the Africa domestic economy. Thereby, the author does concur with the fact that when the economic health and the fate of the SME sector is in a struggle, so is the state and fate of the African economy. It is now a popularly known issue that in Africa, the rich are all in the political class as in government office, while the poor wallow in economic struggle or poverty, and mostly serving in an economic sector defined in the context of this article as the stagnant private sector.

It is an exceptional case, in which we have about 2-3% of indigenous people in Africa being rich out of the political sphere and serving rather in the private sectors, not ignoring the fact of political supports and connections to such businesses, like the business mogul Aliko Dangote and few others. This was the argument posited in my 2016 academic paper and the second edition of my book Entreprenomics ISBN: 978-613-9-98876-1 by LAP LAMBERT Academic Publishing. It is evidenced in performance that in such an environment, most indigenous businesses are established not to solve market problems as expected of entrepreneurs, but rather for self-serving interest and survival economic agenda. As a result, this kind of enterprise setup lacks market-driven vision for a long-term profit sustainability, hence, becomes toxic projects to attract quality investment.

The World Bank Group report of 2019/2020 on easy to do business among the 190 countries of the world, starting from the bottom of such chart begins with an African country, Somalia, all the way to 90th position, having African countries comfortably leading from behind. So it has not been surprised, why the elite on the continent of Africa find politics, and government offices, as lucrative enterprise and see it as a ‘do- and-die’ affairs agenda unlike the European, American or the Asian tigers.

 However, the focus of this article is to critically analyse the difficulty in packaging the domestic SMEs to compete for corporate funding and how my institute over the years has strived to resolve this narrative. In this article, the quality of investment will be defined as “a fundamental criterion, which a funding package possesses, as a benefit to an SME, taken into consideration the business category characteristics”. This implies the criteria package for corporate enterprise funding will be a high-cost burden to a small and medium scale enterprise. Yet the profit-driven investment community focuses with less interest in enterprise structure, but with much interest in ventures with the most profit rewarding to their investment commitment. This assertion above does not necessarily conclude we have no profitable SMEs than corporate enterprises in Africa. But the argument is how to empower the vulnerable SMEs market of Africa into a formidable industry to inspire a vibrant economy of the continent of Africa.

  In the past two decades, all investment grants were donor-driven and non-profit engineered as a foreign direct investment to capitalized Africa domestic SMEs industry. Hence, the condition of interest on those funds was very mild in terms of the cost of capital, yet most of such fundings were misapplied, meaning (the government sector failed to implement the capital requirement). Today such donor funds are not easily accessible to start-ups and SMEs in other to tap into large scale initiatives.

This means SME owners have no special funding market in favour of their ventures as against corporate enterprises in today’s Africa, and this reality has to be very clear to the emerging entrepreneurs, and the existing ones on the continent. If that is the situation, then it implies the fundamental conceptualization of every start-up business, and its vision should be very grounding as a foundation to enable other business models to build on it. From the above-proposed instance, it is the only reason any venture could attract quality investment and solve the first most important problem of Investment Bankers on SMEs related projects in Africa. It is easily observable that areas, where donor and grant funding are accessible as a credit-support, are no more offered on a mass scale through government but rather in a project-centric nature in other to attract talented youth with specialised skills: for instance the case-study of information technology advancement projects funding.

The next challenge of Investment Bankers serving within the SMEs sector of Africa is to overcome the situation of idea-owners (bearers) seeking to use vain words to describe how they believe and think their ideas are worthy and profitable, without acknowledging the fact that, the value of any idea is measured from its quantifiable risk, excluded from its expected revenue generation, scientifically analysed.  And has to be presented in a cogent document, termed us, ‘Bankable Document’.The effort to develop such a document around one’s business project should be viewed as a valid ‘visa’ in securing quality funding and a principle documentation compass of the venture. And its development process is a very cumbersome and complex design for SME projects than corporate enterprise, especially measuring the accuracy of the risk content and mitigation approaches mutually beneficial to the project promoter and the investor. The worst scenario is businesses that have no exiting history of operational performance or having poor audited accounting records as a sole reliable document for investment analysis projections. Without ignoring the business’ strong profit potential based on the venture survey market conditions, which are mostly classified as a quality ‘off-taker’ deals. In such instances, it does not only need a technical expert(s) who knows how to conduct risk analysis using models for investment quantification and viability, but a practitioner who understands the dynamics and evolution of various markets of Africa to pose accurate assumptions governing project risk analysis and profitability, which is in equilibrium to the realities of such a market. In my experience, the most ignored risk study area in business plan conceptualization is the ‘agency cost’ which poses a threat to the output effect of production in developing and underdeveloped economies of this continent. Therefore, the skill to model out the attitudinal effect in labour force contribution to optimum productive expectation is not just a formula work, but involves hardcore thinking, comparative cross-check of data in contextual analysis within a speculative economic environment of Africa. And these are done with a precision of experience.

 It is thereby sad to realize that most of the SME owners think the cost of investing in such documentation is very high, thereby seeking not to place premium value to such documents. Ignoring the fact that a potentially profitable business idea with weak documentation will win you no investment, instead, will promote an environment for smart minds to steal the idea and make a profit out of it or such venture project may attract investment support at a high collateral cost and interest rate. Let’s consider the instance, where a business-project is seeking for $10 million hard currency into an economy with soft currency as a transaction location of the venture, with most of such economies having a bad historic records of exchange rate with the US dollar, which in itself possess a high risk to the investment deal. Yet you are required as an SME to search for a collateral double the credit facility with an interest rate above 10% to work with in such a developing or underdeveloped economy. Meanwhile, the interest rate of the US economy is less than 5%. The outcome of such investment relation, easily establishes the potential bankruptcy risk of the business within the enterprise lifespan.

The conclusion is to admonish all entrepreneurs or SMEs owners to place a special value to their ‘Bankable documentation’ for funding opportunities just as a visa is required as an entrance to any country of destination, the document is the only means to attract quality investment, very affordable, and sometimes without rigid capital conditions in favour of the type of business you may be engaged to.

——————————————————————

Emmanuel TWENEBOAH SENZU,Ph.D. a Professor of Economics and Finance. Head of Research, Frederic Bastiat Institute Africa. 

Post source : Frederic Bastiat Institute Africa Library

About The Author

Related posts

98 Comments

  1. vurtil opmer

    Excellent post. I was checking continuously this blog and I’m impressed! Extremely helpful info particularly the last part 🙂 I care for such information a lot. I was seeking this particular info for a very long time. Thank you and good luck.

    Reply
  2. Shannan Searls

    magnificent publish, very informative. I ponder why the opposite specialists of this sector do not realize this. You should proceed your writing. I am sure, you’ve a huge readers’ base already!|

    Reply
  3. Gerald Cobbley

    My developer is trying to convince me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using Movable-type on various websites for about a year and am worried about switching to another platform. I have heard good things about blogengine.net. Is there a way I can import all my wordpress posts into it? Any help would be really appreciated!|

    Reply
  4. Glenna Vicini

    Hi, Neat post. There is a problem along with your web site in internet explorer, may test this? IE nonetheless is the marketplace chief and a large component of folks will miss your fantastic writing because of this problem.|

    Reply
  5. Laverna Christopherso

    What’s Going down i am new to this, I stumbled upon this I’ve found It positively useful and it has helped me out loads. I’m hoping to give a contribution & aid other customers like its aided me. Good job.|

    Reply
  6. Gail Etchells

    Nice post. I was checking continuously this blog and I’m impressed! Very helpful information specifically the last part 🙂 I care for such info a lot. I was seeking this particular information for a very long time. Thank you and good luck.|

    Reply
  7. Francis Tonas

    I blog quite often and I genuinely thank you for your content. Your article has really peaked my interest. I’m going to book mark your blog and keep checking for new details about once a week. I subscribed to your Feed as well.|

    Reply
  8. Thelma Prestwich

    Hello there, simply turned into aware of your blog thru Google, and located that it’s truly informative. I’m going to watch out for brussels. I will be grateful should you proceed this in future. Numerous people will probably be benefited from your writing. Cheers!|

    Reply
  9. Wendell Debow

    Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point. You definitely know what youre talking about, why waste your intelligence on just posting videos to your site when you could be giving us something informative to read?|

    Reply
  10. Le Esco

    Nice weblog here! Additionally your web site loads up fast! What web host are you the usage of? Can I get your affiliate hyperlink in your host? I want my site loaded up as quickly as yours lol|

    Reply
  11. Rex Sedivy

    Thank you, I’ve just been searching for info approximately this subject for ages and yours is the greatest I’ve discovered till now. However, what about the conclusion? Are you sure concerning the source?|

    Reply
  12. Terrance Py

    hello there and thank you for your information – I have definitely picked up anything new from right here. I did however expertise a few technical issues using this site, as I experienced to reload the website many times previous to I could get it to load correctly. I had been wondering if your web host is OK? Not that I’m complaining, but slow loading instances times will very frequently affect your placement in google and could damage your high-quality score if ads and marketing with Adwords. Well I am adding this RSS to my email and can look out for a lot more of your respective exciting content. Ensure that you update this again very soon.|

    Reply
  13. Broderick Riebe

    Greetings from Ohio! I’m bored at work so I decided to check out your website on my iphone during lunch break. I enjoy the info you provide here and can’t wait to take a look when I get home. I’m surprised at how fast your blog loaded on my phone .. I’m not even using WIFI, just 3G .. Anyhow, fantastic site!|

    Reply
  14. Arlen Ghrist

    My brother recommended I might like this website. He was entirely right. This post actually made my day. You can not imagine simply how much time I had spent for this info! Thanks!|

    Reply
  15. Catherina Elger

    Do you mind if I quote a few of your posts as long as I provide credit and sources back to your website? My website is in the exact same area of interest as yours and my visitors would certainly benefit from a lot of the information you present here. Please let me know if this alright with you. Appreciate it!|

    Reply
  16. Lucila Mackay

    It’s a pity you don’t have a donate button! I’d certainly donate to this fantastic blog! I guess for now i’ll settle for book-marking and adding your RSS feed to my Google account. I look forward to brand new updates and will share this website with my Facebook group. Chat soon!|

    Reply
  17. Shonda Casilla

    Greetings! I know this is kind of off topic but I was wondering which blog platform are you using for this site? I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at options for another platform. I would be great if you could point me in the direction of a good platform.|

    Reply
  18. Neil Ozols

    You can certainly see your expertise within the work you write. The world hopes for more passionate writers such as you who aren’t afraid to mention how they believe. At all times follow your heart.|

    Reply
  19. Taylor Rotman

    It’s actually a nice and useful piece of info. I’m glad that you simply shared this helpful information with us. Please stay us up to date like this. Thanks for sharing.|

    Reply
  20. Penni Bella

    Thanks for every other informative site. Where else could I get that kind of information written in such a perfect approach? I’ve a project that I’m just now running on, and I have been on the glance out for such info.|

    Reply
  21. Lester Gobel

    Its like you read my mind! You appear to know so much about this, like you wrote the book in it or something. I think that you can do with a few pics to drive the message home a little bit, but other than that, this is fantastic blog. An excellent read. I’ll certainly be back.|

    Reply
  22. Rosalva Rashed

    That is a very good tip particularly to those fresh to the blogosphere. Simple but very accurate information… Many thanks for sharing this one. A must read article!|

    Reply
  23. Carmine Cuadras

    Hey! Quick question that’s completely off topic. Do you know how to make your site mobile friendly? My blog looks weird when viewing from my iphone 4. I’m trying to find a theme or plugin that might be able to resolve this problem. If you have any suggestions, please share. Many thanks!|

    Reply
  24. Elin Neaves

    I have been exploring for a little bit for any high quality articles or weblog posts in this sort of area . Exploring in Yahoo I at last stumbled upon this website. Studying this information So i’m happy to show that I’ve an incredibly just right uncanny feeling I came upon just what I needed. I such a lot undoubtedly will make sure to don?t forget this website and provides it a glance on a relentless basis.|

    Reply
  25. Adella Habig

    Hey there! I’ve been following your web site for a while now and finally got the bravery to go ahead and give you a shout out from Huffman Texas! Just wanted to mention keep up the good work!|

    Reply
  26. Bebe Bondurant

    Fantastic blog! Do you have any tips for aspiring writers? I’m hoping to start my own website soon but I’m a little lost on everything. Would you recommend starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely confused .. Any tips? Many thanks!|

    Reply
  27. Donn Claffey

    Woah! I’m really loving the template/theme of this blog. It’s simple, yet effective. A lot of times it’s hard to get that “perfect balance” between user friendliness and appearance. I must say that you’ve done a excellent job with this. Additionally, the blog loads extremely quick for me on Internet explorer. Exceptional Blog!|

    Reply
  28. Carrol Sensmeier

    Hey there! I’ve been following your web site for some time now and finally got the bravery to go ahead and give you a shout out from Huffman Texas! Just wanted to say keep up the excellent work!|

    Reply
  29. Bret Strausser

    My partner and I stumbled over here by a different web address and thought I might as well check things out. I like what I see so now i am following you. Look forward to going over your web page again.|

    Reply
  30. Laurence Winckler

    Greetings! I know this is kinda off topic however I’d figured I’d ask. Would you be interested in exchanging links or maybe guest writing a blog post or vice-versa? My website discusses a lot of the same subjects as yours and I feel we could greatly benefit from each other. If you happen to be interested feel free to send me an email. I look forward to hearing from you! Awesome blog by the way!|

    Reply
  31. Donn Prazenica

    Woah! I’m really digging the template/theme of this blog. It’s simple, yet effective. A lot of times it’s very hard to get that “perfect balance” between superb usability and visual appeal. I must say that you’ve done a fantastic job with this. Additionally, the blog loads very fast for me on Internet explorer. Exceptional Blog!|

    Reply
  32. Romona Yann

    Thank you, I’ve just been searching for info approximately this topic for a while and yours is the best I’ve came upon so far. However, what in regards to the conclusion? Are you positive in regards to the source?|

    Reply
  33. Sharolyn Rabadan

    Someone necessarily lend a hand to make significantly posts I’d state. This is the very first time I frequented your website page and to this point? I amazed with the analysis you made to create this actual put up amazing. Excellent activity!|

    Reply
  34. Luana Ochiltree

    I think this is one of the most important info for me. And i’m glad reading your article. But want to remark on few general things, The site style is perfect, the articles is really nice : D. Good job, cheers|

    Reply
  35. Jarod Zilk

    Hello! This post could not be written any better! Reading this post reminds me of my previous room mate! He always kept chatting about this. I will forward this post to him. Fairly certain he will have a good read. Many thanks for sharing!|

    Reply
  36. Claudie Finkle

    I’m now not sure the place you’re getting your info, but great topic. I needs to spend some time studying much more or understanding more. Thanks for excellent info I was looking for this information for my mission.|

    Reply
  37. Bryan Sang

    Good day! I know this is kinda off topic but I was wondering if you knew where I could find a captcha plugin for my comment form? I’m using the same blog platform as yours and I’m having trouble finding one? Thanks a lot!|

    Reply
  38. Daina Garin

    I like the helpful info you provide in your articles. I’ll bookmark your weblog and check again here frequently. I’m quite sure I’ll learn plenty of new stuff right here! Good luck for the next!|

    Reply
  39. Callie Glynn

    Hi I am so excited I found your website, I really found you by mistake, while I was researching on Yahoo for something else, Anyhow I am here now and would just like to say thanks for a remarkable post and a all round enjoyable blog (I also love the theme/design), I don’t have time to read it all at the moment but I have bookmarked it and also added in your RSS feeds, so when I have time I will be back to read much more, Please do keep up the fantastic work.|

    Reply
  40. Lilla Loxtercamp

    You are so cool! I don’t believe I’ve truly read anything like this before. So good to find somebody with original thoughts on this topic. Seriously.. thanks for starting this up. This website is something that’s needed on the internet, someone with a little originality!|

    Reply
  41. Jamison Helgeson

    We’re a group of volunteers and opening a new scheme in our community. Your web site offered us with helpful info to work on. You have performed a formidable activity and our entire community shall be thankful to you.|

    Reply
  42. Kenny Moschetti

    I’m not sure where you’re getting your info, but great topic. I needs to spend some time learning much more or understanding more. Thanks for great info I was looking for this information for my mission.|

    Reply
  43. Julissa Leviner

    Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates. I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.|

    Reply
  44. Marlin Yurchiak

    My partner and I stumbled over here different web address and thought I might check things out. I like what I see so i am just following you. Look forward to looking over your web page yet again.|

    Reply
  45. rocket league car hitboxes

    Thanks for a marvelous posting! I quite enjoyed reading it,
    you could be a great author.I will make certain to bookmark your blog
    and may come back from now on. I want to encourage yourself
    to continue your great work, have a nice morning!

    Reply
  46. houston junk car buyer

    Good day! I know this is kinda off topic nevertheless I’d figured I’d ask.

    Would you be interested in exchanging links or maybe guest writing a blog post or vice-versa?
    My blog goes over a lot of the same subjects as yours and I believe we could
    greatly benefit from each other. If you happen to be interested feel free to send me an e-mail.
    I look forward to hearing from you! Excellent blog by the way!

    Reply
  47. Damion Mcnew

    Greetings from California! I’m bored to tears at work so I decided to browse your site on my iphone during lunch break. I love the knowledge you present here and can’t wait to take a look when I get home. I’m surprised at how quick your blog loaded on my cell phone .. I’m not even using WIFI, just 3G .. Anyways, awesome blog!|

    Reply
  48. Carrol Ovesen

    My brother recommended I might like this blog. He was entirely right. This post actually made my day. You cann’t imagine simply how much time I had spent for this information! Thanks!|

    Reply
  49. Louie Duty

    A fascinating discussion is worth comment. There’s no doubt that that you need to publish more on this subject matter, it might not be a taboo subject but generally folks don’t speak about such topics. To the next! Many thanks!!|

    Reply
  50. Mack Margot

    Terrific article! That is the type of information that are supposed to be shared around the net. Disgrace on the seek engines for now not positioning this submit higher! Come on over and talk over with my website . Thank you =)|

    Reply

Leave a Reply

Your email address will not be published.

Thank you for your upload