Nov 2010 opportunity assessment

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  • 1. DRAFT DRAFT 2010 Opportunity Assessment Dale Fickett Co-founder, Profit2 dfickett@hotmail.com +353 87 998 2616 (Ireland) +1 856 481 0322 (United States)
  • 2. DRAFT This document has been prepared by Dale S. Fickett and Profit2, and is being furnished to select individuals for the purpose of conveying the nature of a new business venture model, and to develop partnering relationships with appropriate individuals and entities. It contains confidential information relating to trade secrets and intellectual property, including but not limited to: ideas, concepts, strategies, plans, research, processes, approaches, methods and other proprietary information. Readers are to treat the information herein as confidential, and agree to not compete with Profit2 or Dale S. Fickett using the information contained herein. Furthermore, readers may request permission to distribute this information from Dale S. Fickett, and should not otherwise do so. “He is now rising from affluence to poverty.” -Mark Twain “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” -Confucius Table of Contents “Poverty is my pride.” Executive Summary -The Prophet Muhammad 2
  • 3. DRAFT Table of Contents I. The African Development Context.................................................................................................. 5 Introduction – The Need for Action in Sub-Saharan Africa ................................................................ 5 Context – Global Development Efforts ............................................................................................... 5 Measuring Development Progress in Sub-Saharan Africa .................................................................. 6 Conclusion ........................................................................................................................................... 7 II. African Economy and Other Macro-Factors ................................................................................... 7 Resiliency and Growth ........................................................................................................................ 7 Economic Growth Drivers ................................................................................................................... 8 Risks to Economic Growth .................................................................................................................. 9 Additional Macro-Factors ................................................................................................................... 9 Conclusion ......................................................................................................................................... 11 III. African Entrepreneurship and Innovation ................................................................................ 11 Global Entrepreneurship................................................................................................................... 12 Sub-Saharan African Entrepreneurship ............................................................................................ 12 Alleviating Poverty through Entrepreneurship ................................................................................. 13 IV. Country Analysis........................................................................................................................ 13 Framework for Determining Attractive Markets .............................................................................. 13 Financial Return Dimension .............................................................................................................. 14 Social Return Dimension ................................................................................................................... 18 Mapping Attractive Countries........................................................................................................... 18 National Advantage Diamond Analysis ............................................................................................. 28 Conclusion ......................................................................................................................................... 32 V. Industry Analysis ........................................................................................................................... 32 Industry Definitions........................................................................................................................... 32 Why Incubators and Early Stage Investment? .................................................................................. 33 Business Incubation in SSA ............................................................................................................... 35 Private Equity in SSA ......................................................................................................................... 36 Size and Growth Rates ...................................................................................................................... 37 Value Chain Analysis ......................................................................................................................... 41 3
  • 4. DRAFT Conclusion ......................................................................................................................................... 44 VI. Next Steps ................................................................................................................................. 44 VII. Sources ...................................................................................................................................... 45 VIII. Appendices ................................................................................................................................ 46 List of African Small Business Incubators.......................................................................................... 46 List of Private Equity Providers in Africa ........................................................................................... 49 4
  • 5. DRAFT I. The African Development Context Introduction – The Need for Action in Sub-Saharan Africa There are three primary challenges for society, and for our generation – the threat of terrorism and the need for nuclear non-proliferation, containing climate change, and eradicating extreme poverty. While it is more convenient to discuss the amelioration of extreme poverty, our goal must be clear – to ensure that no human being must suffer the indignities of living on less than $1.25 per day. According to the World Bank’s World Development Indicators 2010, the world population stood at 6,697,300,000 in 2008, and one in four, or 1,374,000,000 have been doing just this.1 These people face a daily fight to meet basic survival needs, such as adequate nutrition, uncontaminated drinking water, safe shelter and access to basic health care.2 In Sub-Saharan Africa just over half the population lives in this extreme state of poverty, the highest poverty rate for any world region. Not only do these people live at subsistence level, but they are in countries of low economic development – there are also very low education and health standards. Sub-Saharan Africa, as a region, is the world’s largest collection of countries of Low Human Development. In fact, according to the UN’s Human Development Report 2010, at present, there are just over 1 billion people living in countries with these poor conditions, and just over 80% of them live in Sub-Saharan Africa.3 Context – Global Development Efforts Global development efforts, or targeted interventions to improve the livelihoods of people living in poverty, are said to have started with the 1944 establishment of the U.S.’s Marshall Plan and the establishment of the World Bank and International Monetary Fund at the Bretton Woods Conference.4 Since their inception it is estimated that $1 trillion5 has been spent in private-, civil-, and public- sector activities.6 Although there are clearly many programs targeting poverty in developed countries, “global development” efforts are generally regarded as those focused specifically on the poor living outside North America, Western Europe and developed Asia. These efforts focus on three objectives: 1) to increase the availability and widen the distribution of basic life-sustaining goods; 2) to raise the levels of living; and 3) to expand the range of economic and social choices.7 It is encouraging to note that there have been large improvements in alleviating poverty. To put today’s situation into context, in 1820, at the dawn of the industrial revolution, it is estimated that 75% of humanity lived in these conditions of poverty8. In short, technology improvements that have enabled mass production, instantaneous transmission of information, and global trade have also lifted billions out of a state of poverty. 1 World Bank (2010), p. 64 and p. 92. $1.25/day poverty population and rates are based on 2005 estimates. 2 Sachs (2005), p. 56 3 UN (2010), p. 187 4 See Führer (1996). 5 Moyo (2009), p. xix 6 See Fickett (2010), pp. 8-11, for further discussion on the background of economic development in Sub- Saharan Africa. 7 Todaro (2006), p.22 8 See http://en.wikipedia.org/wiki/Poverty_reduction 5
  • 6. DRAFT Measuring Development Progress in Sub-Saharan Africa For those that have not escaped extreme poverty, coordinated international intervention improved dramatically with the establishment of the Millennium Development Goals in 2000. Over the last ten years, through the global pursuits of these goals, it has been found that the achievement of these standards of living improvements was made easier in states experiencing economic growth, as compared to stagnant states; and that solutions in one state or region do not easily convert to others.9 As a result of these efforts, (since 2000) 37 million more children have been able to attend and complete primary school; 14 million children have been vaccinated against the measles; and the number of children (under age 5) dying has fallen from 10 million per year to 8.8 million per year. Four out of five people in developing countries now live in states that have attained gender equality in primary and secondary education; and seven out of ten people in developing countries live in states that have halved the proportion of people without access to clean drinking water.10 Economic growth remains strong in many developing countries, and achieving the Millennium Development Goals is within reach, despite setbacks incurred as a result of food crises, the financial crisis, and the resulting economic downturn. However, there is still much progress to be made in assisting the developing world in lifting their standards of living. 11 Only 16% of the developing world’s population live in countries where the proportion of people without access to basic sanitation has been halved. At present, seven out of ten countries are off-track to meet this goal in 2015. The slowest progress has been in addressing childhood malnutrition – 56% of the developing world population lives in the 102 countries that are unlikely to attain this goal.12 While the global numbers are encouraging, reaching the Millennium Development Goals in Sub- Saharan Africa is off-track in some regards. In the region, higher unemployment, falling incomes and lower migrant remittances have slowed progress towards reaching the MDGs.13 Those areas requiring most attention for SSA, include: The proportion of people living on less than $1.25/day has only decreased from 58% to 51%; Gender equality in education has improved at primary school level, but has fallen at secondary and tertiary levels; Giving birth in Sub-Saharan Africa is especially risky, where 46% of women deliver without skilled care; The spread of HIV appears to have stabilized, and more people are surviving longer (but correct transmission knowledge among the 15-24 age group is worst in Sub-Saharan Africa ; Forested area as a percentage of land area, has fallen from 31% to 28%, while billions of metric tons of carbon dioxide emissions have been increasing; and Overseas development aid continues to rise, but Africa has been short-changed. Fortunately, progress has been made regarding: Primary school enrolment ratio for 1998-99 was 58%, and has improved to 76%; and The under-5 mortality rate has fallen from 184 per 1,000 births, to 144 (but is still the world’s highest incidence rate).14 9 World Bank (2010), pp. 1 - 3 10 Ibid. 11 UN (2010b), pp. 1-3 12 Ibid. 13 IMF (2010), pp. 3 – 14 14 See UN (2010b). 6
  • 7. DRAFT Conclusion Efforts to address progress in these areas are undertaken by a wide array of development stakeholders, including: inter-governmental organisations, private sector corporations, civil-sector NGOs, and government agencies. In brief, their efforts can be categorized as: 1) Working at a macro-policy level to influence politicians and regulators to create ecosystems more conducive to economic growth that facilitates poverty alleviation; 2) meso-level interventions, such as those intended to construct and augment industry value chains or other community support systems; and 3) micro-level programs to support individuals, their families or their businesses. Note: For further discussion on global development in Sub-Saharan Africa, please see Fickett (2010): Development Stakeholders, pp. 5-7; Economic Development in Sub-Saharan Africa, pp. 8-11; and Private Investment and Economic Growth, p. 11. Economic development, or the improvement of livelihoods for those who most need it, has come as the result of government policy to enable growth in the private sector. More economic opportunity has generally meant higher incomes, better education and better health care. However, the rising tide of economic activity does not lift all ships, and there are many cases of those left behind – both individuals in countries which have improved, as well as whole nations that have struggled to improve conditions for their populations. This resultant inequality has been the driving force behind sizeable efforts by many stakeholders. These groups from the private-, civil- and public-sector have sought to address the challenges of laggard countries through interventions to spur development which addresses these inequalities in standards-of-living. Historic efforts in parts of Asia and Latin America have been commended as largely successful in improving the livelihoods for hundreds of millions. However, Sub-Saharan Africa in particular, still faces arguably the largest challenges in improving livelihoods. The nature of the development challenges in SSA range from poor access to income-generating economic activity – to low access to education – to low levels of health care. We appear to be on the cusp of a large wave of new economic growth in SSA, one which has the potential to make tremendous gains in addressing these inequalities at their most extreme, and one which necessitates concerted effort to direct benefits to those that are in most need. II. African Economy and Other Macro-Factors Resiliency and Growth Although Sub-Saharan Africa is clearly facing a range of developmental issues regarding the conditions in which people live, there is also much cause for enthusiasm related to the region’s prospects for future improvements. 2010-2020 is likely to be the first time since the industrial revolution that developing countries add more to global economic growth than developed countries15, and Africa will play a leading part in this growth. Africa (including North Africa) has gross domestic product of $1.6 trillion, roughly the size of Brazil or Russia.16 The IMF predicts a strong re-bound for Sub-Saharan Africa, with a 5% growth rate for 2010 and 5.5% for 2011. For most countries in the region, this will mean a return to 15 McKinsey (2010), p. 4 16 Ibid., p. 11 7
  • 8. DRAFT their pre-crisis level. In fact, only developing Asia is set to outpace Sub-Saharan Africa’s growth.17 The Emerging Market Private Equity Association concurs, stating, “Sub-Saharan Africa represents one of the most dramatic growth stories among emerging markets.”18 The outlook for 2011 and beyond is promising. Growth is expected to accelerate to 5.5%, and no country is expected to have negative growth in 2011 (a rare historic occurrence).19 Across the region, fiscal balances are expected to improve. Government debt-to-GDP is expected to rise, however deterioration should be mild due to anticipated debt relief, and improved tax revenues. Only a slight deterioration in the external account balances is expected as demand is expected to fall slightly, and little change in currency reserve positions is expected.20 Economic Growth Drivers The region’s growth is explained by several factors. First, policy changes of the last decade are making a difference. Political commitment has resulted in stronger fiscal and monetary stability, investments in infrastructure and education, and increases in trade.21 Second, Africa (including North Africa) has been helped by post-crisis global trade, and a rebound in commodity prices.22 The increase in global trade has been focused on faster-growing geographic segments of the global economy – China, Latin America and developing Asia.23 Also, economic activity is rebounding due to a resurgence in mining and demand for consumer and capital goods.24 Third, capital flow changes as a result of the financial crisis and the broader economic downturn are mixed. The slowing of global Investment Trends in Sub-Saharan Africa • Half of the 2010 inward FDI flows of $1.2 trillion now go to developing and transition economies • With 5.3% of global inward FDI, SSA is the smallest region for receiving investment, and is expected to remain so through 2012 • 2009 FDI flows to Africa fell 19% to $59 billion, the first decrease in a decade • In 2009 outward FDI from Africa contracted by 50% to $5 billion • The pre-crisis level of FDI is not expected to be reached again until 2012, with an estimate at $1.6 - $2 trillion • The ten year annualized return for the Africa composite index is 13.8%, compared with -1.0% for the Dow Jones and 7.3% for the MSCI Emerging Markets index Source: UNCTAD, EMPEA 17 IMF (2010), pp. 3 - 14 18 EMPEA (2010), p. 11 19 Ibid. 20 Ibid. 21 McKinsey (2010), p. 37 - 39 22 OECD (2010), pp. 7-9 23 IMF (2010), pp. 3 - 14 24 Ibid. 8
  • 9. DRAFT capital markets resulted in weaker Foreign Direct Investment (FDI) fell, especially in non-extractive industries (see below).25 However, the outlook for FDI into the ‘higher value’ services and manufacturing industries is promising, as governments enact investment-friendly policy frameworks. Interestingly, existing investments earn returns 2/3 higher than those in China, India, Indonesia and Vietnam.26 Weaker demand and higher unemployment outside Africa reduced worker remittances, while overseas development assistance (ODA) has generally held up. Fourth, past macro-economic prudence has enabled expansionary fiscal and monetary.27 Finally, Africa has a range of longer-term factors which demonstrate large expansionary headroom - large untapped natural resources (of greater value when considered in terms of rising commodity prices), growing populations with increasing levels of discretionary income, potential in hydro and solar power due to geography, and potential to displace Asia as the low-cost manufacturing hub, given proximity to European and North American consumers, long coastlines, and wage dynamics.28 Risks to Economic Growth Downside risks to the growth scenario, in the short term, include: Weakening of global demand; Depression in commodity prices, or increased price volatility; Weakened investment due to higher costs of capital; Shortfalls in overseas development aid due to developed country fiscal pressures; and Localized conflict, financial system deterioration, poor public policy changes or natural disasters. 29 Additional Macro-Factors The following table illustrates a range of other macro-factors of interest when considering African potential for economic growth and for the alleviation of African poverty (for further discussion on trends as they impact African entrepreneurship, please see section IV): Factor Source Economic Increasing economic diversification, with agriculture, wholesale and McKinsey retail, transportation, telecommunications and manufacturing accounting for 67% of growth between 2000 and 2008 Increasing demand from developing countries for African resources in Accenture timber, agriculture, fresh water and mineral deposits Large oil-exporting and middle-income countries have faced increases in IMF unemployment, but less significant than that experienced in developed markets As the financial crisis unfolded, governments were able to enact counter- IMF act decreasing investment inflows with higher fiscal spending, and monetary rates were lowered where possible Capital inflows into Africa (including North Africa), have increased from McKinsey $9B in 2000 to $62B in 2008 – relative to GDP, comparable to China 25 OECD (2010), pp. 7 - 9 26 Collier (2010), p. 61 - 63 27 See IMF (2010), pp. 3 – 14, McKinsey (2010) p. 4 28 Accenture (2010), p. 5 – 7; Collier (2010), pp. 61 – 63; and McKinsey (2010), p. 13 29 Downside risks drawn from OECD (2010), p. 7 – 10; McKinsey (2010), p. 11; and IMF (2010), p. 14 - 16 9
  • 10. DRAFT Capital flows are increasing due to intra-Africa trade, and that African Accenture traded companies enjoy ROIC that is 65% higher than those in China, Vietnam and India. Demographics & Social Increasing urbanization and changes in income have resulted in an Accenture emerging African middle class, representing 35% of the population In 1980 20% of the population lived in cities, it’s now approximately 40% McKinsey - roughly comparable to China and India. By 2030 it is expected to rise to 50%, and the top 18 cities are expected to have combined spending power of $1.3 trillion. In 2000 59M African households had income of $5000 or more; in 2014 McKinsey it is expected to rise to 106M households Africa already has more households with over $20,000 in annual income McKinsey than India Work patterns have changed, as the services industry now makes up Accenture more than 40% of Africa’s GDP By 2040 Africa is expected to have a workforce of 1.1 billion, larger than McKinsey China or India Tertiary educational enrolment have grown at 12% since 1975, but Accenture challenges remain to stem graduate emigration On average, Africans are half as expensive to employ as their counter- Accenture parts in Latin America, Asia and Central Europe Political & Regulatory African governance is improving, with over 20 countries encouraging McKinsey greater political participation since 1989. Continental coordination and trade are improving though the African Mo Ibrahim Union, the New Economic Partnership for African Development and Foundation regional trade blocs Of Africans surveyed across 19 countries – 65% hold community Mo Ibrahim meetings; 55% were active in joining others to raise issues; and 62% Foundation believe they should question leaders’ actions Almost every African nation has an independent media Mo Ibrahim Foundation Privatization of state-owned enterprises, removal of trade barriers, McKinsey strengthened regulatory and legal systems have all increased attractiveness of inward FDI Nigeria has led the region in privatization—the World Bank estimates Emerging that between 2000 and 2008, Nigeria privatized 105 enterprises valued Markets Private at nearly US$6.5 billion. Ghana privatized seven enterprises valued at Equity US$1.1 billion and South Africa saw 13 enterprises privatized for US$780 Association30 million in the same time period. Cultural Cultural variation between and within countries is significant – with Africa Guide31 performance and celebration customs, and traditional visual arts and crafts focused on family and ethnic groups Strong linguistic heritage with over 2,000 indigenous languages. Official Wikipedia32 languages in many countries tied to European colonialism. 30 See EMPEA (2010), p. 12 31 See http://www.africaguide.com/culture/index.htm 32 See http://en.wikipedia.org/wiki/Languages_of_Africa#Official_languages 10
  • 11. DRAFT Primary cultural trends, include: reverse innovation, growth in mobile Globalpost.com33 connectivity, rise of the African creative class, the Africa brand and related tourism, the rise of African / African-American initiatives, and increased trade and investment with China and India Technology Productivity is improving, currently averaging 2.% growth since 2000, McKinsey based on high mobile phone penetration rates, increasing competition and growing economies of scale Mobile phone penetration rate is currently at 50%, is among the world’s Economist fastest growing; and is creating unique innovations such as mobile banking and electronic stored value Kigali recently announced its plans to for ubiquitous wireless internet IT News Africa access, at an investment of $7.66M Increasing broadband connectivity is driving growth in African Accenture outsourcing businesses Reverse innovation and the rise of emerging market consumers are Accenture placing new demands on traditional consumer products companies in developing low-cost/high-quality offerings that meet local needs, and in selling to these consumers through unfamiliar channels Conclusion Despite the development challenges discussed in section II, there are significant predictions for economic growth in SSA. It has been demonstrated that SSA is returning to pre-crisis trends, and will rival the established BRICs as an engine for post-crisis growth. This economic growth is driven by: macro-economic stability, pro-investment/pro-business policy environments, fairly favorable capital- flow dynamics, and a range of favorable geographic and demographic factors. The challenge remains how to harness this forthcoming wave of activity to benefit the poor. Work in developmental entrepreneurship, including systems approaches, inclusive markets approaches, and sustainable livelihoods approaches looks to provide an answer. If this work offer the design of the ‘vessel’ by which we will ride this economic growth wave,34 then impact investing provides the engine by which the vessel can be powered to create exponential impact in poverty alleviation. III. African Entrepreneurship and Innovation Following the G20 summit on November 15, 2008, the leaders of the worlds largest economies issued a statement explaining how they intended to restructure the worlds economic architecture. On the first page of this statement, they stated: “Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction.”35 33 See http://www.globalpost.com/webblog/commerce/top-6-african-business-and-culture-trends-watch-2010 34 See Fickett (2010), pp. 3 – 5 for further elaboration on developmental entrepreneurship in the academic literature. 35 Klapper et. al. (2009), p. 2 11
  • 12. DRAFT The OECD defines “entrepreneurship” as the phenomenon associated with enterprising human action in pursuit of the generation of value through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. It is essential for the continued dynamism of the modern market economy and a greater entry rate of new business can foster competition and economic growth.36 Specifically, entrepreneurship, or the creation of new private- sector, profit-generating businesses, has been recognized as: A key catalyst for creating new technologies, products, processes and services; An engine by which financial value is created through high potential, high growth companies; That financial value supports significant job creation; and Entrepreneurs are increasingly identifying new models for creating social impact, in areas such as housing, health care, education, the arts, and poverty alleviation. 37 Global Entrepreneurship Globally, entrepreneurship is primarily measured through the Global Entrepreneurship Monitor (GEM) and the World Bank Group Entrepreneurship Survey (WBGES) dataset. The former captures early-stage entrepreneurial activity and entrepreneurial intent, especially in the informal sector; while the latter captures formal business registration.38 Recently, the GEM found that the 2009 economic downturn, expectedly, reduced the number of people initiating new ventures for two- thirds of the 54 countries surveyed.39 Also, GEM recently found: 1) Across countries, entrepreneurial attitudes and perceptions vary widely and are positive views are generally related to higher social status and higher media visibility for successful entrepreneurs; 2) development; 3) Countries with high levels of employment protection exhibit lower start-up rates; 4) Entrepreneurial institutional supports are generally more important within countries at more advanced phases of economic development; and 5) the economic downturn has resulted in decreased informal/angel investing, as well as venture capital investments in nearly all markets. According to the findings of the WBGES: 1) In developed countries four new firms register for every 1,000 people in the labor force, while there is less than one for countries of medium and low development; 2) Data show that dynamic business creation occurs in countries that provide entrepreneurs supportive policy and regulatory environments; 3) Concurring with the GEM, almost all countries noticed a drop in new business registration as a result of the global economic downturn; and 4) Countries in which the financial services sector plays a larger role in the domestic economy, experienced sharper declines in new business formation.40 Sub-Saharan African Entrepreneurship Like other regions of the world entrepreneurship in Sub-Saharan Africa is a key component of economic activity. Since 2004 the WBGES has captured the creation of 2,690,818 new firms in SSA, 36 See Klapper et al. (2007), p. 2; Klapper, Laeven and Rajan (2007); Djankov, La Porta, Lopez de Silanes and Shleifer (2002). 37 Timmons and Spinelli (2003), p. 19. Also, see Global Entrepreneurship Monitor (2009), p. 7, in relation to social entrepreneurship. GEM found that in the 49 countries studied 1.8% of the adult population was engaged in social entrepreneurial activity. 38 Acs et. al (2007), p. 11 39 Global Entrepreneurship Monitor (2009), 5 - 7 40 See World Bank (2010b). 12
  • 13. DRAFT or 14% of the 18.7 million started globally.41 As SSA’s portion of global economic output is much smaller at 1.52%42, arguably SSA is beginning to generate a ‘more than their share’ of the world’s small businesses. Moreover, this does not account for the substantial portion of informal economic activity in SSA, which is not captured by the WBGES survey. A 2007 study of Micro, Small and Medium Enterprises (MSMEs) by the International Finance Corporation, included eight SSA countries, and captured 4.5 million such businesses, or 27.5 MSMEs per 1,000 Sub-Saharan Africans.43 Additionally, these MSMEs were shown to contribute 38% to 66% of their respective country’s employment.44 Indeed, McKinsey recently agreed with this assessment of the importance of the entrepreneurial sector in Africa’s growth, stating, “Entrepreneurship is seen as a significant component to private sector growth (in Africa).”45 Alleviating Poverty through Entrepreneurship A range of initiatives under numerous headings have been initiated to harness the power of private markets, and more specifically, entrepreneurship, to alleviate poverty – “Pro-poor growth”, “Inclusive Markets”, “Sustainable Livelihoods”, “Enterprise Development”. In short, developmental entrepreneurship is the study of utilising the establishment of small businesses as a lever to alleviate poverty in countries with low levels of economic development. There is a significant body of research supporting the assertion that new ventures can be used as a vehicle for poverty alleviation. The OECD promotes the “central role” of the private sector in poverty alleviation46; while the UN Development Program states, “The poor harbor a potential for consumption, production, innovation, and entrepreneurial activity that is largely untapped.”47 They also site many examples of businesses that are creating “value for all” by buying from, and selling to, the poor.48 Finally, the WBGES shows relationships between entrepreneurial activity and indicators of economic growth and development.49 Note: For further discussion on developmental entrepreneurship and poverty alleviation in SSA through entrepreneurship, please see Fickett (2010): Economics and Management Literature, pp. 3 – 5; Poverty Alleviation through Developmental Entrepreneurship, pp. 12 – 13; and Research on Addressing Developmental Entrepreneurship Opportunities, pp. 13 – 17. IV. Country Analysis Framework for Determining Attractive Markets Sub-Saharan Africa is a diverse collection of 46 countries, and each has a unique policy environment, structure of economic output, technology landscape and social profile. As such, it is necessary to understand which countries are the most conducive for developmental entrepreneurship ventures. 41 See WBGES Dataset 2010 available at: http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:22731215~pagePK:642 14825~piPK:64214943~theSitePK:469382,00.html 42 World Bank (2010), p. 34 43 See IFC dataset on MSMEs available at: http://www.ifc.org/ifcext/sme.nsf/Content/Resources 44 Ibid. 45 McKinsey (2010), p. 69 46 OECD (2006), pp. 14-15, 20 47 UN Development Programme (2008), pp. 1-12 48 Ibid 49 Klapper, et. al. (2007), pp. 15 – 17, 32 13
  • 14. DRAFT In consideration of a determination of which national markets are most attractive, it is first necessary to define the two primary dimensions along which a developmental entrepreneurship opportunity should be measured – social and financial (see figure 1). First, it must provide a demonstrable impact in the alleviation of poverty in the markets in which it operates, through job creation, income increases, direct standards-of-living improvements related to the products or services provided, secondary effects related to the use of local supply chain partners, or secondary effects related to livelihood impacts – increased educational enrolment or health improvements for the families of indigenous entrepreneurs. Also, the given venture may create tertiary impacts, such as improved perceptions of entrepreneurship, spill-over effects related to knowledge capital, and improved entrepreneurial networks and role models. Second, a given venture must generate financial returns commensurate with its capital requirements and capital structure. In order for the venture to be self-sufficient over the long-term, it must create enough economic value to repay creditors and/or generate risk-adjusted returns for providers of equity capital. Initiatives reliant on grants and subsidies are inherently time-bound due to the nature of the financing. Developmental entrepreneurship ventures are self-sustaining. Note: For further discussion on the social and financial components of developmental entrepreneurship opportunities, please see Fickett (2010), pp. 20 – 24. Illustrative Not-for-Profit and Most Attractive Social Return Dimension Public Sector Space Opportunities Least Attractive Private Sector Space Opportunities Financial Return Dimension Figure 1: Mapping Social and Financial Returns Financial Return Dimension The WBGES demonstrates a range of considerations to utilize when comparing countries’ conduciveness for entrepreneurial activity. First, the quality and efficiency of the legal, regulatory 14
  • 15. DRAFT and governance environments are the primary determinants of entrepreneurial activity.50 Interestingly, Ghana and South Africa have recently been found to be less corrupt than China, India and Brazil.51 Second, business density, or the number of registered business per member of the labor force, is another key indicator of entrepreneurial conduciveness.52 Third, the Doing Business53 rankings are strong indicators of business density and entry, or the number of new businesses registered.54 Forth, and intuitively, the cost of starting a business as a percentage of per capita Gross National Income (GNI) is also a key factor in entrepreneurial activity. For every 10 percentage points decrease in the cost of starting a business (as a percentage of per capita GNI), the business entry rate will increase by 1%.55 Fifth, the log Gross Domestic Product (GDP) per capita and domestic credit accessibility are both strongly correlated with business entry, however no causal relationship has been established.56 Concurring with these points, the IFC recently found that businesses are created at a faster rate in countries with good governance, a strong regulatory and legal system, low corporate taxes, and less administrative procedures when dealing with public-sector agencies.57 The extent to which the national environment is supportive of entrepreneurship and innovation is another important dynamic in relation to the attractiveness of a given country. According to a recent report of the OECD, “the major function of SMEs and entrepreneurship in innovation is the introduction of advances in products, processes, organizational methods and marketing techniques into the economy.”58 Innovation drives the creation of jobs and economic growth; and innovation policy seeks to foster supportive environments. It happens in developed and developing countries alike; and innovation policy must take into account local conditions, economic inequalities, demographic challenges, and activity of the informal sector.59 The European Union Lisbon Treaty identified three factors in the uptake of new technology – R&D expenditure, structural reforms, and market de-regulation; and subsequently, a 2007 African Union summit adopted a science and technology plan of action, with the New Economic Partnership for African Development (NEPAD) overseeing a science and technology program.60 Furthermore, innovation is at the heart of economic development, social welfare and protection of the environment – with the World Bank declaring, “Innovation is the main source of increased performance, of getting more out of limited resources, of finding new ways to use existing resources, and to mobilize people to produce better goods and services.”61 The following table provides selected areas of African innovation by industry sector, including both opportunities and recent innovations: 50 Klapper, et al. (2007), p. 2-3, 15 - 18 51 See Transparency International (2010). 52 Ibid. 53 See World Bank (2010c). 54 Klapper, et. al. (200&), pp. 18 - 21 55 Ibid. 56 Ibid. 57 IFC (2010), p. 1 58 OECD (2010b), p. 32 59 OECD (2010c), p. 9 - 12 60 See OECD (2009), p. 81; OECD (2010c), p. 9 - 12 61 World Bank (2010d), pp. 22 - 24 15
  • 16. DRAFT Innovation Instances and Opportunities Source Agribusiness Agricultural productivity improvements provide a significant opportunity, as World Bank productivity is the primary driver of poverty reduction, as livelihood impact is (2009) gauged to be 4 times greater in agriculture than other sectors, and as crop yields in SSA have remained stagnant since the 1960s. 70% of people live in rural communities, and 90% of rural populations depend on agriculture for their primary source of income. Research in high-yield seedlings through Cameroon’s Institute of Agricultural Accenture Research for Development Financial Services Safaricom Ltd., with its M-PESA offering, allows customers to send money by Accenture using mobile SMS services. There are currently 6 million users. There are now similar services in Tanzania, Uganda, Rwanda, Sierra Leone, South Africa and Somalia. South Africa’s First National Bank has introduced an eWallet solution. Accenture Mobile banking product enabling Kenyan farmers to purchase insurance against Accenture poor weather conditions and low crop yields. Aquaculture Aquaculture has a demonstrated capability to reduce poverty, improve World Bank livelihoods, and be a significant engine of growth, yet the fisheries sector is (2007) poorly planned, inadequately funded and neglected by governments. Health Care Introduction of telemedicine call centers and mobile clinics McKinsey Shifting first-line medical inquiries to nurse-practitioners to better utilize McKinsey doctors’ capacity Information & Communication Technologies Introduction of solar powered internet kiosks in Kenya, Nigeria, Rwanda, and Accenture Zambia. Opportunities related to Africa’s position as the fastest-growing region for OECD (2009) mobile phone use, and the only region where mobile phone penetration trumps fixed-line prevalence. Algeria, Botswana, Mauritius and Rwanda have stated ambitions of becoming OECD (2009) regional ICT hubs. The ability to capture an innovative idea, to translate that idea to a suitable offering, and to deliver it to market in a profitable fashion is dependent upon the dynamics of the geographic and product market, and the capabilities of the firm. Differences in total factor productivity account for roughly half the differences in income across countries, and are generally associated with differences in technological progress.62 A country’s ability to harness innovation is therefore a key element in the determination of a country’s attractiveness for developmental entrepreneurship activities. Simply put, the more innovation that is currently present in a given market, the more that there is likely to be in the future. There are several other factors which provide insight into a given country’s ability to support entrepreneurship and innovation. One of the strongest determinants of entrepreneurial and 62 de Mel, et. al (2009), p. 23 16
  • 17. DRAFT innovation potential is the educational level achieved by the individual entrepreneur.63 It stands to reason that a country with a higher proportion of its population achieving tertiary education, is more conducive to innovation than one with a lower level of educational achievement. Also, as one might expect, the extent to which a country invests in research and development activities is also positively correlated to growth and innovation.64 International relationships through trade and receipt of inward FDI are also strong indicators of innovation. The extent to which a country receives inward FDI, is a strong indicator of its ability to support private-sector activity. According to Gorodnichenko et. al. vertical transfer of capabilities from foreign to domestic firms and FDI spill-over are significant. .65 Two industries – infrastructure and natural resources dominate as destinations for inward FDI, and along with activity in the informal sector, are strong loci of innovation.66 Pressure from foreign competition has a positive effect on innovation, as these firms are more likely to upgrade their product, acquire a new technology, and obtain a new accreditation.67 Furthermore, globally engaged firms are larger, more productive, more capital intensive, and pay higher wages than purely domestic firms. In short, engaging in global supply chains, through either trade or receipt of investment, tends to spur innovation. There are a range of factors which serve as indicators of a given county’s conduciveness for entrepreneurial activity, and these factors serve as the components for our ‘Business Viability Index’. The economic factors include: Market Size, as measured in 2008 GDP;68 Market Growth, as measured by a simple average of the 2009-2011 estimates of real GDP growth;69 Global Competitiveness, as measured by the World Economic Forum’s Global Competitiveness Index, including assessments of institutions, infrastructure, macro- economic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation;70 Attractiveness as an Investment Destination, as measured by 2008 inward FDI as a proportion of GDP;71 Strength of Exporting Capabilities, as measured by the 2008 value of exports per capita;72 The political, legal and regulatory factors include: Strength of Governance, utilizing an average of the World Bank governance indicators across the six dimensions – voice and accountability, political stability and absence of 63 Ibid. 64 Ibid. 65 Şeker (2009), p. 2 66 OECD (2010c), p. 65 – 66, p. 83 67 Gorodnichenko et. al. (2009), p. 15, 28 68 Analysis conducted using data from UN (2010), p. 206 – 208. 69 Analysis conducted using data from IMF (2010), p. 72. 70 Analysis conducted using data from WEF (2010), p. 15. 71 Analysis conducted using data from OECD (2010), p. 252 – 253. 72 Analysis conducted using data from World Bank (2010), p. 238 – 241, p. 246 – 249. 17
  • 18. DRAFT violence or terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption;73 Ease of Doing Business, drawing from the World Bank’s Doing Business ranking, including starting a business, dealing with construction permits, registering a property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business74; and Corruption Perception, as measured by Transparency International’s corruption perception index.75 Social Return Dimension The extent to which developmental entrepreneurship initiatives will create poverty alleviation impact is by a more straight-forward set of factors. First, it’s necessary to work in an area in which there are significant amounts of people living below the $1.25/day international poverty line. Second, those countries in which levels of human development, including education and health care provision, are lower provide greater opportunities to make a social impact. Utilising these two factors, we have constructed our ‘Social Impact Index’: Number of People Living on $1.25/day76; and Human Development Index Value.77 Mapping Attractive Countries Utilizing the Business Viability Index and the Social Impact Index, we have categorized the 46 SSA countries accordingly. Please note, that the diagrams below also provide the size of the country’s economy (bubble diameter is on a logarithmic scale), the bubble text indicates the 2010 estimate of GDP growth, and the bubble color indicates the country’s level of human development (red=low, yellow=medium, and green=high): 73 Analysis conducted using data from Kaufman et. al. (2010). 74 Analysis conducted using data from World Bank (2010c). 75 Analysis conducted using data from Transparency International (2010). 76 Analysis conducted using data from UN (2010). 77 Ibid. 18
  • 19. DRAFT 100 Low Social Impact Potential and Low Business Viability Climate Ethiopia 8% 80 Social Impact Index 60 Guinea Côte 3% d’Ivorie Sudan 3% 4.2% 40 Togo Comoros 3.3% Mauritania 2.1% -1% 20 Congo 10.6% Equatorial Guinea São Tomé 0.9% and Príncipe 4.5% Gabon 4.5% 10 20 30 40 50 60 70 80 90 100 Business Viability Index Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data. Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data. High Social Impact Potential and Low Business Viability Climate Democratic Rep. 100 of Congo Niger 5.4% 3.5% Zimbabwe Eritrea 5.9% 1.8% 80 Burundi Chad Guinea- 3.9% 4.3% Bissau Sudan 3.5% 4.2% Social Impact Index 60 Guinea Angola Sierra 3% 5.9% Leone 4.5% Central African Republic 40 3.3% 20 0 10 20 30 40 50 60 70 80 90 100 Business Viability Index Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data. Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data. 19
  • 20. DRAFT 100 Low Social Impact Potential and High Business Viability Climate 80 Social Impact Index 60 Kenya 4.1% South Africa Cameroon 3% 40 Lesotho Benin 2.6% Gambia 5.6% 2.8% 5% Botswana 6.6% Swaziland 20 2% Cape Verde Namibia 4.1% 4.4% Mauritius Seychelles 3.6% 0.7% 0 10 20 30 40 50 60 70 80 90 100 Business Viability Index Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data. Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data. High Social Impact Potential and High Business Viability Climate 100 Mozambique Ethiopia 6.5% Tanzania 8% Nigeria 6.5% 80 7.4% Burkina Zambia Faso 6.6% 4.4% Malawi Senegal Social Impact Index 60 6% Rwanda 4% Mali 5.4% 5.1% Ghana Angola Uganda 5% 5.9% 5.8% Madagascar -2% 40 Liberia 6.3%$ 20 0 10 20 30 40 50 60 70 80 90 100 Business Viability Index Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data. Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data. 20
  • 21. DRAFT To determine a group of five countries for closer analysis for factors more specific to entrepreneurial conduciveness, we utilize the following diagram: High Social Impact Potential and Social Impact Index High Business Viability Climate Mozambique Ethiopia Burkina Faso Nigeria Senegal Tanzania Zambia Uganda Liberia Ghana Malawi Rwanda Angola Mali Madagascar Business Viability Index The following tables illustrates the data gathered for the five priority countries and for South Africa (which serves as a point of comparison given its economic leadership in SSA, including supplementary factors, not included in the business viability index and social impact index78: 78 References for all data provided in the tables that follow are available upon request. 21
  • 22. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Economic Landscape Market Size - 2008 GDP 292.2B 18.7B 34.1B 21.9B 17.1B 10B Market Growth - Simple average of the 2009 - 2011 estimated real GDP growth rates (arrow indicates trend) 1.6↑ 6.8↑ 6.3%↑ 3.5↑ 6.4→ 5.1↑ Global Competitiveness - World Economic Forum Global Competitiveness Index 4.32 3.32 3.56 3.67 3.55 4.00 Attractiveness as an Investment Destination - 2008 FDI for every $10,000 of 2008 GDP $183 $313 $621 $322 $549 $103 Stength of Exporting Capabilities - 2008 value of exports per capita $1,913 $138 $308 $286 $428 $59 Economic Diversification - 2008 manufacturing and services as a percentage of GDP 82% 61% 47% 76% 45% 52%
  • 23. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Economic Landscape Non Resource Non Resource Non Resource Non Resource Resource Rich- Non Resource IMF Classification Rich-Coastal Rich-Coastal Rich-Coastal Rich-Coastal Non Oil (copper) Rich - Landlocked 2009 Real Per Capita GDP - 2000 PPP, 2000 exchange rates $3,691 $395 $347 $522 $436 $345 Consumer prices / inflation - annual percentage change Supplementary Considerations 2009 7.1% 3.3% 19.3% -1.7% 13.4% 10.4% 2009 Overall fiscal balance - percentage of GDP -5.3% -5.6% -9.8% -5.2% -3.2% -2.3% 2009 Overall government debt - percentage of GDP 30.8% 29.3% 66.5% 32.0% 27.7% 20.2% 2009 Trade Balance 0.1 -14.1 -14.4 -19.2 7.1 -14.7 2009 Reserves - months of imports goods and services 4.6 4.7 2.7 4.5 4.1 5.1 Highest marginal corporate tax rate 35% 32% 25% .. 35% .. UNCTAD Outward FDI performance index 2005- 2007 (measures importance of a countrys outward FDI relative to its proportion of global GDP. (higher = greater importance) 0.534 0.001 ... ... 0.014 0.139 23
  • 24. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Legal, Regulatory & Political Landscape Strength of Governance - Average of the World Bank governance indicators percentiles across six dimensions 59.86 45.20 55.58 40.78 40.68 38.76 Ease of Doing Business - Index Components World Bank Doing Business 2011 Rank amongst other Sub-Saharan African states 2 13 5 23 7 4 Corruption Perception - Transparency International corruption perception index 4.5 2.7 4.1 2.9 3 4 Value of 2000-2008 Supp. privatized enterprises (previously semi-state) $780 billion ... $6.5 billion ... ... ... Business Viability Index 59.7 69.6 84.6 76.1 76.8 72.0 24
  • 25. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Social LandscapeComponent Number of People living below $1.25/day 12,759,000 16,732,000 7,020,000 4,087,000 8,101,000 7,430,000Index Human Development Index Value 0.597 0.284 0.363 0.291 0.382 0.385s Dominant business language English Portuguese English French English French, English Gross National Income at PPP - 2008, Billion $ 476,200,000,000 17,200,000,000 30,900,000,000 21,700,000,000 15,500,000,000 10,800,000,000 Lowest 20% 3.10% 2.10% 5.20% 6.20% 3.60% 5.40% 2008 Population 48,700,000 22,400,000 23,400,000 12,200,000 12,600,000 9,700,000 Gini Coefficient 57.8 47.1 42.8 39.2 50.7 46.7 Bottom Quintile GNI per Supplementary Considerations capita $1,515.63 $119.02 $343.33 $551.39 $221.43 $300.62 Second Quintile GNI per capita $2,737.91 $215.00 $647.05 $942.70 $479.76 $501.03 Third Quintile GNI per capita $4,840.23 $380.09 $977.18 $1,360.70 $787.30 $734.85 Fourth Quintile GNI per capita $9,191.54 $721.79 $1,445.96 $1,956.56 $1,267.06 $1,091.13 Top Quintile GNI per capita $30,605.87 $2,403.39 $3,189.04 $4,082.09 $3,395.24 $2,939.38 Life expectancy at birth 52.0 48.4 57.1 56.2 47.3 51.1 Mean years of schooling 8.2 1.2 7.1 3.5 6.5 3.3 Social Impact Index 45.0 84.0 62.0 63.0 63.0 60.0 25
  • 26. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Technology Landscape Mobile and Fixed Line Phone Subscriptions per 100 people 102 20 50 46 29.0 14 Population 50.5 24.3 Mobile and Fixed Line Phone Subscriptions 51.5 12.2 Network Readiness Index Global Rank 62 116 98 75 97.0 ... 2005-2007 Agriculture value added per worker 2000 $ €3,077 €173 €378 €224 €232 €226 Improvements in Agricultural Productivity - Difference between 1990-92 and 2005-07 agricultural value added per worker (in 2000 $) $928 $56 $26 -$27 $43 $33 R&D Expenditures as a % of GDP 2000-07 0.96 0.50 … 0.09 0.03 ... Measure of Relationships with MNCs as a predictor of innovation likelihood - exports as a percentage of GDP 2008 35% 33% 42% 25% 37% 15% Measure of Relationships with MNCs as a predictor of innovation likelihood - imports as a percentage of GDP 2008 38% 46% 75% 47% 34% 31% Role in the African Ministerial Council on Science and Steering Steering Steering Technology Secretariat Host Committee Committee AMCOST Chair ... Committee 26
  • 27. DRAFT South Africa Mozambique Ghana Senegal Zambia Rwanda Demographic Landscape Population between aged 15-64 / Labor Force 31,655,000 11,872,000 13,572,000 6,588,000 6,426,000 5,335,000 Environmental Landscape Environmental Commitment - participation in major international treaties in 1973- 2001 (of 9) 9 9 9 9 7 8 2007 Arable Land - hectares per 100 people 30.7 21.2 18.2 26.3 43.8 12.7 27
  • 28. DRAFT National Advantage Diamond Analysis Utilizing Michael Porter’s framework for determining national advantage, we constructed the following table for in depth analysis of th five priority the countries: South Africa Mozambique Ghana Senegal Zambia RwandaFactor Conditions * A portion of the $64M in country-specific funds, dedicated to Angola,Early Stage Private Equity Raised - Namibia andJanuary 2009 - July 2010 (in billions) $1,761.25m ... Ghana ... ... ...Local pension funds investing in privateequity funds Yes ... Yes ... ... ... *Has received small-scale PE attention as a part of EACEarly Stage Private Equity Invested $723m ... $20m ... ... investment2009 Inward Foreign Direct Investment $5,696M $881M $1,685M $208M $959M $119MTotal Outward Foreign Direct Investment $1,584M $3M $7M $15M ... $14MAccess to debt finance - credit bureaucoverage 54.70% 2.2% public 10.3% private 4.4% public 3.0% private 0.7% publicLabor Force - Aged 15-64 (in millions) 31.7 7.2 13.6 6.6 6.4 5.3 28
  • 29. DRAFT South Africa Mozambique Ghana Senegal Zambia RwandaLikelihood to Innovate - Tertiaryenrolment ratio (% of tertiary school-agepopulation) ... 1.50% 6.20% 8.00% 2.40% 4.00%Likelihood to Innovate - Populationhaving completed a tertiary degree 4.30% … … … … …Entrepreneurial Talent - LaborProductivity - GDP per person employed% growth change 1990-92 vs. 2003-05 8.40% 9.20% 0.20% 440.00% 5.70% ...Entrepreneurial Talent - LaborProductivity - GDP per person employed% growth 3.90% 6.20% 3.00% 3.40% 3.20% ...Existing ICT Access - Internet users per100 people 8.6% 1.6% 4.3% 8.4% 5.5% 3.1%Existing ICT Access - Population coveredby mobile phone network 100% 44% 73% 85% 50% 92%Estimate of the size of emerging middleclass with over $3,650 in annual income(in millions) 24,350,000 224,000 936,000 1,464,000 756,000 97,000Estimate of emerging middle class withover $3,650 in annual income as apercentage of the population 50.0% 1.0% 4.0% 12.0% 6.0% 1.0%Demand ConditionsTotal Businesses Registered, 2007 553,425 … … 1,000 ... 455Total Business Density, number of adultsper registered business 57 ... ... 6,588 ... 11,725New businesses as a percentage of totalregistered businesses 7.47% ... … 2.30% ... ... 29
  • 30. DRAFT South Africa Mozambique Ghana Senegal Zambia RwandaCost to start a business as a percentageof income per capita 6.0% 13.9% 20.3% 63.1% 27.9% 8.8%Number of MSMEs 900,683 ... 25,679 ... ... ...MSME Density (MSMEs per 1,000 peoplein the labor force) 28.5 ... 1.9 ... ... ...Number of New Businesses - AnnualAverage calculated over the last fouryears data available 35,195 ... 7,626 ... ... ...Entry Density - New Business Entry percaptia for the most recent year available 0.77 (2009) ... 0.72 (2007) ... ... ... Related and Supporting IndustriesComposite measure of access to financialservices 46% 12% 16% 27% 15% 23%Strength of Sciences and TechnologiesIndustries - ICT exports as a percentageof total commercial services exports in2008 14.7% 27.9% 24.8% 50.7% 9.1% 19.0%GDP 276445 9846 16653 13273 14314 4457Commercial Services exports as apercentage of GDP 12394 488 1559 1097 297 326Value of ICT exports 1822 136 387 556 27 62Strength of Sciences and TechnologiesIndustries - ICT exports as a percentageof 2008 GDP 0.7% 1.4% 2.3% 4.2% 0.2% 1.4%Reliability of Power Supply - T&D lossesas a percentage of output 8% 14% 18% 25% 7% ...Extent of transportation infrastructure -percentage of roads that are paved 17.3 18.7 14.9 29.3 22.0 19 30
  • 31. DRAFT South Africa Mozambique Ghana Senegal Zambia RwandaFirm Strategy, Structure and RivalryPopulation 2008 (M of people) 31.7 7.2 13.6 6.6 6.4 5.3New Trademarks Filed 29833 1240 61 ... 1159 238New Patents Filed 5781 40 ... ... ... ...Number of New Trademarks per 10,000people in the labor force 9.42 1.73 0.04 ... 1.80 0.45Number of New Patents per 10,000people in the labor force 1.83 0.01 ... ... ... ...Exit Robustness - Measures of stockmarket development, number of listedcompanies 411 ... 35 ... ... ...Exit Robustness - Measures of stockmarket development, marketcapitalization of listed companies $805.2b ... $2.5b ... ... ...Exit robustness - measures of stockmarket development, stocks traded,turnover ratio % 83.80% ... 2.00% ... ... ... Johannesburg Stock Ghana Stock Lusaka StockLocal stock exchange Exchange ... Exchange ... Exchange ...Number of securities listed 334 ... 35 ... 22 ...Concentration of Incubators 11 2 3 2 ... 2 32 local PE providers, and 9 additional fundsConcentration of Early Stage Investors active in South Africa ... 2 ... ... ... 31
  • 32. DRAFT ConclusionFive countries stand out as having the economic, political, legal, regulatory, technological, social anddemographic characteristics required to make optimal impact in poverty alleviation, while also beingconducive to supporting entrepreneurial ventures from a commercial perspective: Rwanda; Ghana; Senegal; Mozambique; and Zambia.Upon comparison of these five priority countries, Ghana’s strengths can be summarized, as follows: Large market and growing market; Relatively strong ability to attract inward investment, especially regarding an emerging private equity market; Strong governance regime, and is perceived to have relatively low levels of corruption; Record of privatization of previously state-controlled enterprises; Higher access to financial services, and specifically access to credit, for entrepreneurs; Low corporate tax rate; English speaking population, especially in conducting business; Broadly, a better educated and larger labor force; Strong technology and innovation landscape, with relatively high rates of multi-national corporation participation in the economy, higher levels of trade, higher productivity in the agricultural sector, and government commitments to promoting innovation; Strength of existing entrepreneurial activity, especially regarding new patents and trademark applications; and Stronger market for venture exits.Alternatively, Senegal demonstrates relative strengths in the following areas: Significant economic diversification, including strong manufacturing and services sectors; Higher consumer spending power, lower income inequality, and a larger emerging middle class; The low level of human development indicates that despite economic strengths, little has been invested in health and educational infrastructure, and therefore a potential for strong developmental impact; Higher internet access and network readiness; Strength of existing entrepreneurial activity; and Related and supporting industries, such as financial services, ICT exports, power supply and road infrastructure are all strong. V. Industry AnalysisIndustry DefinitionsAccording to the National Business Incubator Association, "Business incubation is a business supportprocess that accelerates the successful development of start-up and fledgling companies by providing
  • 33. DRAFT entrepreneurs with an array of targeted resources and services."79 Early stage funding for our purposes will be limited to equity investments – angel investment and venture capital.80 We define our industry as ‘equity funding $5,000 to $500,000 in early stage, high social impact, high growth entrepreneurs.’ Entrepreneurs typically progress through two inter-related processes associated with the launch of their business. First, incubation involves a range of non-financial supports, which a new venture utilizes to plan and launch the business. Second, the finance process includes all activities that a venture undertakes in planning investment, securing funding, monitoring the elements of their finance function (e.g. capital structure), and investor relationship management. We intend to assist out entrepreneurs through both processes, as they progress through the following stages of establishing and growing their businesses: Incubation FFF and Angel 1st and 2nd Stage Later Stage Investment Venture Capital Venture Capital Finance Seed Capital Start-up Scale-Up Milestone Feasibility Study & Business Model Harvest Business Plan Complete Proven Figure 7: Generic Phases of Entrepreneurial Growth Why Incubators and Early Stage Investment? Entrepreneurs, through the new business ventures they create, are in the unique position of driving economic growth that benefits entrepreneurs, their families, supply chain partners, and other stakeholders. Of course, this is true for a lot of private sector players; however entrepreneurs also have the latitude to design business models which also distribute the benefits of their activities across broad segments of the population. We are firm in our commitment to local entrepreneurs, as they are one of the strongest levers in the fight against poverty; and we are resolute in our support for their efforts with the two most powerful tools available to us – incubator models and private equity investment. Incubators have a track record dating back to the 1960s, and have proven an important catalyst in the development of successful new ventures. Incubators provide start-ups the support they need to create jobs, and incubators have been successful in this regard. As a point of comparison, the U.S. Department of Commerce Economic Development Administration recently found that incubators create 20-times more jobs than do community infrastructure construction programs, and at 5% of the 79 See http://www.nbia.org/works 80 Entrepreneurs will undoubtedly also seek credit through micro-finance and other financial services providers. 33
  • 34. DRAFT cost.81 Firms that are provided incubator support are more likely to remain in existence. The U.S.’s National Business Incubator Association (NBIA) estimates that in 2005 alone, North American incubators assisted 27,000 start-ups, provided over 100,000 jobs, and supported companies whose annual revenues totaled $17 billion.82 Access to financial capital is another critical success factor for entrepreneurs. FFF, or ‘friends, family and fools’ and bootstrapping are coming forms of initial seed capital. In the former, entrepreneurs borrow or solicit an equity investment from people with whom they are already well acquainted. In the latter, entrepreneurs use their own personal savings and personal access to credit in order to fund their venture. Another common form of funding is bank debt, and in developing countries, microfinance plays a role as micro-finance institutions may lend up to $2,000. Acquiring larger amounts of business debt is rare, but can be achieved through collateralized loans, or loans guaranteed against the value of other assets (i.e. real estate). When an entrepreneur utilizes all of the above sources of funding, he/she typically turns to equity investment for further capital infusion. Equity investment becomes a viable route the more sophisticated the venture and the higher the likelihood of sufficient returns based on realistic, aggressive growth plans. Lastly, an entrepreneurial team may attract a seasoned industry expert that is convinced of the model’s viability, and who therefore is interested in making an investment and shouldering some of the risk, but who also gets to share in the venture’s profits. Thus, seed capital options on the equity side, include: FFF, bootstrapping, and angel investment. Generally, seed capital markets are largely informal. The term private equity, relates to a range of investment vehicles, of which venture capital is one form. Venture capital, as shown above, is utilized by entrepreneurial teams that have completed a pilot, or feasibility study and business plan. Although for the highest potential ventures, attracting venture capital without having launched in earnest does occur, it is rare. Most entrepreneurial teams will utilize seed capital debt and equity sources through the first several years of their existence to demonstrate that their business model works, and that there is sufficient head room for scaling it. In either of these cases, when a venture capitalist makes an investment for a portion of the venture’s equity, they typically require a seat on the board of directors and have input into management decisions.83 According to the National Venture Capital Association (U.S.) venture-capital enable entrepreneurial outcomes, and in so doing catalyzes job creation and economic output84: 11% of private sector employment is with venture-backed firms; Venture-backed revenue is 21% of GDP; During 2006-2008 total private sector job growth in the U.S. was 0.2%, while venture backed firms outpaced this rate by 8 times – at 1.6%; During the same period, total revenues in U.S. private sector companies grew by 3.5%, yet total revenues for venture backed companies grew by 5.3%; From 1970 to 2008, $456 billion has been invested in over 27,000 countries. 81 See http://www.nbia.org/works 82 Ibid. 83 For further discussion Private Equity, see Chisholm (2009); for more on Entrepreneurial Finance, see Timmons & Spinelli (2003); and for more on Venture Capital, see Metrick & Yasuda (2011) and Meyer & Mathonet (2005). 84 NVCA (2009), p. 2 34
  • 35. DRAFT Business Incubation in SSA iDisc, the business incubator support network of infoDev, was launched in 2002, and has since mobilized $20 million, supporting close to 100 institutions in 50 countries. The footprint in SSA started in 2006 in Ghana, and now supports 44 incubators across Africa, including 3 in Ghana, 2 in Senegal, 2 in Rwanda and 2 in Mozambique. These incubators target high-growth entrepreneurial ventures. There are communities of practice focused on generating benefits for the rural poor, the urban poor, women and youth.85 Also, the African Incubator Network (AIN) and the South African Business and Technology Incubation Association (SABTIA) are also regional bodies by which African incubators exchange knowledge capital and build relationships. The incubator community, and specifically iDisc, are focused on the following industry sectors: Agriculture (10%); ICTs (46%); International (3%); Manufacturing (20%); Mixed Use (18%); and Textile 3%.86 Over the past four years, iDisc activity in SSA has been focused on job creation through the launch and scaling of new businesses, resultant growth in tax revenues, increased economic diversification and promotion of indigenous technologies.87 A recent study of the outcomes, impacts and lessons of global business incubation (which we presume are likely to apply within the SSA context), include: 1) Study and replicate the most successful business incubation models; 2) Expand regional business incubation networks; 3) Use technology to scale business incubation services in cost effective ways; 4) Promote the community of business incubators as participants in the economy; 5) Invest in developing innovative and entrepreneurial leaders; 6) Continue targeted investments in the ICT sector; 7) Develop and diffuse a policy framework for supporting ICT-enabled entrepreneurs; 8) Address the lack of risk capital; and 9) Promote a stronger entrepreneurial culture within the community.88 In relation to incubation in the developing world, there are several critical success factors89: Volume of companies co-located is important as it leads to natural clustering & collaboration; Entrepreneurs will learn more from each other, and other businesses, than ‘consultants’; Combining start-ups with mature companies in same building encourages collaboration; Diversified models (incubation + office rentals) keep programs sustainable and independent; Not being 100% publicly funded keeps incubator focused on tenants and services provided; Strict entry criteria (focused on innovation & implementation) can ensure high success rates; Investors/entrepreneurs seeking to make new equity investments can be leveraged as mentors; Businesses seeking future clients can provide discounted professional services; A strong manager who monitors both mentors and companies is key; 85 See http://www.idisc.net/en/Index.html 86 Ibid. 87 See http://www.idisc.net/en/Page.MEIA.Incubator.Overview.html 88 See http://www.idisc.net/en/Page.MEIA.Study.Recommendations.html 89 infoDev (2009), p. 6 – 7 35
  • 36. DRAFT Use managers who have entrepreneurial experience and can ‘relate’; Incubation programs can remain lean and cost effective with few employees (2); Ensuring tenants pay for services screens out those that are not somewhat commercialized; and Incubators create a climate of collaborate on & networking from the start Private Equity in SSA Private equity in SSA is an immature and growing market. According to the Emerging Markets Private Equity Association’s recent study on the topic, 2009 saw a notable contraction in private capital flowing into and out of SSA; however “Sub-Saharan Africa experienced a noticeable up-tick through July 2010 with $1.5 billion raised, already surpassing the full year 2009 total of $933 million. Furthermore...the recovery of fundraising momentum in Sub-Saharan Africa was stronger than in many other emerging markets, including China, India and Russia...”90 Following the financial crisis Limited Partners (i.e. investors), or LPs, now view emerging market risk in a more favorable light than elaborate financial engineering, and are keen to include an African element in their risk portfolio. 91 However, SSA Private Equity is still small on the global stage. In January to July 2010, PE fundraising for SSA accounted for $64 million of the 18,836 million raised for emerging markets, and on the investment side, during the same period, SSA accounted for $439 million of the $83,095 invested globally.92 Despite its small size relative to other world regions, and speaking to African acceptance of Private Equity, SSA has a 0.15% PE penetration rate (as measured by PE Investment / GDP) – higher than China, the Middle East and North Africa, Brazil and Russia.93 The following trends describe the rebound for Private Equity in SSA: Greater political and economic stability are translating into larger investment opportunities, and more attractive exit options; Growth in the number of experience fund managers, historically a key challenge; There is growing sentiment that SSA could reach the fundraising and investment volumes of China and India; South Africa leads SSA as the most mature PE market, leads SSA receiving nearly 50% of investment over January – July 2010 (however, historically this has been 70%); Over the past year there has been a dramatic change in the level of interest in markets outside South Africa, notably Nigeria, Angola the East African Community, Namibia and Ghana; New fund managers are entering the market in various countries around the continent, many of whom are securing initial support from the Development Finance Institutions (DFIs); Exit markets are deepening and expanding geographically.94 “Sub-Saharan Africa is on the verge of taking off. Strong reforms are taking place, the playing field for business is improving, and everyone is starting to recognize that you can find commercially-driven companies in the region with good profits...” -David Creighton, Cordiant Capital, President & CEO 90 EMPEA (2010), p. 6 91 Ibid. 92 th EMPEA (2010b), Data as of 30 September 93 Ibid. 94 EMPEA (2010), p. 6 - 14 36
  • 37. DRAFT Regarding fundraising, private equity in SSA is primarily raised for pan-African funds, although some country-specific funds are emerging.95 These specialist funds currently cover: South Africa, Nigeria, Angola, Ghana and Namibia. Several sector-specific funds in infrastructure and agribusiness are also starting to provide investors industry plays in SSA. Despite the 2006-2008 growth trend (see below), and the recent resurgence in both fundraising and investment, a number of barriers deterring investment in SSA remain. According to a recent EMPEA survey, limited partners were detracted from investing in SSA based upon the following factors: Limited number of established General Partners (GPs); Shallow pool of management talent; Political Risk; Weak exit environments; Challenging regulatory / tax environments; and Scale of opportunity to invest is too small.96 Size and Growth Rates To approximate the growth in SSA private equity, the following scenarios were employed. First, having conducted a regression analysis of the 2006 – 2010 dataset, we find that 60% of the variability in total PE volume (funds raised and funds invested), is explained by the GDP growth rate. As such, scenario 1 is based upon the IMF predictions for SSA GDP growth through 2012. Second, in consideration of the downside risks mentioned in the IMF analysis, such as a broad drop in the global recovery or a sudden depression in commodity prices, we examine the effects of a double-dip recession. Using the methodology employed in scenario 1, we use the lower GDP growth rates to estimate total PE volume in a recessionary scenario. Finally, the third scenario makes the assumption that the 2006 – 2008 growth trend of 30% reflects the true potential in SSA private equity, and that because of its immaturity as a market, there is plenty of headroom for investment demand and investment destinations. Therefore, in scenario 3 we examine the effects of the 30% growth rate through 2013. 95 EMPEA (2010), p. 14 96 EMPEA (2010), p. 8 - 9 37
  • 38. DRAFT Sub-Saharan Africa Private Equity Activity Scenario 1 -Track GDP growth trend $6.0B 8.0% 5.6 3.0 7.0% 4.9 $5.0B 3.4 4.32 6.0% 4.22 Private Equity Investment Activity $4.0B 5.0% 1.5 1.3 GDP Growth Rate $3.0B 4.0% 0.07 2.7 0.1 2.6 2.2 3.0% 1.04 1.3 $2.0B 2.2 1.5 1.5 2.0% $1.0 B 0.9 1.0% 2006 2007 2008 2009 2010 2011 2012 Actual PE Fundraising Estimated PE Fundraising Actual PE Investment Estimated PE Investment 38
  • 39. DRAFT Sub-Saharan Africa Private Equity Activity Scenario 2 - Double dip as downside risks are realized $6.0B 8.0% 5.6 3.0 7.0% 4.9 $5.0B 3.4 6.0% Private Equity Investment Activity $4.0B 5.0% 1.5 1.3 GDP Growth Rate $3.0B 4.0% 0.07 2.7 0.1 2.6 2.2 3.0% 1.04 2.08 2.08 1.3 $2.0B 2.2 1.5 1.5 2.0% $1.0 B 0.9 1.0% 2006 2007 2008 2009 2010 2011 2012 Actual PE Fundraising Estimated PE Fundraising Actual PE Investment Estimated PE Investment 39
  • 40. DRAFT $6.0B Sub-Saharan Africa Private Equity Activity Scenario 3 – Return to the 2006-2008 Growth Trend $6.0B 5.85 5.6 3.0 4.9 $5.0B 3.4 4.51 Private Equity Investment Activity $4.0B 1.5 3.47 1.3 $3.0B 0.07 2.7 0.1 2.6 2.2 1.04 1.3 $2.0B 2.2 1.5 1.5 $1.0 B 0.9 2006 2007 2008 2009 2010 2011 2012 2013 Actual PE Fundraising Estimated PE Fundraising Actual PE Investment Estimated PE Investment 40
  • 41. DRAFT Our best approximation of the size of the business incubation market in SSA is based on a top-down analysis. Currently, there are 44 known incubators in SSA, and the median revenues infoDev has reported in relation to their ten year financial model for mixed-use incubators is $537,000.97 Assuming that on average these 44 incubators are generating this level of income, we can approximate the market to be approximately $23,000,000. Assuming that the incubator market moves in proportion with growth in private equity transactions, the following table illustrates the three scenarios discussed; and implications for the size of incubator volume.98 Economic Scenario Estimate of 2012 Incubator Industry Value in SSA 1 – Track GDP Growth Trend $45,218,000 2 – Double dip as downside risks are realized $21,850,000 3 – Return to 2006-08 growth trend $50,531,000 Value Chain Analysis To gain an understanding of the role of various industry chain participants in the provision of early stage investment and incubation services, we provide the following view of the flow of business support services and financial capital to SSA entrepreneurs: 97 infoDev (2009b), p. 86 98 This approximation of industry value and growth is currently necessary due to the lack of market research in this area. Further bottom-up analysis is required to gain a better understanding of SSA incubator revenue models, volumes, drivers and growth trends. 41
  • 42. DRAFT Inter-governmental Organizations Government- Grants Sponsored grant Programs Government Not-for-profit Private Depositors & Donors Debt Instruments Micro-finance •Corporates Institutions •Small to Mid-sized Businesses •High Net Worth Individuals •Mass Consumers Commercial Banks & For Profit Micro- Finance Providers Commercial Banks Client Venture Institutional Investors Investment Bank •Pension Funds Private Equity •Endowments Houses •Insurance Companies Equity Investments •Hedge Funds / Absolute Return •Mutual Funds •Other Funds Venture Capital Firms Private Investors •High Net Worth Individuals •Family Offices •Other Retail Investors FFF & Angel Investors Note: The diagram illustrates the predominant capital flows to microenterprises, and is not an exhaustive examination of the broader financial services capital chain. Inter-governmental Organization High Investment National & Regional Debt Expected Return Public Sector Deposit Civil Society Grants & Private Sector Donations None Figure 8: Industry Value Chain for Entrepreneurial Finance in SSA 42
  • 43. DRAFT Inclusive Markets, Impact Investing, & Market Development Program Directors • Knowledge Capital • Network Contacts NGO Sustainable Livelihoods Practitioners, Foundations & Researchers Micro-enterprise •Knowledge Capital and Small Business •Network Contacts Incubators Client • Advisory Venture Direct Private Sector Suppliers • Technology & • ICT Solutions Infrastructure • Voice & Data Network Connectivity • Relationships • Construction Services • Power Supply Public Sector and Semi-state Utilities •Voice & Data Connectivity •Power Supply Inter-governmental Organization National & Regional Public Sector Civil Society Private Sector Figure 8: Industry Value Chain for Entrepreneurial Finance in SSA 43
  • 44. DRAFT Conclusion Early stage private sector development is a key component of economic growth, and therefore income dynamics in any market. In SSA these entrepreneurs provide an opportunity to support grass-roots enterprise and income generating activity. Their activity has the potential to raise incomes, reduce poverty and catalyze other developmental benefits. Two of the most effective tools in supporting entrepreneurs – early stage equity capital and small business incubators have been introduced to Africa over the past decade, and have worked to varying degrees. One of the key challenges in generating social impact, utilizing these tools, is to learn from past mistakes and replicate what has already to work well. Clearly, there is potential for financial return, as a comparison based on Bloomberg data, demonstrates that the ten year annualized returns on the African composite index of 13.8% compare favorably against the MSCI emerging market index (7.3%), and the DJIA (-1.0%). VI. Next Steps Networking and Recruitment. We will recruit a co-founder/CFO with significant venture capital experience in a leading firm or investment bank, while also having a demonstrated passion for poverty alleviation in Africa. He/she will share the view that part of the process of soliciting capital for SSA equity investments with a social purpose, will include tempering investor expectations. Our ventures will look and feel differently than traditional entrepreneurial teams in the U.S. or Western Europe. We will also recruit a co-founder/COO who will have day-to-day responsibility for directing the operations of the incubator. He/she will have a deep understanding of the local culture, language(s) and nuances of conducting business in SSA. He/she will have extensive relationships in the private- and public- sectors, and be instrumental in introducing our future entrepreneurs in touch with their key stakeholders. He/she will also ideally come from a background of entrepreneurship and/or incubating experience. Strategy Formulation. The commentary and analyses in this opportunity assessment provide useful background information from a high-level; however more detailed market research is required to gain an understanding of following aspects of the markets for incubation and early-stage investments in selected target countries: Markets analysis (e.g. finer estimates of market sizes by country); Economics of the markets (e.g. revenue, cost and profit estimates); Five forces analysis of market dynamics; Competitive analysis (e.g. mapping primary, secondary and tertiary competitors, and profiles); Descriptions of existing offerings by competitor; Client recommendations in relation to service improvements; and Segmentation of client entrepreneurs and prospective entrepreneurs. The following analysis will provide a robust platform upon which to develop a portfolio strategy to market entry, including key decisions regarding: Market positioning and client value propositions (especially related to differentiation); Alliance and partnering strategy; Financial modelling, analysis and economic value proposition; Operating model principles; Organizational strategy; and Functional-level strategic decisions required. 44
  • 45. DRAFT Feasibility Study. Upon completion of the aforementioned research, analysis and strategic decisions, a local feasibility study will be utilized in the test market(s) to test the assumptions, identify further risks, and identify which partnering relationship(s) is/are most conducive to driving the desired social benefits. Initial inquiries may eliminate certain market entry options, but we would envisage exploring the following partnering relationships: End-to-end venture capital and Incubation-only in a frontier incubation in a frontier market market, and partnering with an (e.g. Ghana) established fund manager (e.g. Actis) Venture capital-only in South End-to-end venture capital and Africa, and partnering with an incubation in South Africa established incubator (e.g. Heart) The feasibility study will also provide insight into: 1) The delivery model that will enable us to provide optimal support levels in the most efficient ways; 2) Client segmentation and targeting approaches; and 3) Desired financial model. Fundraising. Initially, we will work with prospective donors to acquire the grant funding required to fund the market research and feasibility study. Dependent upon the outcome of these activities further fundraising efforts will be employed to raise appropriate grant, debt and equity capital. VII. Sources Chisholm (2009), Venture Capital & the Finance of Innovation, Wiley & Sons, Hoboken, NJ. Fickett (2010) Metrick & Yasuda (2011) Meyer & Mathonet (2005), Managing a Portfolio of Venture Capital and Private Equity Funds, John Wiley & Sons, Ltd. Hoboken, New Jersey. infoDev (2009) = Mixed use incubator handbook OECD (2009) -= Innovation and ICT in Africa` OECD (2010) = African Outlook OECD (2010b) = SMEs, Entrepreneurship and Innovation OECD (2010c) = Innovation and the Development Agenda UNCTAD World Investment Report 2010-2011 Timmons & Spinelli (2003), New Venture Creation, McGraw Hill, New York. World Bank (2007) = Changing the Face of Waters 45
  • 46. DRAFT World Bank (2009) = Agribusiness and Innovation World Bank (2010) = Governance Indicators World Bank (2010b) = World Bank Group entrepreneurship Survey Snapshot (website) World Bank (2010c) = Doing business World Bank (2010d) = Innovation Policy VIII. Appendices List of African Small Business Incubators Aba Technology Incubation Centre Nigeria Acorn Technologies South Africa AVIEX Ltd. Congo Bandwidth Barn South Africa Branson School of Entrepreneurship South Africa Business Entrepreneurship and Development Rwanda Busy Internet Ghana Calabar technology incubation centre Nigeria Centre International des Technologies Chad Chemin (The South African Chemical Technology Incubator) South Africa EMERALD BIITRACDEC DEVELOPMENT CENTER-NIGERIA Nigeria Fantsuam Foundation Nigeria Furntech South Africa Ghana Multimedia Incubator Centre Ghana Hawassa University Ethiopia 46
  • 47. DRAFT IFC - SSC Kenya Business Incubator Kenya Incubadora de Empresas de Luanda Angola Instituto Superior Politecnico de Manica Mozambique IntEnt Ghana Ghana Kenya Kountry Business Incubator (KeKoBI) Kenya MANAGEMENT TRAINING AND ADVISORY CENTRE (MTAC) Uganda Maxum Business Incubator South Africa MICTI Technology and Business Incubator Mozambique MINNA TECHNOLOGY INCUBATION CENTRE Nigeria Mpumalanga Stainless Initiative South Africa National Computer Board (NCB) Mauritius National Council of Negro Women/International Division (NCNW) Senegal Nextzon Business Services Limited Nigeria SACOMA Kenya SmartXchange South Africa Softstart BTI South Africa Solvebrand Ltd United Kingdom Soshanguve Manufacturing Technology Demonstration Centre South Africa Technology and Business Incubation Facility (TBIF) Rwanda technology incubation center gusau, zamfara state, nigeria Nigeria Technology Incubation Centre Nigeria 47
  • 48. DRAFT Technology Incubation Centre Birnin-Kebbi Nigeria Technology Incubation Centre, Akure. Nigeria Technology Incubation Centre, Warri Nigeria TECHNOLOGY INCUBATION CENTRE,BENIN Nigeria The Seda Construction Incubator South Africa The Technology Incubation Center,Maiduguri. Nigeria Uganda Industrial Research Institute (UIRI) Uganda Université de Thiés Senegal 48
  • 49. DRAFTList of Private Equity Providers in AfricaSearch Criteria: Investor Regions: Africa; # of ProfessionalsInvestor ID# Investor Nam e Office Nam e Office Type City Country Investor Type Investor Status at Firm10633-51 Absa Capital Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Cairo Regional Office Cairo Egypt PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Casablanca Regional Office Casablanca Morocco PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Johannesburg Regional HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Nairobi Regional Office Nairobi Kenya PE/Buyout Actively Seeking New Investments40666-78 Adlevo Capital Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments47553-67 African Agricultural Capital Kampala Primary HQ Kampala Uganda Venture Capital10909-18 AfriCap Microfinance Fund Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments25358-77 AfricInvest Capital Partners Nairobi Primary HQ Nairobi Kenya PE/Buyout40703-32 Angola Capital Partners Luanda Primary HQ Luanda Angola PE/Buyout13092-22 Beltone Partners Cairo Primary HQ Cairo Egypt Other Private Equity11144-71 Brait Private Equity Mauritus Regional Office Mauritus South Africa PE/Buyout Actively Seeking New Investments 2511144-71 Brait Private Equity Northlands Primary HQ Northlands South Africa PE/Buyout Actively Seeking New Investments 2551173-11 Catalyst Principal Partners Nairobi Primary HQ Nairobi Kenya PE/Buyout34293-16 Citadel Capital Nairobi Regional Office Nairobi Kenya PE/Buyout Actively Seeking New Investments40675-69 Coast2Coast Westlake Primary HQ Westlake South Africa PE/Buyout41003-38 Commercial International Bank Cairo Primary HQ Cairo Egypt42495-04 Concord International Investments Group airo C Regional HQ Cairo Egypt PE/Buyout11927-71 Destiny Holdings Johannesburg Primary HQ Johannesburg South Africa Corporation Actively Seeking New Investments25294-33 Dimension Data Johannesburg Primary HQ Johannesburg South Africa Corporation42151-42 East Africa Capital Partners Nairobi Primary HQ Nairobi Kenya Other10984-15 EFG-Hermes Alexandria Regional Office Alexandria Egypt Investment Bank 99010984-15 EFG-Hermes Cairo Primary HQ Giza Egypt Investment Bank 99011171-71 Emerging Markets Partnership Braamfontein Regional Office Braamfontein South Africa PE/Buyout Actively Seeking New Investments 5011189-98 Ethos Private Equity Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments42265-18 EVI Capital Partners Johannesburg Regional HQ Johannesburg South Africa PE/Buyout11360-35 FirstRand Sandton Primary HQ Sandton South Africa Corporation Actively Seeking New Investments10865-26 Haykala Investment Managers Cairo Primary HQ Cairo Egypt PE/Buyout Actively Seeking New Investments10918-63 Horizon Equity Partners Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments40761-73 InReturn Capital Nairobi Primary HQ Nairobi Kenya Corporation20672-29 Inspired Evolution Cape Tow n Primary HQ Cape Tow n South Africa Investment Bank
  • 50. DRAFT 40674-70 Julius Baer Group Cairo Regional Office Cairo Egypt Investment Bank 10918-54 Medu Capital Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments 42874-30 Naspers Cape Tow n Primary HQ Cape Tow n South Africa Corporation Actively Seeking New Investments 11990-17 Net 1 Ueps Technologies Johannesburg Primary HQ Johannesburg South Africa Corporation 42893-47 Netw orld Roggebaai Primary HQ Roggebaai South Africa Corporation 11239-30 NIB-MDM Private Equity Investments Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments 3 11056-42 OrasInvest Dokki Primary HQ Dokki Egypt PE/Buyout Actively Seeking New Investments 12381-49 Pamodzi Investment Athol Primary HQ Athol South Africa PE/Buyout Actively Seeking New Investments 12320-11 PCS Equity Solutions Johannesburg Primary HQ Johannesburg South Africa Corporation Actively Seeking New Investments 25268-59 Pin Oak Partners Cape Tow n Primary HQ Cape Tow n South Africa PE/Buyout Actively Seeking New Investments 11389-42 Rand Merchant Bank Sandton Primary HQ Sandton South Africa Investment Bank Actively Seeking New Investments 11356-03 Sanlam Private Equity Bellville Primary HQ Bellville South Africa PE/Buyout Actively Seeking New Investments 11458-90 Sphere Private Equity Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments 14186-26 Strategy Partners Bellville Primary HQ Bellville South Africa PE/Buyout 10048-15 The Carlyle Group Cairo Regional Office Cairo Egypt PE/Buyout Actively Seeking New Investments 500 43053-40 The Industrial Development Corporation Sandton Africa of South Primary HQ Sandton South Africa Corp Development 12438-64 Thembeka Capital Stellenbosch Primary HQ Stellenbosch South Africa PE/Buyout Actively Seeking New Investments 11788-93 TransCentury Nairobi Primary HQ Nairobi Kenya PE/Buyout 10643-86 Treacle Private Equity Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments 11325-97 VenFin Ltd. Stellenbosch Primary HQ Stellenbosch South Africa Venture Capital Will Consider New Projects 16 40996-00 VPB Gaborone Primary HQ Gaborone Botsw ana PE/Buyout 10074-61 Warburg Pincus Port Louis Regional Office Port Louis Mauritius PE/Buyout Actively Seeking New Investments 11339-92 Zephyr Management Johannesburg Regional Office Johannesburg South Africa PE/Buyout Actively Seeking New Investments 40 50