africa investment

With changing times, the markets are becoming integrated owing to globalization. The investors are being offered social and financial returns. Angel investing has become a rage all thanks to the television shows. The changes in the market have created waves in African countries. The seventh investment was closed in Ethiopia in December 2015 making it one of the most active investment countries in Africa. Other country that is showing a high potential and getting attention from investors is Angola.

The three major trends that are creating a storm in African entrepreneurship segment have been summarized below.

Angel investing: “The new venture capital”

People with high net worth all around the world are looking for new ways for investing their personal wealth. The high net worth individuals [HN1s] are looking for new investment opportunities. Direct investments are being propelled with the rise of discount brokers and TV shows such as Shark Tank and The Profit. Angel groups and investors are increasing in number.

The rise of entrepreneurial finance that has been personalized has been one of the biggest changes in the venture capital segment during the last decade as per Josh Lerner who is a professor at Harvard Business School. This includes angel groups, crowd funding platforms and angel investors. Angel investments prove out to be significant contributor in terms of creation of job ad growth.

The rise of impact investing

Impact investing has gained a momentum amongst investors. The attributes of investing and philanthropy are combined in impact investing. Positive social impact and financial returns are sought by investors in impact investing. A broad spectrum is covered in impact investing which includes ESG securities, direct investments in emerging economies and donor advised funds.

Africa is the next big investment hub

The economy of Africa is improving and this is hard to deny. Owing to the rich natural resources and the human capital is contributing to tremendous rise in economy. A steady growth of GDP is expected in 2016 at a rate of 5%. The expansion of large, mid-size and small companies is sprouting all over Africa. The key driver of growth is the private sector. The local companies are hungry for capital.

The perfect opportunity

The Impact Angel is a new financial comer in the African continent.   Due to better interest from HNIs, family offices, millennial as well as wealth managers, most of the people are re-directing their philanthropic strategies as well as charitable giving as high impact investments. It is believed that such a trend is going to offer wide opportunities for companies in Africa which were once deprived of capital. Such an opportunity is going to attract many investors to aid the companies’ financial requirements.

However, the companies who are successful in attracting investments from impact angels have to understand that they have to perform to deliver the results expected by them. It might be possible that the investors can occupy a position among the boards and will also monitor the performance of the company.

At the same time, the investors must also be cautious. Making investments in unfamiliar environments can be extremely risky. It is better for the investors to take the aid of a trusted local partner while making investments as the local partner will be aware the business environment to help you oversee the structuring, management, diligence as well as the closing of the investment deal.

Written by Kenneth Hogrefe