Africa: A Place to Invest

The International Monetary Fund estimates the sub-Saharan Africa’s economies will grow 5.4% this year and 5.8% in 2015, compared to 1.7% and 3% in the U.S. for the same two years respectively, as reported by Bloomberg. According to The Telegraph, a couple of years ago the Nigerian economy grew to $453 billion, overtaking South Africa as the biggest African economy. Bloomberg also reported a forecast by New York-based McKinsey & Co that Nigeria’s economy could potentially expand approximately 7.1% each year, making it one of the world’s top 20 economies.

But what are the advantages of investing in Africa?

Vast untapped resources, a young population and an expanding middle-class are all part of it. The economic growth in Sub-Saharan Africa proved too low to generate sufficient employment opportunities and the unemployment rate of 77.4% in 2013 remained the highest of all regions, according to the International Labor Organization. Empowering small and medium-size enterprises (SMEs) and entrepreneurship is the key driver in promoting economic growth and helping to curtail the rising unemployment in Africa.

Meanwhile, entrepreneurship is thriving in Africa. Christian Ngan was among the 30 most promising entrepreneurs in Africa in 2014 cited in Forbes. And this isn’t the only entrepreneur who appears to have a sparkling understanding of business. The Kenyan Eric Kintoti’s company Shades System East Africa, which manufactures products such as military and relief tents, branded gazebos and canvas seats, boasts annual sales of $1 million. These entrepreneurs and many others are hugely influencing manufacturing, technology, real estate, media and entertainment, financial services, agriculture, fashion and the service industry in Africa. The government’s move towards a green economy has also promoted new start-up businesses in recycling in South Africa.

Initiatives to support entrepreneurship

Anyone looking to set up a business and in need of a little support to achieve it won’t be let down, since African governments are implementing various initiatives to foster innovation and entrepreneurship. In South Africa, the National Empowerment Fund (NEF) is a government agency set up to support business ventures pioneered and run by black people. Amongst the solutions the fund offers are the iMbewu Fund, which supports new start-ups as well as existing enterprises with debt, quasi-equity and equity finance products from between R250,000 and R10 million. Meanwhile, the South African Ministry of Small Business Development gets behind up-and-coming entrepreneurship by fostering common programs and visions between small businesses and financial institutions.

Over in Zimbabwe, the government is also tempting entrepreneurs with a range of incentives. Companies located in the special economic zones are exempted from income tax for the first five years, capital gains tax, and non-resident taxes.  Imports are duty free and sales tax on goods and services is refundable.

Then there is GroFin, which provides business support and finance to young entrepreneurs across Africa. This scheme has impacted positively young entrepreneurs across Africa, especially those who do not come from business backgrounds.

The economic potential of this continent is enormous. Many African governments are making investments in infrastructure, education, and health care, and these are improving the lives of millions of people. The continent is also strengthening economic partnerships and diplomatic ties with Europe and the U.S. This will have a significant impact on the development of entrepreneurship in Africa. If Africa is to guarantee itself long-term development and economic expansion then increasing the competitiveness of African entrepreneurs by allowing them greater economic financial freedom is definitely the way forward.

[author] [author_image timthumb=’on’][/author_image] [author_info]Jose Capelo[/author_info]Jose Capelo is the founder of Marketingquery, he is an international development advisor and has worked together with various entrepreneurs on projects to promote development and business.[/author]