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Investing in Africa

There is more than one way to do it

Over the last dozen, or so, months I have written many blog posts, tweets and contributed to LinkedIn group discussions urging readers to invest in Africa.  When I use the words investment+Africa, I receive more likes, re-tweets and comments than I do with other keywords or topics.  Clearly there is a growing interest in Investing in Africa.

Investing for Profit

Many people equate investing in Africa with philanthropic endeavors of giving aid and providing grants.  That is not at all what I am talking about when I urge people to Invest in Africa.  I am talking about putting money into the African economy and expecting a profitable return.

Equity Investing in Africa

There are three major ways to invest in Africa for-profit.  The first is purchasing a stake in or share of a company.  This can be done by buying shares of an individual equity through the many national stock exchanges on the continent, or on European and American exchanges that list major African companies.  There are a growing number of Africa oriented stock funds listed as well.  Venture capital funds give investors the ability to get in early at a company’s start-up stage where there is opportunity for explosive growth.  Angel investors, with plenty of cash, can front innovative entrepreneurs with the cash they need to bring their novel venture to market.  Traditionally these Angel investors are give a percentage share of the budding company.

Start A Business

Another way to invest in Africa is start your own business.  You may have an existing business outside of Africa and you want to move into this growing market.  Most African countries are open to foreign businesses setting up shop in their republic.  Some even encourage the move by offering tax breaks and liberal policies for the repatriation of profits.  Many small and medium size businesses have successfully entered the Africa market.  Other foreigners have preformed due diligence, or retained an expert to do it for them, then started a brand new business that fills an undeserved niche.  They may even come up with a product or service that differentiates itself from the competition in a niche.  More and more individuals or groups are starting up enterprises in Africa.

Form A Partnership

A third way to invest in Africa is to partner with African entrepreneurs or businesses.  In some ways an Angel investor or venture capitalist partners with an entrepreneur.  Here I am speaking of an actual day-to-day joint running of a business with an African partner.  Many African countries require all businesses to have a national from that country as part owner.  Some go as far as mandating that nationals own 51 percent of the entity.  Even when there is no such partnership requirement, foreigners have joined forces with nationals to begin a venture.  This is a great arrangement for both parties.  Very seldom are good partnerships formed where each party has similar experience and expertise.  The preferred, and more often successful, partnership combines local experience and understandings with a foreigner’s expertise in some discipline or technology that was lacking.

None of these ways of investing in Africa are guaranteed to return a profit.  There are always risks.  That is true anywhere in the world.  You must always perform due diligence or consult with someone who can do it for you, or at least help you.  If you would like some assistance looking into investing in Africa contact take me at Africa Mentor.

I have not exhausted the ways in which one could invest money in Africa with the expectation of gaining a profit. Suggest some others in the comment section below.

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