While the desire to invest and enterprise exists, there are several challenges that make it difficult for Africans in the diaspora to execute on said desires. These challenges include the existence of restrictive rules and regulations, lack of information and guidance, skill-gap, and trusted proxies or managers on the continent.
Africa needs capital to fund its infrastructure, startups, and other development projects if it is to register the much needed economic growth. The feedback from the annual African Development Bank meeting held in Morocco on the 29th of May 2013 was that Africans in the diaspora are willing and ready to invest in the development of the continent. They are more valuable investors compared to foreign investors because of the social and cultural connections they have to their home countries. Furthermore, they bear less risks of capital expatriation, meaning that the returns from their investments can have ripple economic development.
While African diaspora remittances to Africa are still growing, having risen from $42 billion in 2017 to $46 billion in 2018 in Sub-Saharan Africa alone, most of this money received goes to family members, religious institutions, and NGOs and is used for charity work or to initiate small family businesses. In order to create jobs and spur economic growth, Africans in the diaspora needs to invest in more productive projects.
Initiatives that exist to encourage African diaspora investments
Thankfully, there are numerous initiatives to attract diaspora investors and ease the investment process are on the rise. Below are some examples of such.
RemitFund is a non-profit which aims to make funds accessible for diaspora-led businesses that can strengthen African economies. It has developed an investment fund, where Africans in the diaspora can donate a part of their remittances to the Africa Diaspora Investment Fund (ADIF). The funds will go toward the continent’s SDG-aligned sectors such as clean energy and agribusiness, and will also be injected into businesses initiated by Africans. The first investment fund is expected to close this year, 2019.
RemitFund also offers a training program for diaspora entrepreneurs so that they can be prepared to start successful ventures in the continent. The non-profit also wants to start a crowdfunding platform and an African Fellowship for startups which will leverage a network of tech hubs in Africa.
MBAs For Africa caters to Diaspora members who want to start businesses on the continent. It provides an analysis of business news in the continent, a network of peers and experts, access to 100+ business plans, and functional templates and tools that will help you start your business with ease. No more excuses, it is now time to execute.
The compact with Africa toolbox is a hub of information that contains an analysis of the obstacles and market barriers of investing in private ventures in Africa. It was created by the G-20 in July 2017, with the aim of encouraging more private investments in Africa. The Compact with Africa toolbox helps to bridge the information gap by providing straightforward and accessible information about the many private investment opportunities available to investors. It contains analytical perspectives of governments; would-be-investors; and International Organizations such as the World Bank Group (WBG), the African Development Bank (AfDB), and the International Monetary Fund (IMF).
Currently there are 11 Compact countries including Egypt, Morocco, Tunisia, Ethiopia, Rwanda, Benin, Cote d’Ivoire, Guinea, Ghana, Togo, and Senegal, with more countries encouraged to join.
The SDIP creates an open platform for public, private, and philanthropic entities to partner and assist developing countries and emerging economies to meet their needs. It aims to close the financing gap required to achieve the Sustainable Development Goals (SDGs) through the use of blended funds. It is mostly geared toward infrastructural development.
Its regional hubs help to close the information gap and tackle financing at a local level. Some of the activities of these regional hubs include identifying projects that could benefit from the blended funds and their financial viability, and identifying and replicating investment mechanisms that have proven effective in other regions.
Formerly known as Homestrings, Movement Capital is a top crowdfunding platform that targets emerging markets. The platform gives investors access to unique investment opportunities in the continent. It vets opportunities with consistent track records and invests in sectors such as real estate, telecoms, and SMEs. Some of the Investment opportunities offered include projects and public-private partnerships. These opportunities are provided in a fact sheet which investors can access so that they can make informed decisions. Moreover, Movement Capital monitors the investments and sends reports and updates to individuals quarterly.
Diaspora investment networks
Forums which bring together African Diaspora investors provide face to face interactions and access to information that can be used to make investment or entrepreneurship decisions. Such forums include the African Diaspora Investment Symposium (ADIS), the Africa Diaspora Forum, the Diaspora Trade and Investment Conference, and the African Diaspora Agro Food Forum to name a few.
Institutions which support African diaspora entrepreneurial projects
Sustainable Technology for Africa provides an avenue for African Diaspora entrepreneurs in Europe to actualize their idea of a social enterprise or a sustainable product in Africa. They welcome projects and vet them to end up with the best. The process involves boot camps to teach the participants how to start their businesses, and coaching sessions which will prepare the participants for the final presentation where the winning projects will be chosen.
The diaspora challenge mobilizes the African diaspora community to build scalable business solutions to challenges in Africa. Their three focus areas include education, Fintech, and energy. The winning project receives prototype funding of $15,000, business advisory, and seed investment of up to $250,000. Feasible projects also receive market access and networks as well as mentorship by industry experts.
The initiatives above have helped to make Africa more accessible to investors. Solutions that focus on pooling of funds accommodate investors with little capital. The problems of a skills-gap and information gap, however, still lingers. As much as Africans in the Diaspora can chip in to provide the expertise needed to provide the skills needed in the job market, Africa needs to develop its own skilled workforce and tout its own horn. Countries such as Uganda and Kenya are using education models to try and close the skills gap which is a step in the right direction.