Africa has endured vast improvements in terms of economic growth as of late, with new developments in the payments space and the adaptation of new technologies. According to the study “Accelerating Entrepreneurship in Africa,” conducted by Omidyar Network Africa, the entrepreneurial sector is growing too.
But despite that progress, as CapitalFM Business points out, many challenges that hinder prospective startups from taking off also remain.
The underlying issue amongst these ventures is finding the funding to complete necessary projects, such as infrastructure and training.
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Part of the entrepreneurs’ job is to find investors to endorse their idea, both literally and financially. In order to convince these investors to fund the process, they must present a business plan that outlines each step in addition to explaining costs and profits. The business plan is a deal breaker, and many new ventures are failing to deliver.
“Financers note a lack of fundable business plans, due to the quality and feasibility of the business idea and the commitment of the entrepreneur and his or her team,” the study explains.
With a lack of investors, finding capital to fund ventures continues to be a primary challenge in Africa. Of the six countries surveyed, it was reported that the majority of financing came from personal or family loans, coming in at 45 percent. Bank funding also makes it difficult for entrepreneurs to turn to for help because of the steep fees. Some banks were reported to request 150 percent collateral of the borrowed money.
Another difficulty the study indicated was the poor sub-Saharan African infrastructure. The lack of reliable electricity, communication technology, poor quality roads and rail networks causes great inefficiency for businesses. Addressing these problems is necessary to run a good business, but the costs are high. Most growing firms cannot afford to fix these infrastructure setbacks, Capital FM Business points out.
The Kenyan government is working hard to eliminate these obstacles. They have been investing in recent development plans to improve the transportation and telecommunications system in the country. They will continue to focus on ways to increase Kenya’s competitiveness in the global market and improve the system to attract investors to foster the growth of new ventures.
To read the full story at CapitalFM Business click here.
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