Sh1.5b boost for young investors

September 23, 2008
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, NAIROBI, September 23 – Upcoming young entrepreneurs now have a chance to grow their small businesses into large companies following the launch of a Sh1.5 billion SME Ventures Fund in the market.

A venture capitalist with the East Africa Capital Partners Richard Bell told Capital Business that they had established the fund with the aim of developing small technology-based outfits in the region.

“What we are looking for is Africa’s next Bill Gates. We want to invest in tomorrow’s multi-millionaires,” he said of the fund, which is partly financed by the US-government agency, Overseas Private Investment Corporation.  It aims to foster economic development in emerging markets and will begin operations in early 2009.

Mr Bell disclosed that they would provide between Sh3.6 million and Sh36.4 million to start-up such companies and own a certain stake in the firm but with the aim of exiting after about five years.

“We have clearly defined horizons, we want to get in, build the business and then get out. We don’t want to own the business forever,” he added.

He however observed that their biggest challenge reamined determining which company to invest in, saying it was difficult to find a good firm with a profile such as a vision to go regional and skills to write a business plan.

“We struggle to find people who have both the vision to expand their business across the borders and those who are skilled in drafting their business plans,” he noted.

The capitalist explained that while exiting, the partners employ any of the three strategies such as management buy-back, going to the stock market or inviting strategic investors.

Mr Bell underscored the importance of having venture capitalists on board saying they instil discipline and credibility to a business, which makes it more attractive to investors.

“We are very stringent about making sure that all taxes are paid and this adds value to the business,” he said adding that these are some of the corporate governance issues such as having proper accounting procedures that they insist on.

The Capital Partners have in the last two years established a $100million (Sh7.2billion) fund dubbed the “Africa Technology Media and Telecoms (ATMT) Fund with a sector focus on media and ICT. They only invest in East Africa.

The decision to invest in ICT came about the sector is the fastest growing in the global economy.  The industry has also been starved of equity risk capital.  One of the ATMT’s primary investments has been in the Internet Service Provider, Wananchi Group where they pumped in $50 million to enable the firm become more competitive.

“One of Wananchi’s main consumer strategies is to be the first company in the region to offer true triple play service,” he said while explaining that this would enable their customers to sign up to a true broadband service, voice telephony and multi-channel cable television.

The fund also owns 10 percent in The East African Marine System (TEAMS), which is anticipated to arrive in Mombasa in mid 2009. Mr Bell pointed out that the undersea fibre optic cable would make the cost of bandwidth cheaper, faster and more stable than the current satellite access.

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