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Monday, 5 November 2012

How Bill Gates Can Help African Entrepreneurs

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American software entrepreneur and billionaire has done much for Africa through the Bill and Melinda Gates Foundation in the area of health. However, Mr Gates can help mobilise development capital that African entrepreneurs badly need.

Why Bill Gates

There have been many efforts to help Africa come out of poverty but these have been led by politicians like former British Prime Minister Tony Blair and Irish activist Sir Bob Geldof.

I believe what Africa needs is a champion like Mr Gates who understands business and wealth creation. Right now what Africa most needs is cheap development capital to create wealth.

Africa's Huge Investment Potential

Apart from mining, Africa has huge investment potential in agribusiness, construction, energy, food processing, health and energy.

Financing Challenges African Entrepreneurs Face

The financial environment in Africa is generally very hostile. Finance is scarce and very expensive. Even microfinance has not helped much with some institutions charging as much as 200 percent per year on loans.

Private equity is still too little for all the financing needs and is short-term oriented.

Lack of finance limits productivity and wealth creation.

Trillion Dollar Global Capital Market

The irony is while African entrepreneurs lack development capital the world is awash with trillions of dollars looking for investment vehicles.

Investment funds have trillions of dollars under management while the offshore wealth business is worth about $15 trillion dollars. Middle East Sovereign Wealth Funds alone have trillions of dollars in assets.

Africa is not tapping into this huge resource pool despite very attractive returns by global standards.

African Growth Fund

What Africa needs is a multi-billion dollar growth fund to meet the financing needs of African entrepreneurs small or big. This where a person of the stature of Bill Gates can help. There doesn't seem to be capacity within Africa to tap into the trillion dollar global capital market.

Asset Finance

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What most Africa entrepreneurs lack are modern machine tools to process basic raw materials into finished products. That is why there is a great need for asset finance or leasing to buy equipment.

Asset finance has several advantages;

1. The equipment is collateral for the loan.
2. Leasing has tax relief benefits.
3. Machines increase productivity and create wealth.

Will Bill Gates take up the challenge?