Emboldened by persistent economic growth in the past decade, Ghanaian entrepreneurs are looking to explore new business opportunities, while also scaling up existing enterprises. As they test new sources of financing, experts say that clearly defining their businesses and exhibiting a high degree of internal transparency will make them attractive to investors.
“In terms of capital, Ghanaian businesses, like many throughout Africa, say that the biggest impediment to growing their business is the lack of capital. But the truth is there is not a paucity of capital throughout the world. The challenge is connecting the capital to right projects and also creating the difference, both in the company and the country, that attracts and keeps capital,” says Rosa Whitaker, CEO of Washington DC based consultancy, Whitaker Group.
“When we look at the sources of capital coming into companies and countries – whether we’re looking FDIs, venture capital, private equity – the flows are increasing. And then you have these innovations with these new social impact funds up on the markets, so the funds are increasing,” she observes.
Reginald France, Founding Managing Director of Ghana based Boulders Advisors Ltd, and co-panelist with Whitaker on the 8th MTN Business World Executive Breakfast Meeting, emphasizes the need for Ghanaian entrepreneurs to increasingly be professional to successfully tap into the global financial market.
“We’ve got to determine and identify our businesses as to whether we are franchise businesses or whether we’re commodity businesses. If you are a commodity business it means that you have other competitors who provide similar services and products in your industry and you need to actually benchmark yourself to them as to where you are, your market share, what services you provide separately from them and how you add value into that.
“You need to design and develop the strategy that you have and identify the great things about your services, and also to have a plan that you constantly review,” France explains.
He points out that in looking for investors, Ghanaian entrepreneurs need to consider the right type of debt structure or capital they need and whether they are going to get that from money banks or from investors, as well as which type of investors they should consult.
“But let’s start with the fundamental question: why do we need an investment? What are we prepared to give in return for the investment? Are we prepared to make changes on our Boards and capacity? Do we appoint board members who add value to it? Corporate ethics – how do we operate our businesses?”
France says this is imperative against a backdrop of new developments.
“If you also look at the appetite for African investments that have flowed in, in 2012, there was an increase of about 3.3% of investments net private capital into Africa, which is about US$54 billion, and an additional US$3.3 billion which was direct foreign investments.
“In terms of attraction to the sovereigns, you will notice that sometime last year we had Zambia raising money, sovereign debt, at the world market and recently we had Rwanda, which did a maiden debt issuance for US$400 million and it attracted US$3.5 billion.
“You will also know that Ghana is looking at a one billion euro bond and Nigeria is also going to the market. So you can tell there is a lot of appetite that is going on for frontier markets because of the yields that are there and the growth opportunities,” he observes.
Whitaker also believes other sources of funding are rapidly emerging but could be better harnessed.
“In private equity, you’ve got new players like Tullow and Helios. They’ve started expensive aggressive deals across the continent. And in the last five years, these funds targeting opportunities in Africa have raised over US$9 billion. But they came across a rather troubling discovery.
“In 2012, when you look at private equity, they’ve invested about US $1 billion to 58 deals in Africa, and this is really a small fraction of the US$24 billion that’s been invested across emerging markets,” Whitaker says, adding that this represents a lot of anti-potential.
She perceives that many Ghanaian entrepreneurs focus on venture capital but points out that venture capitalists tend to shy away from startups.
“But I believe that, in this region, the new innovation of social impact funds and the angel investor – those wealthy individuals who want to invest and make profits but also deliver social dividends and development dividends – they offer important sources of funding,” says Whitaker.