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Foreign tech investors face culture shock in Africa

Vince Matinde | May 8, 2015
Issues involved grow in importance as foreign VC funding in Africa increases.

"Most of the bad things related to bad management of expectations and too broad assumptions about the market context and cultural context within which our investments worked," Kjelsgaard said. "Many aspects were very different from my own background from Northern Europe."

GrowthAfrica, through the incubation programme GrowthHub, has invested in over 91 startups since its inception in 2012. The program has so far enabled startups to raise over €6.4 million (US$7.2 million) in funding. GrowthAfrica has invested in startups such as Wayo, which provides technology to let companies track delivery of services. Other companies in which GrowthAfrica has invested include SokoText, which offers an SMS marketing tool for grocery sellers, and ChamaPesa, which provides accounting software.

Kjelsgaard acknowledged that often, local talent is not on par with that in developed countries, saying that most graduates still need two to three years of training to fit in the corporate scene.

Lack of appropriate infrastructure was a major obstacle when Kjelsgaard came into the African market. There weren't as many connectivity development initiatives as there are today, he noted, adding that infrastructure is an important point to consider when investing in any market.

Kjelsgaard advises any investors looking to take on businesses in Africa to take time and learn local business processes and how the society works around the product you want to invest in.

In working with local entrepreneurs, Kjelsgaard advised, "Invest early on in local talent -- it takes time to build it, but it is the best return on any investment you will make; and don't assume local talent is cheap, unproductive and efficient. Talent costs money -- also in Africa -- but expect excellence and value in return!"

Even though the business environment in Europe and Africa are different, Kjelsgaard believes that Africa still offers great opportunities for investments, adding that the opportunities outweigh the risks and the potential return on investments is enormous.

 

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