DRAFT

Opportunity Assessment

2010

Dale Fickett

Co-founder, Profit2

dfickett@hotmail.com

+353 87 998 2616 (Ireland)

+1 856 481 0322 (United States)

DRAFT

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This document has been prepared by Dale S. Fickett and Profit2, and is being furnished to select

individuals for the purpose of conveying the nature of a new business venture model, and to develop

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Table of Contents

Executive Summary

“He is now rising from affluence to poverty.”

-Mark Twain

“In a country well governed, poverty is something to

be ashamed of. In a country badly governed, wealth

is something to be ashamed of.”

-Confucius

“Poverty is my pride.”

-The Prophet Muhammad

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Table of Contents

I. The African Development Context .................................................................................................. 5

Introduction – The Need for Action in Sub-Saharan Africa ................................................................ 5

Context – Global Development Efforts ............................................................................................... 5

Measuring Development Progress in Sub-Saharan Africa .................................................................. 6

Conclusion ........................................................................................................................................... 7

II. African Economy and Other Macro-Factors ................................................................................... 7

Resiliency and Growth ........................................................................................................................ 7

Economic Growth Drivers ................................................................................................................... 8

Risks to Economic Growth .................................................................................................................. 9

Additional Macro-Factors ................................................................................................................... 9

Conclusion ......................................................................................................................................... 11

III. African Entrepreneurship and Innovation ................................................................................ 11

Global Entrepreneurship ................................................................................................................... 12

Sub-Saharan African Entrepreneurship ............................................................................................ 12

Alleviating Poverty through Entrepreneurship ................................................................................. 13

IV. Country Analysis ........................................................................................................................ 13

Framework for Determining Attractive Markets .............................................................................. 13

Financial Return Dimension .............................................................................................................. 14

Social Return Dimension ................................................................................................................... 18

Mapping Attractive Countries ........................................................................................................... 18

National Advantage Diamond Analysis ............................................................................................. 28

Conclusion ......................................................................................................................................... 32

V. Industry Analysis ........................................................................................................................... 32

Industry Definitions ........................................................................................................................... 32

Why Incubators and Early Stage Investment? .................................................................................. 33

Business Incubation in SSA ............................................................................................................... 35

Private Equity in SSA ......................................................................................................................... 36

Size and Growth Rates ...................................................................................................................... 37

Value Chain Analysis ......................................................................................................................... 41

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Conclusion ......................................................................................................................................... 44

VI. Next Steps ................................................................................................................................. 44

VII. Sources ...................................................................................................................................... 45

VIII. Appendices ................................................................................................................................ 46

List of African Small Business Incubators .......................................................................................... 46

List of Private Equity Providers in Africa ........................................................................................... 49

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I. The African Development Context

Introduction – The Need for Action in Sub-Saharan Africa

There are three primary challenges for society, and for our generation – the threat of terrorism and

the need for nuclear non-proliferation, containing climate change, and eradicating extreme poverty.

While it is more convenient to discuss the amelioration of extreme poverty, our goal must be clear –

to ensure that no human being must suffer the indignities of living on less than $1.25 per day.

According to the World Bank’s World Development Indicators 2010, the world population stood at

6,697,300,000 in 2008, and one in four, or 1,374,000,000 have been doing just this.1 These people

face a daily fight to meet basic survival needs, such as adequate nutrition, uncontaminated drinking

water, safe shelter and access to basic health care.2

In Sub-Saharan Africa just over half the population lives in this extreme state of poverty, the highest

poverty rate for any world region. Not only do these people live at subsistence level, but they are in

countries of low economic development – there are also very low education and health standards.

Sub-Saharan Africa, as a region, is the world’s largest collection of countries of Low Human

Development. In fact, according to the UN’s Human Development Report 2010, at present, there are

just over 1 billion people living in countries with these poor conditions, and just over 80% of them

live in Sub-Saharan Africa.3

Context – Global Development Efforts

Global development efforts, or targeted interventions to improve the livelihoods of people living in

poverty, are said to have started with the 1944 establishment of the U.S.’s Marshall Plan and the

establishment of the World Bank and International Monetary Fund at the Bretton Woods

Conference.4 Since their inception it is estimated that $1 trillion5 has been spent in private-, civil-,

and public- sector activities.6 Although there are clearly many programs targeting poverty in

developed countries, “global development” efforts are generally regarded as those focused

specifically on the poor living outside North America, Western Europe and developed Asia. These

efforts focus on three objectives: 1) to increase the availability and widen the distribution of basic

life-sustaining goods; 2) to raise the levels of living; and 3) to expand the range of economic and

social choices.7

It is encouraging to note that there have been large improvements in alleviating poverty. To put

today’s situation into context, in 1820, at the dawn of the industrial revolution, it is estimated that

75% of humanity lived in these conditions of poverty8. In short, technology improvements that have

enabled mass production, instantaneous transmission of information, and global trade have also

lifted billions out of a state of poverty.

1 World Bank (2010), p. 64 and p. 92. $1.25/day poverty population and rates are based on 2005 estimates.

2 Sachs (2005), p. 56

3 UN (2010), p. 187

4 See Führer (1996).

5 Moyo (2009), p. xix

6 See Fickett (2010), pp. 8-11, for further discussion on the background of economic development in Sub-

Saharan Africa. 7 Todaro (2006), p.22

8 See http://en.wikipedia.org/wiki/Poverty_reduction

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Measuring Development Progress in Sub-Saharan Africa

For those that have not escaped extreme poverty, coordinated international intervention improved

dramatically with the establishment of the Millennium Development Goals in 2000. Over the last

ten years, through the global pursuits of these goals, it has been found that the achievement of

these standards of living improvements was made easier in states experiencing economic growth, as

compared to stagnant states; and that solutions in one state or region do not easily convert to

others.9 As a result of these efforts, (since 2000) 37 million more children have been able to attend

and complete primary school; 14 million children have been vaccinated against the measles; and the

number of children (under age 5) dying has fallen from 10 million per year to 8.8 million per year.

Four out of five people in developing countries now live in states that have attained gender equality

in primary and secondary education; and seven out of ten people in developing countries live in

states that have halved the proportion of people without access to clean drinking water.10

Economic growth remains strong in many developing countries, and achieving the Millennium

Development Goals is within reach, despite setbacks incurred as a result of food crises, the financial

crisis, and the resulting economic downturn. However, there is still much progress to be made in

assisting the developing world in lifting their standards of living. 11 Only 16% of the developing

world’s population live in countries where the proportion of people without access to basic

sanitation has been halved. At present, seven out of ten countries are off-track to meet this goal in

2015. The slowest progress has been in addressing childhood malnutrition – 56% of the developing

world population lives in the 102 countries that are unlikely to attain this goal.12

While the global numbers are encouraging, reaching the Millennium Development Goals in Sub-

Saharan Africa is off-track in some regards. In the region, higher unemployment, falling incomes and

lower migrant remittances have slowed progress towards reaching the MDGs.13 Those areas

requiring most attention for SSA, include:

� The proportion of people living on less than $1.25/day has only decreased from 58% to 51%;

� Gender equality in education has improved at primary school level, but has fallen at

secondary and tertiary levels;

� Giving birth in Sub-Saharan Africa is especially risky, where 46% of women deliver without

skilled care;

� The spread of HIV appears to have stabilized, and more people are surviving longer (but

correct transmission knowledge among the 15-24 age group is worst in Sub-Saharan Africa ;

� Forested area as a percentage of land area, has fallen from 31% to 28%, while billions of

metric tons of carbon dioxide emissions have been increasing; and

� Overseas development aid continues to rise, but Africa has been short-changed.

Fortunately, progress has been made regarding:

� Primary school enrolment ratio for 1998-99 was 58%, and has improved to 76%; and

� The under-5 mortality rate has fallen from 184 per 1,000 births, to 144 (but is still the

world’s highest incidence rate).14

9 World Bank (2010), pp. 1 - 3

10 Ibid.

11 UN (2010b), pp. 1-3

12 Ibid.

13 IMF (2010), pp. 3 – 14

14 See UN (2010b).

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Conclusion

Efforts to address progress in these areas are undertaken by a wide array of development

stakeholders, including: inter-governmental organisations, private sector corporations, civil-sector

NGOs, and government agencies. In brief, their efforts can be categorized as: 1) Working at a

macro-policy level to influence politicians and regulators to create ecosystems more conducive to

economic growth that facilitates poverty alleviation; 2) meso-level interventions, such as those

intended to construct and augment industry value chains or other community support systems; and

3) micro-level programs to support individuals, their families or their businesses.

Note: For further discussion on global development in Sub-Saharan Africa, please see Fickett (2010): Development

Stakeholders, pp. 5-7; Economic Development in Sub-Saharan Africa, pp. 8-11; and Private Investment and Economic

Growth, p. 11.

Economic development, or the improvement of livelihoods for those who most need it, has come as

the result of government policy to enable growth in the private sector. More economic opportunity

has generally meant higher incomes, better education and better health care. However, the rising

tide of economic activity does not lift all ships, and there are many cases of those left behind – both

individuals in countries which have improved, as well as whole nations that have struggled to

improve conditions for their populations. This resultant inequality has been the driving force behind

sizeable efforts by many stakeholders. These groups from the private-, civil- and public-sector have

sought to address the challenges of laggard countries through interventions to spur development

which addresses these inequalities in standards-of-living. Historic efforts in parts of Asia and Latin

America have been commended as largely successful in improving the livelihoods for hundreds of

millions. However, Sub-Saharan Africa in particular, still faces arguably the largest challenges in

improving livelihoods. The nature of the development challenges in SSA range from poor access to

income-generating economic activity – to low access to education – to low levels of health care. We

appear to be on the cusp of a large wave of new economic growth in SSA, one which has the

potential to make tremendous gains in addressing these inequalities at their most extreme, and one

which necessitates concerted effort to direct benefits to those that are in most need.

II. African Economy and Other Macro-Factors

Resiliency and Growth

Although Sub-Saharan Africa is clearly facing a range of developmental issues regarding the

conditions in which people live, there is also much cause for enthusiasm related to the region’s

prospects for future improvements.

2010-2020 is likely to be the first time since the industrial revolution that developing countries add

more to global economic growth than developed countries15, and Africa will play a leading part in

this growth. Africa (including North Africa) has gross domestic product of $1.6 trillion, roughly the

size of Brazil or Russia.16 The IMF predicts a strong re-bound for Sub-Saharan Africa, with a 5%

growth rate for 2010 and 5.5% for 2011. For most countries in the region, this will mean a return to

15

McKinsey (2010), p. 4 16

Ibid., p. 11

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their pre-crisis level. In fact, only developing Asia is set to outpace Sub-Saharan Africa’s growth.17

The Emerging Market Private Equity Association concurs, stating, “Sub-Saharan Africa represents

one of the most dramatic growth stories among emerging markets.”18

The outlook for 2011 and beyond is promising. Growth is expected to accelerate to 5.5%, and no

country is expected to have negative growth in 2011 (a rare historic occurrence).19 Across the

region, fiscal balances are expected to improve. Government debt-to-GDP is expected to rise,

however deterioration should be mild due to anticipated debt relief, and improved tax revenues.

Only a slight deterioration in the external account balances is expected as demand is expected to fall

slightly, and little change in currency reserve positions is expected.20

Economic Growth Drivers

The region’s growth is explained by several factors. First, policy changes of the last decade are

making a difference. Political commitment has resulted in stronger fiscal and monetary stability,

investments in infrastructure and education, and increases in trade.21 Second, Africa (including

North Africa) has been helped by post-crisis global trade, and a rebound in commodity prices.22 The

increase in global trade has been focused on faster-growing geographic segments of the global

economy – China, Latin America and developing Asia.23 Also, economic activity is rebounding due to

a resurgence in mining and demand for consumer and capital goods.24 Third, capital flow changes as

a result of the financial crisis and the broader economic downturn are mixed. The slowing of global

17

IMF (2010), pp. 3 - 14 18

EMPEA (2010), p. 11 19

Ibid. 20

Ibid. 21

McKinsey (2010), p. 37 - 39 22

OECD (2010), pp. 7-9 23

IMF (2010), pp. 3 - 14 24

Ibid.

Investment Trends in Sub-Saharan Africa

• Half of the 2010 inward FDI flows of $1.2 trillion now go to developing and

transition economies

• With 5.3% of global inward FDI, SSA is the smallest region for receiving investment,

and is expected to remain so through 2012

• 2009 FDI flows to Africa fell 19% to $59 billion, the first decrease in a decade

• In 2009 outward FDI from Africa contracted by 50% to $5 billion

• The pre-crisis level of FDI is not expected to be reached again until 2012, with an

estimate at $1.6 - $2 trillion

• The ten year annualized return for the Africa composite index is 13.8%, compared

with -1.0% for the Dow Jones and 7.3% for the MSCI Emerging Markets index

Source: UNCTAD, EMPEA

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capital markets resulted in weaker Foreign Direct Investment (FDI) fell, especially in non-extractive

industries (see below).25 However, the outlook for FDI into the ‘higher value’ services and

manufacturing industries is promising, as governments enact investment-friendly policy frameworks.

Interestingly, existing investments earn returns 2/3 higher than those in China, India, Indonesia and

Vietnam.26 Weaker demand and higher unemployment outside Africa reduced worker remittances,

while overseas development assistance (ODA) has generally held up. Fourth, past macro-economic

prudence has enabled expansionary fiscal and monetary.27 Finally, Africa has a range of longer-term

factors which demonstrate large expansionary headroom - large untapped natural resources (of

greater value when considered in terms of rising commodity prices), growing populations with

increasing levels of discretionary income, potential in hydro and solar power due to geography, and

potential to displace Asia as the low-cost manufacturing hub, given proximity to European and North

American consumers, long coastlines, and wage dynamics.28

Risks to Economic Growth

Downside risks to the growth scenario, in the short term, include:

� Weakening of global demand;

� Depression in commodity prices, or increased price volatility;

� Weakened investment due to higher costs of capital;

� Shortfalls in overseas development aid due to developed country fiscal pressures; and

� Localized conflict, financial system deterioration, poor public policy changes or natural

disasters. 29

Additional Macro-Factors

The following table illustrates a range of other macro-factors of interest when considering African

potential for economic growth and for the alleviation of African poverty (for further discussion on

trends as they impact African entrepreneurship, please see section IV):

Factor Source

Economic

� Increasing economic diversification, with agriculture, wholesale and

retail, transportation, telecommunications and manufacturing

accounting for 67% of growth between 2000 and 2008

McKinsey

� Increasing demand from developing countries for African resources in

timber, agriculture, fresh water and mineral deposits

Accenture

� Large oil-exporting and middle-income countries have faced increases in

unemployment, but less significant than that experienced in developed

markets

IMF

� As the financial crisis unfolded, governments were able to enact counter-

act decreasing investment inflows with higher fiscal spending, and

monetary rates were lowered where possible

IMF

� Capital inflows into Africa (including North Africa), have increased from

$9B in 2000 to $62B in 2008 – relative to GDP, comparable to China

McKinsey

25

OECD (2010), pp. 7 - 9 26

Collier (2010), p. 61 - 63 27

See IMF (2010), pp. 3 – 14, McKinsey (2010) p. 4 28

Accenture (2010), p. 5 – 7; Collier (2010), pp. 61 – 63; and McKinsey (2010), p. 13 29

Downside risks drawn from OECD (2010), p. 7 – 10; McKinsey (2010), p. 11; and IMF (2010), p. 14 - 16

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� Capital flows are increasing due to intra-Africa trade, and that African

traded companies enjoy ROIC that is 65% higher than those in China,

Vietnam and India.

Accenture

Demographics & Social

� Increasing urbanization and changes in income have resulted in an

emerging African middle class, representing 35% of the population

Accenture

� In 1980 20% of the population lived in cities, it’s now approximately 40%

- roughly comparable to China and India. By 2030 it is expected to rise to

50%, and the top 18 cities are expected to have combined spending

power of $1.3 trillion.

McKinsey

� In 2000 59M African households had income of $5000 or more; in 2014

it is expected to rise to 106M households

McKinsey

� Africa already has more households with over $20,000 in annual income

than India

McKinsey

� Work patterns have changed, as the services industry now makes up

more than 40% of Africa’s GDP

Accenture

� By 2040 Africa is expected to have a workforce of 1.1 billion, larger than

China or India

McKinsey

� Tertiary educational enrolment have grown at 12% since 1975, but

challenges remain to stem graduate emigration

Accenture

� On average, Africans are half as expensive to employ as their counter-

parts in Latin America, Asia and Central Europe

Accenture

Political & Regulatory

� African governance is improving, with over 20 countries encouraging

greater political participation since 1989.

McKinsey

� Continental coordination and trade are improving though the African

Union, the New Economic Partnership for African Development and

regional trade blocs

Mo Ibrahim

Foundation

� Of Africans surveyed across 19 countries – 65% hold community

meetings; 55% were active in joining others to raise issues; and 62%

believe they should question leaders’ actions

Mo Ibrahim

Foundation

� Almost every African nation has an independent media Mo Ibrahim

Foundation

� Privatization of state-owned enterprises, removal of trade barriers,

strengthened regulatory and legal systems have all increased

attractiveness of inward FDI

McKinsey

� Nigeria has led the region in privatization—the World Bank estimates

that between 2000 and 2008, Nigeria privatized 105 enterprises valued

at nearly US$6.5 billion. Ghana privatized seven enterprises valued at

US$1.1 billion and South Africa saw 13 enterprises privatized for US$780

million in the same time period.

Emerging

Markets Private

Equity

Association30

Cultural

� Cultural variation between and within countries is significant – with

performance and celebration customs, and traditional visual arts and

crafts focused on family and ethnic groups

Africa Guide31

� Strong linguistic heritage with over 2,000 indigenous languages. Official

languages in many countries tied to European colonialism.

Wikipedia32

30

See EMPEA (2010), p. 12 31

See http://www.africaguide.com/culture/index.htm 32

See http://en.wikipedia.org/wiki/Languages_of_Africa#Official_languages

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� Primary cultural trends, include: reverse innovation, growth in mobile

connectivity, rise of the African creative class, the Africa brand and

related tourism, the rise of African / African-American initiatives, and

increased trade and investment with China and India

Globalpost.com33

Technology

� Productivity is improving, currently averaging 2.% growth since 2000,

based on high mobile phone penetration rates, increasing competition

and growing economies of scale

McKinsey

� Mobile phone penetration rate is currently at 50%, is among the world’s

fastest growing; and is creating unique innovations such as mobile

banking and electronic stored value

Economist

� Kigali recently announced its plans to for ubiquitous wireless internet

access, at an investment of $7.66M

IT News Africa

� Increasing broadband connectivity is driving growth in African

outsourcing businesses

Accenture

� Reverse innovation and the rise of emerging market consumers are

placing new demands on traditional consumer products companies in

developing low-cost/high-quality offerings that meet local needs, and in

selling to these consumers through unfamiliar channels

Accenture

Conclusion

Despite the development challenges discussed in section II, there are significant predictions for

economic growth in SSA. It has been demonstrated that SSA is returning to pre-crisis trends, and will

rival the established BRICs as an engine for post-crisis growth. This economic growth is driven by:

macro-economic stability, pro-investment/pro-business policy environments, fairly favorable capital-

flow dynamics, and a range of favorable geographic and demographic factors. The challenge

remains how to harness this forthcoming wave of activity to benefit the poor. Work in

developmental entrepreneurship, including systems approaches, inclusive markets approaches, and

sustainable livelihoods approaches looks to provide an answer. If this work offer the design of the

‘vessel’ by which we will ride this economic growth wave,34 then impact investing provides the

engine by which the vessel can be powered to create exponential impact in poverty alleviation.

III. African Entrepreneurship and Innovation Following the G20 summit on November 15, 2008, the leaders of the world's largest economies

issued a statement explaining how they intended to restructure the world's economic architecture.

On the first page of this statement, they stated:

“Our work will be guided by a shared belief that market principles, open trade and investment

regimes, and effectively regulated financial markets foster the dynamism, innovation, and

entrepreneurship that are essential for economic growth, employment, and poverty

reduction.”35

33

See http://www.globalpost.com/webblog/commerce/top-6-african-business-and-culture-trends-watch-2010 34

See Fickett (2010), pp. 3 – 5 for further elaboration on developmental entrepreneurship in the academic

literature. 35

Klapper et. al. (2009), p. 2

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The OECD defines “entrepreneurship” as the phenomenon associated with enterprising human

action in pursuit of the generation of value through the creation or expansion of economic activity,

by identifying and exploiting new products, processes or markets. It is essential for the continued

dynamism of the modern market economy and a greater entry rate of new business can foster

competition and economic growth.36 Specifically, entrepreneurship, or the creation of new private-

sector, profit-generating businesses, has been recognized as:

� A key catalyst for creating new technologies, products, processes and services;

� An engine by which financial value is created through high potential, high growth

companies;

� That financial value supports significant job creation; and

� Entrepreneurs are increasingly identifying new models for creating social impact, in areas

such as housing, health care, education, the arts, and poverty alleviation. 37

Global Entrepreneurship

Globally, entrepreneurship is primarily measured through the Global Entrepreneurship Monitor

(GEM) and the World Bank Group Entrepreneurship Survey (WBGES) dataset. The former captures

early-stage entrepreneurial activity and entrepreneurial intent, especially in the informal sector;

while the latter captures formal business registration.38 Recently, the GEM found that the 2009

economic downturn, expectedly, reduced the number of people initiating new ventures for two-

thirds of the 54 countries surveyed.39 Also, GEM recently found: 1) Across countries,

entrepreneurial attitudes and perceptions vary widely and are positive views are generally related to

higher social status and higher media visibility for successful entrepreneurs; 2) development; 3)

Countries with high levels of employment protection exhibit lower start-up rates; 4) Entrepreneurial

institutional supports are generally more important within countries at more advanced phases of

economic development; and 5) the economic downturn has resulted in decreased informal/angel

investing, as well as venture capital investments in nearly all markets. According to the findings of

the WBGES: 1) In developed countries four new firms register for every 1,000 people in the labor

force, while there is less than one for countries of medium and low development; 2) Data show that

dynamic business creation occurs in countries that provide entrepreneurs supportive policy and

regulatory environments; 3) Concurring with the GEM, almost all countries noticed a drop in new

business registration as a result of the global economic downturn; and 4) Countries in which the

financial services sector plays a larger role in the domestic economy, experienced sharper declines in

new business formation.40

Sub-Saharan African Entrepreneurship

Like other regions of the world entrepreneurship in Sub-Saharan Africa is a key component of

economic activity. Since 2004 the WBGES has captured the creation of 2,690,818 new firms in SSA,

36

See Klapper et al. (2007), p. 2; Klapper, Laeven and Rajan (2007); Djankov, La Porta, Lopez de Silanes and

Shleifer (2002). 37

Timmons and Spinelli (2003), p. 19. Also, see Global Entrepreneurship Monitor (2009), p. 7, in relation to

social entrepreneurship. GEM found that in the 49 countries studied 1.8% of the adult population was

engaged in social entrepreneurial activity. 38

Acs et. al (2007), p. 11 39

Global Entrepreneurship Monitor (2009), 5 - 7 40

See World Bank (2010b).

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or 14% of the 18.7 million started globally.41 As SSA’s portion of global economic output is much

smaller at 1.52%42, arguably SSA is beginning to generate a ‘more than their share’ of the world’s

small businesses. Moreover, this does not account for the substantial portion of informal economic

activity in SSA, which is not captured by the WBGES survey. A 2007 study of Micro, Small and

Medium Enterprises (MSMEs) by the International Finance Corporation, included eight SSA

countries, and captured 4.5 million such businesses, or 27.5 MSMEs per 1,000 Sub-Saharan

Africans.43 Additionally, these MSMEs were shown to contribute 38% to 66% of their respective

country’s employment.44 Indeed, McKinsey recently agreed with this assessment of the importance

of the entrepreneurial sector in Africa’s growth, stating, “Entrepreneurship is seen as a significant

component to private sector growth (in Africa).”45

Alleviating Poverty through Entrepreneurship

A range of initiatives under numerous headings have been initiated to harness the power of private

markets, and more specifically, entrepreneurship, to alleviate poverty – “Pro-poor growth”,

“Inclusive Markets”, “Sustainable Livelihoods”, “Enterprise Development”. In short, developmental

entrepreneurship is the study of utilising the establishment of small businesses as a lever to alleviate

poverty in countries with low levels of economic development. There is a significant body of

research supporting the assertion that new ventures can be used as a vehicle for poverty alleviation.

The OECD promotes the “central role” of the private sector in poverty alleviation46; while the UN

Development Program states, “The poor harbor a potential for consumption, production,

innovation, and entrepreneurial activity that is largely untapped.”47 They also site many examples of

businesses that are creating “value for all” by buying from, and selling to, the poor.48 Finally, the

WBGES shows relationships between entrepreneurial activity and indicators of economic growth and

development.49

Note: For further discussion on developmental entrepreneurship and poverty alleviation in SSA through

entrepreneurship, please see Fickett (2010): Economics and Management Literature, pp. 3 – 5; Poverty Alleviation

through Developmental Entrepreneurship, pp. 12 – 13; and Research on Addressing Developmental Entrepreneurship

Opportunities, pp. 13 – 17.

IV. Country Analysis

Framework for Determining Attractive Markets

Sub-Saharan Africa is a diverse collection of 46 countries, and each has a unique policy environment,

structure of economic output, technology landscape and social profile. As such, it is necessary to

understand which countries are the most conducive for developmental entrepreneurship ventures.

41

See WBGES Dataset 2010 available at:

http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:22731215~pagePK:642

14825~piPK:64214943~theSitePK:469382,00.html 42

World Bank (2010), p. 34 43

See IFC dataset on MSMEs available at: http://www.ifc.org/ifcext/sme.nsf/Content/Resources 44

Ibid. 45

McKinsey (2010), p. 69 46

OECD (2006), pp. 14-15, 20 47

UN Development Programme (2008), pp. 1-12 48

Ibid 49

Klapper, et. al. (2007), pp. 15 – 17, 32

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In consideration of a determination of which national markets are most attractive, it is first

necessary to define the two primary dimensions along which a developmental entrepreneurship

opportunity should be measured – social and financial (see figure 1). First, it must provide a

demonstrable impact in the alleviation of poverty in the markets in which it operates, through job

creation, income increases, direct standards-of-living improvements related to the products or

services provided, secondary effects related to the use of local supply chain partners, or secondary

effects related to livelihood impacts – increased educational enrolment or health improvements for

the families of indigenous entrepreneurs. Also, the given venture may create tertiary impacts, such

as improved perceptions of entrepreneurship, spill-over effects related to knowledge capital, and

improved entrepreneurial networks and role models. Second, a given venture must generate

financial returns commensurate with its capital requirements and capital structure. In order for the

venture to be self-sufficient over the long-term, it must create enough economic value to repay

creditors and/or generate risk-adjusted returns for providers of equity capital. Initiatives reliant on

grants and subsidies are inherently time-bound due to the nature of the financing. Developmental

entrepreneurship ventures are self-sustaining.

Note: For further discussion on the social and financial components of developmental entrepreneurship opportunities,

please see Fickett (2010), pp. 20 – 24.

Financial Return Dimension

The WBGES demonstrates a range of considerations to utilize when comparing countries’

conduciveness for entrepreneurial activity. First, the quality and efficiency of the legal, regulatory

Financial Return Dimension

Not-for-Profit and

Public Sector Space

Most Attractive

Opportunities

Least Attractive

OpportunitiesPrivate Sector Space

So

cia

l Re

turn

Dim

en

sio

n

Illustrative

Figure 1: Mapping Social and Financial Returns

15

DRAFT

and governance environments are the primary determinants of entrepreneurial activity.50

Interestingly, Ghana and South Africa have recently been found to be less corrupt than China, India

and Brazil.51

Second, business density, or the number of registered business per member of the labor force, is

another key indicator of entrepreneurial conduciveness.52 Third, the Doing Business53 rankings are

strong indicators of business density and entry, or the number of new businesses registered.54

Forth, and intuitively, the cost of starting a business as a percentage of per capita Gross National

Income (GNI) is also a key factor in entrepreneurial activity. For every 10 percentage points

decrease in the cost of starting a business (as a percentage of per capita GNI), the business entry

rate will increase by 1%.55 Fifth, the log Gross Domestic Product (GDP) per capita and domestic

credit accessibility are both strongly correlated with business entry, however no causal relationship

has been established.56 Concurring with these points, the IFC recently found that businesses are

created at a faster rate in countries with good governance, a strong regulatory and legal system, low

corporate taxes, and less administrative procedures when dealing with public-sector agencies.57

The extent to which the national environment is supportive of entrepreneurship and innovation is

another important dynamic in relation to the attractiveness of a given country. According to a

recent report of the OECD, “the major function of SMEs and entrepreneurship in innovation is the

introduction of advances in products, processes, organizational methods and marketing techniques

into the economy.”58 Innovation drives the creation of jobs and economic growth; and innovation

policy seeks to foster supportive environments. It happens in developed and developing countries

alike; and innovation policy must take into account local conditions, economic inequalities,

demographic challenges, and activity of the informal sector.59 The European Union Lisbon Treaty

identified three factors in the uptake of new technology – R&D expenditure, structural reforms, and

market de-regulation; and subsequently, a 2007 African Union summit adopted a science and

technology plan of action, with the New Economic Partnership for African Development (NEPAD)

overseeing a science and technology program.60 Furthermore, innovation is at the heart of economic

development, social welfare and protection of the environment – with the World Bank declaring,

“Innovation is the main source of increased performance, of getting more out of limited resources,

of finding new ways to use existing resources, and to mobilize people to produce better goods and

services.”61

The following table provides selected areas of African innovation by industry sector, including both

opportunities and recent innovations:

50

Klapper, et al. (2007), p. 2-3, 15 - 18 51

See Transparency International (2010). 52

Ibid. 53

See World Bank (2010c). 54

Klapper, et. al. (200&), pp. 18 - 21 55

Ibid. 56

Ibid. 57

IFC (2010), p. 1 58

OECD (2010b), p. 32 59

OECD (2010c), p. 9 - 12 60

See OECD (2009), p. 81; OECD (2010c), p. 9 - 12 61

World Bank (2010d), pp. 22 - 24

16

DRAFT

Innovation Instances and Opportunities Source

Agribusiness

Agricultural productivity improvements provide a significant opportunity, as

productivity is the primary driver of poverty reduction, as livelihood impact is

gauged to be 4 times greater in agriculture than other sectors, and as crop yields

in SSA have remained stagnant since the 1960s. 70% of people live in rural

communities, and 90% of rural populations depend on agriculture for their

primary source of income.

World Bank

(2009)

Research in high-yield seedlings through Cameroon’s Institute of Agricultural

Research for Development

Accenture

Financial Services

Safaricom Ltd., with its M-PESA offering, allows customers to send money by

using mobile SMS services. There are currently 6 million users. There are now

similar services in Tanzania, Uganda, Rwanda, Sierra Leone, South Africa and

Somalia.

Accenture

South Africa’s First National Bank has introduced an eWallet solution. Accenture

Mobile banking product enabling Kenyan farmers to purchase insurance against

poor weather conditions and low crop yields.

Accenture

Aquaculture

Aquaculture has a demonstrated capability to reduce poverty, improve

livelihoods, and be a significant engine of growth, yet the fisheries sector is

poorly planned, inadequately funded and neglected by governments.

World Bank

(2007)

Health Care

Introduction of telemedicine call centers and mobile clinics McKinsey

Shifting first-line medical inquiries to nurse-practitioners to better utilize

doctors’ capacity

McKinsey

Information & Communication Technologies

Introduction of solar powered internet kiosks in Kenya, Nigeria, Rwanda, and

Zambia.

Accenture

Opportunities related to Africa’s position as the fastest-growing region for

mobile phone use, and the only region where mobile phone penetration trumps

fixed-line prevalence.

OECD (2009)

Algeria, Botswana, Mauritius and Rwanda have stated ambitions of becoming

regional ICT hubs.

OECD (2009)

The ability to capture an innovative idea, to translate that idea to a suitable offering, and to deliver it

to market in a profitable fashion is dependent upon the dynamics of the geographic and product

market, and the capabilities of the firm. Differences in total factor productivity account for roughly

half the differences in income across countries, and are generally associated with differences in

technological progress.62 A country’s ability to harness innovation is therefore a key element in the

determination of a country’s attractiveness for developmental entrepreneurship activities. Simply

put, the more innovation that is currently present in a given market, the more that there is likely to

be in the future.

There are several other factors which provide insight into a given country’s ability to support

entrepreneurship and innovation. One of the strongest determinants of entrepreneurial and

62

de Mel, et. al (2009), p. 23

17

DRAFT

innovation potential is the educational level achieved by the individual entrepreneur.63 It stands to

reason that a country with a higher proportion of its population achieving tertiary education, is more

conducive to innovation than one with a lower level of educational achievement. Also, as one might

expect, the extent to which a country invests in research and development activities is also positively

correlated to growth and innovation.64

International relationships through trade and receipt of inward FDI are also strong indicators of

innovation. The extent to which a country receives inward FDI, is a strong indicator of its ability to

support private-sector activity. According to Gorodnichenko et. al. vertical transfer of capabilities

from foreign to domestic firms and FDI spill-over are significant. .65 Two industries – infrastructure

and natural resources dominate as destinations for inward FDI, and along with activity in the

informal sector, are strong loci of innovation.66 Pressure from foreign competition has a positive

effect on innovation, as these firms are more likely to upgrade their product, acquire a new

technology, and obtain a new accreditation.67 Furthermore, globally engaged firms are larger, more

productive, more capital intensive, and pay higher wages than purely domestic firms. In short,

engaging in global supply chains, through either trade or receipt of investment, tends to spur

innovation.

There are a range of factors which serve as indicators of a given county’s conduciveness for

entrepreneurial activity, and these factors serve as the components for our ‘Business Viability Index’.

The economic factors include:

� Market Size, as measured in 2008 GDP;68

� Market Growth, as measured by a simple average of the 2009-2011 estimates of real GDP

growth;69

� Global Competitiveness, as measured by the World Economic Forum’s Global

Competitiveness Index, including assessments of institutions, infrastructure, macro-

economic environment, health and primary education, higher education and training, goods

market efficiency, labor market efficiency, financial market development, technological

readiness, market size, business sophistication, and innovation;70

� Attractiveness as an Investment Destination, as measured by 2008 inward FDI as a

proportion of GDP;71

� Strength of Exporting Capabilities, as measured by the 2008 value of exports per capita;72

The political, legal and regulatory factors include:

� Strength of Governance, utilizing an average of the World Bank governance indicators

across the six dimensions – voice and accountability, political stability and absence of

63

Ibid. 64

Ibid. 65

Şeker (2009), p. 2 66

OECD (2010c), p. 65 – 66, p. 83 67

Gorodnichenko et. al. (2009), p. 15, 28 68

Analysis conducted using data from UN (2010), p. 206 – 208. 69

Analysis conducted using data from IMF (2010), p. 72. 70

Analysis conducted using data from WEF (2010), p. 15. 71

Analysis conducted using data from OECD (2010), p. 252 – 253. 72

Analysis conducted using data from World Bank (2010), p. 238 – 241, p. 246 – 249.

18

DRAFT

violence or terrorism, government effectiveness, regulatory quality, rule of law, and control

of corruption;73

� Ease of Doing Business, drawing from the World Bank’s Doing Business ranking, including

starting a business, dealing with construction permits, registering a property, getting credit,

protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a

business74; and

� Corruption Perception, as measured by Transparency International’s corruption perception

index.75

Social Return Dimension

The extent to which developmental entrepreneurship initiatives will create poverty alleviation

impact is by a more straight-forward set of factors. First, it’s necessary to work in an area in which

there are significant amounts of people living below the $1.25/day international poverty line.

Second, those countries in which levels of human development, including education and health care

provision, are lower provide greater opportunities to make a social impact. Utilising these two

factors, we have constructed our ‘Social Impact Index’:

� Number of People Living on $1.25/day76; and

� Human Development Index Value.77

Mapping Attractive Countries

Utilizing the Business Viability Index and the Social Impact Index, we have categorized the 46 SSA

countries accordingly. Please note, that the diagrams below also provide the size of the country’s

economy (bubble diameter is on a logarithmic scale), the bubble text indicates the 2010 estimate of

GDP growth, and the bubble color indicates the country’s level of human development (red=low,

yellow=medium, and green=high):

73

Analysis conducted using data from Kaufman et. al. (2010). 74

Analysis conducted using data from World Bank (2010c). 75

Analysis conducted using data from Transparency International (2010). 76

Analysis conducted using data from UN (2010). 77

Ibid.

19

DRAFT

20

40

60

80

100

10 20 30 40 50 60 70 80 90

Soci

al I

mp

act

Ind

ex

Business Viability Index

Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data.

Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data.

Equatorial Guinea

0.9%

São Tomé

and Príncipe

4.5%

100

Congo

10.6%

Mauritania

-1%

Comoros

2.1%

Togo

3.3%

Côte

d’Ivorie

3%

Ethiopia

8%

Sudan

4.2%

Guinea

3%

Gabon

4.5%

Low Social Impact Potential

and Low Business Viability Climate

Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data.

Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data.

Eritrea 1.8%

Niger

3.5%

Chad

4.3%

Sierra

Leone

4.5%

Guinea-

Bissau

3.5%

Burundi

3.9%

Angola

5.9%

Democratic Rep.

of Congo

5.4%

Guinea

3%

Zimbabwe

5.9%

20

40

60

80

100

Soci

al I

mp

act

Ind

ex

10 20 30 40 50 60 70 80 90

Business Viability Index1000

Sudan

4.2%

Central African

Republic

3.3%

High Social Impact Potential

and Low Business Viability Climate

20

DRAFT

Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data.

Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data.

Mauritius

3.6%Seychelles

0.7%

Namibia

4.4%

South Africa

3%

Cape Verde

4.1%

Swaziland

2%

Botswana

6.6%

Kenya

4.1%

Benin

2.8%

Lesotho

5.6%Gambia

5%

Cameroon

2.6%

20

40

60

80

100

Soci

al I

mp

act

Ind

ex

10 20 30 40 50 60 70 80 90

Business Viability Index1000

Low Social Impact Potential

and High Business Viability Climate

Note: Seychelles and Eritrea social impact index based on GNI per captia due to lack of data.

Mauritania size of economy, Mauritania 2009 growth rate est. and Sudan 2009 growth rate est. based on CIA Factbook data.

Nigeria

7.4%

Madagascar

-2%

Tanzania

6.5%

Uganda

5.8%

Rwanda

5.4%Ghana

5%

Zambia

6.6%Senegal

4%

Malawi

6%

Burkina

Faso

4.4%

Mozambique

6.5%

20

40

60

80

100

Soci

al I

mp

act

Ind

ex

10 20 30 40 50 60 70 80 90

Business Viability Index1000

Mali

5.1%Angola

5.9%

Ethiopia

8%

Liberia

6.3%$

High Social Impact Potential

and High Business Viability Climate

21

DRAFT

To determine a group of five countries for closer analysis for factors more specific to entrepreneurial

conduciveness, we utilize the following diagram:

The following tables illustrates the data gathered for the five priority countries and for South Africa

(which serves as a point of comparison given its economic leadership in SSA, including

supplementary factors, not included in the business viability index and social impact index78:

78

References for all data provided in the tables that follow are available upon request.

Soci

al I

mp

act

Ind

ex

Business Viability Index

Ghana

ZambiaSenegal

Rwanda

Mozambique

Madagascar

TanzaniaUganda

Malawi

Nigeria

Burkina Faso

MaliAngola

Ethiopia

Liberia

High Social Impact Potential and

High Business Viability Climate

DRAFT

South Africa

Economic Landscape

Market Size - 2008 GDP 292.2B

Market Growth - Simple

average of the 2009 - 2011

estimated real GDP growth

rates (arrow indicates trend) 1.6↑

Global Competitiveness -

World Economic Forum

Global Competitiveness

Index 4.32

Attractiveness as an

Investment Destination -

2008 FDI for every $10,000

of 2008 GDP $183

Stength of Exporting

Capabilities - 2008 value of

exports per capita $1,913

Economic Diversification -

2008 manufacturing and

services as a percentage of

GDP 82%

South Africa Mozambique Ghana Senegal

18.7B 34.1B 21.9B

6.8↑ 6.3%↑ 3.5↑

3.32 3.56 3.67

$313 $621 $322

$138 $308 $286

61% 47% 76%

Zambia Rwanda

17.1B 10B

6.4→ 5.1↑

3.55 4.00

$549 $103

$428 $59

45% 52%

23

DRAFT

South Africa

Economic Landscape

Sup

ple

me

nta

ry C

on

sid

era

tio

ns

IMF Classification

Non Resource

Rich-Coastal

2009 Real Per Capita GDP -

2000 PPP, 2000 exchange

rates $3,691

Consumer prices / inflation -

annual percentage change

2009 7.1%

2009 Overall fiscal balance -

percentage of GDP -5.3%

2009 Overall government

debt - percentage of GDP 30.8%

2009 Trade Balance 0.1

2009 Reserves - months of

imports goods and services 4.6

Highest marginal corporate

tax rate 35%

UNCTAD Outward FDI

performance index 2005-

2007 (measures importance

of a country's outward FDI

relative to its proportion of

global GDP. (higher = greater

importance) 0.534

South Africa Mozambique Ghana Senegal

Non Resource

Non Resource

Rich-Coastal

Non Resource

Rich-Coastal

Non Resource

Rich-Coastal

$395 $347 $522

3.3% 19.3% -1.7%

-5.6% -9.8% -5.2%

29.3% 66.5% 32.0%

-14.1 -14.4 -19.2

4.7 2.7 4.5

32% 25% ..

0.001 ... ...

Zambia Rwanda

Resource Rich-

Non Oil (copper)

Non Resource

Rich - Landlocked

$436 $345

13.4% 10.4%

-3.2% -2.3%

27.7% 20.2%

7.1 -14.7

4.1 5.1

35% ..

0.014 0.139

24

DRAFT

South Africa

Legal, Regulatory & Political

Landscape

Ind

ex

Co

mp

on

en

ts

Strength of Governance -

Average of the World Bank

governance indicators

percentiles across six

dimensions 59.86

Ease of Doing Business -

World Bank Doing Business

2011 Rank amongst other

Sub-Saharan African states 2

Corruption Perception -

Transparency International

corruption perception index 4.5

Sup

p.

Value of 2000-2008

privatized enterprises

(previously semi-state) $780 billion

Business Viability Index 59.7

South Africa Mozambique Ghana Senegal

45.20 55.58 40.78

13 5 23

2.7 4.1 2.9

... $6.5 billion ...

69.6 84.6 76.1

Zambia Rwanda

40.68 38.76

7 4

3 4

... ...

76.8 72.0

25

DRAFT

South Africa

Social Landscape

Ind

ex

Co

mp

on

en

t

s

Number of People living

below $1.25/day 12,759,000

Human Development Index

Value 0.597

Sup

ple

me

nta

ry C

on

sid

era

tio

ns

Dominant business language English

Gross National Income at

PPP - 2008, Billion $ 476,200,000,000

Lowest 20% 3.10%

2008 Population 48,700,000

Gini Coefficient 57.8

Bottom Quintile GNI per

capita $1,515.63

Second Quintile GNI per

capita $2,737.91

Third Quintile GNI per capita $4,840.23

Fourth Quintile GNI per

capita $9,191.54

Top Quintile GNI per capita $30,605.87

Life expectancy at birth 52.0

Mean years of schooling 8.2

Social Impact Index 45.0

South Africa Mozambique Ghana Senegal

16,732,000 7,020,000 4,087,000

0.284 0.363 0.291

Portuguese English French

476,200,000,000 17,200,000,000 30,900,000,000 21,700,000,000

2.10% 5.20% 6.20%

22,400,000 23,400,000 12,200,000

47.1 42.8 39.2

$119.02 $343.33 $551.39

$215.00 $647.05 $942.70

$380.09 $977.18 $1,360.70

$721.79 $1,445.96 $1,956.56

$2,403.39 $3,189.04 $4,082.09

48.4 57.1 56.2

1.2 7.1 3.5

84.0 62.0 63.0

Zambia Rwanda

8,101,000 7,430,000

0.382 0.385

English French, English

15,500,000,000 10,800,000,000

3.60% 5.40%

12,600,000 9,700,000

50.7 46.7

$221.43 $300.62

$479.76 $501.03

$787.30 $734.85

$1,267.06 $1,091.13

$3,395.24 $2,939.38

47.3 51.1

6.5 3.3

63.0 60.0

26

DRAFT

South Africa

Technology Landscape

Mobile and Fixed Line Phone

Subscriptions per 100 people 102

Population 50.5

Mobile and Fixed Line Phone

Subscriptions 51.5

Network Readiness Index

Global Rank 62

2005-2007 Agriculture value

added per worker 2000 $ €3,077

Improvements in Agricultural

Productivity - Difference

between 1990-92 and 2005-07

agricultural value added per

worker (in 2000 $) $928

R&D Expenditures as a % of

GDP 2000-07 0.96

Measure of Relationships with

MNCs as a predictor of

innovation likelihood - exports

as a percentage of GDP 2008 35%

Measure of Relationships with

MNCs as a predictor of

innovation likelihood - imports

as a percentage of GDP 2008 38%

Role in the African Ministerial

Council on Science and

Technology Secretariat Host

South Africa Mozambique Ghana Senegal

20 50 46

24.3

12.2

116 98 75

€173 €378 €224

$56 $26 -$27

0.50 … 0.09

33% 42% 25%

46% 75% 47%

Secretariat Host

Steering

Committee

Steering

Committee AMCOST Chair

Zambia Rwanda

29.0 14

97.0 ...

€232 €226

$43 $33

0.03 ...

37% 15%

34% 31%

...

Steering

Committee

27

DRAFT

South Africa

Demographic Landscape

Population between aged 15-64

/ Labor Force 31,655,000

Environmental Landscape

Environmental Commitment -

participation in major

international treaties in 1973-

2001 (of 9) 9

2007 Arable Land - hectares per

100 people 30.7

South Africa Mozambique Ghana Senegal

11,872,000 13,572,000 6,588,000

9 9 9

21.2 18.2 26.3

Zambia Rwanda

6,426,000 5,335,000

7 8

43.8 12.7

28

DRAFT

National Advantage Diamond Analysis

Utilizing Michael Porter’s framework for determining national advantage, we constructed the following table for in depth analysis of th

countries:

South Africa

Factor Conditions

Early Stage Private Equity Raised -

January 2009 - July 2010 (in billions) $1,761.25m

Local pension funds investing in private

equity funds Yes

Early Stage Private Equity Invested $723m

2009 Inward Foreign Direct Investment $5,696M

Total Outward Foreign Direct Investment $1,584M

Access to debt finance - credit bureau

coverage 54.70%

Labor Force - Aged 15-64 (in millions) 31.7

Michael Porter’s framework for determining national advantage, we constructed the following table for in depth analysis of th

South Africa Mozambique Ghana Senegal

...

* A portion of

the $64M in

country-specific

funds, dedicated

to Angola,

Namibia and

Ghana ...

... Yes ...

... $20m ...

$881M $1,685M $208M

$3M $7M $15M

2.2% public 10.3% private 4.4% public

7.2 13.6 6.6

Michael Porter’s framework for determining national advantage, we constructed the following table for in depth analysis of the five priority

Zambia Rwanda

... ...

... ...

...

*Has received

small-scale PE

attention as a

part of EAC

investment

$959M $119M

... $14M

3.0% private 0.7% public

6.4 5.3

29

DRAFT

South Africa Mozambique Ghana Senegal Zambia Rwanda

Likelihood to Innovate - Tertiary

enrolment ratio (% of tertiary school-age

population) ... 1.50% 6.20% 8.00% 2.40% 4.00%

Likelihood to Innovate - Population

having completed a tertiary degree 4.30% … … … … …

Entrepreneurial Talent - Labor

Productivity - GDP per person employed

% growth change 1990-92 vs. 2003-05 8.40% 9.20% 0.20% 440.00% 5.70% ...

Entrepreneurial Talent - Labor

Productivity - GDP per person employed

% growth 3.90% 6.20% 3.00% 3.40% 3.20% ...

Existing ICT Access - Internet users per

100 people 8.6% 1.6% 4.3% 8.4% 5.5% 3.1%

Existing ICT Access - Population covered

by mobile phone network 100% 44% 73% 85% 50% 92%

Estimate of the size of emerging middle

class with over $3,650 in annual income

(in millions) 24,350,000 224,000 936,000 1,464,000 756,000 97,000

Estimate of emerging middle class with

over $3,650 in annual income as a

percentage of the population 50.0% 1.0% 4.0% 12.0% 6.0% 1.0%

Demand Conditions

Total Businesses Registered, 2007 553,425 … …

1,000 ... 455

Total Business Density, number of adults

per registered business 57 ... ...

6,588 ... 11,725

New businesses as a percentage of total

registered businesses 7.47% ... … 2.30% ... ...

30

DRAFT

South Africa Mozambique Ghana Senegal Zambia Rwanda

Cost to start a business as a percentage

of income per capita 6.0% 13.9% 20.3% 63.1% 27.9% 8.8%

Number of MSMEs 900,683 ... 25,679 ... ... ...

MSME Density (MSMEs per 1,000 people

in the labor force) 28.5 ... 1.9 ... ... ...

Number of New Businesses - Annual

Average calculated over the last four

year's data available 35,195 ...

7,626 ... ... ...

Entry Density - New Business Entry per

captia for the most recent year available 0.77 (2009) ... 0.72 (2007) ... ... ...

Related and Supporting Industries

Composite measure of access to financial

services 46% 12% 16% 27% 15% 23%

Strength of Sciences and Technologies

Industries - ICT exports as a percentage

of total commercial services exports in

2008 14.7% 27.9% 24.8% 50.7% 9.1% 19.0%

GDP 276445 9846 16653 13273 14314 4457

Commercial Services exports as a

percentage of GDP 12394 488 1559 1097 297 326

Value of ICT exports 1822 136 387 556 27 62

Strength of Sciences and Technologies

Industries - ICT exports as a percentage

of 2008 GDP 0.7% 1.4% 2.3% 4.2% 0.2% 1.4%

Reliability of Power Supply - T&D losses

as a percentage of output 8% 14% 18% 25% 7% ...

Extent of transportation infrastructure -

percentage of roads that are paved 17.3 18.7 14.9 29.3 22.0 19

31

DRAFT

South Africa Mozambique Ghana Senegal Zambia Rwanda

Firm Strategy, Structure and Rivalry

Population 2008 (M of people) 31.7 7.2 13.6 6.6 6.4 5.3

New Trademarks Filed 29833 1240 61 ... 1159 238

New Patents Filed 5781 40 ... ... ... ...

Number of New Trademarks per 10,000

people in the labor force 9.42 1.73 0.04 ... 1.80 0.45

Number of New Patents per 10,000

people in the labor force 1.83 0.01 ... ... ... ...

Exit Robustness - Measures of stock

market development, number of listed

companies 411 ... 35 ... ... ...

Exit Robustness - Measures of stock

market development, market

capitalization of listed companies $805.2b ... $2.5b ... ... ...

Exit robustness - measures of stock

market development, stocks traded,

turnover ratio % 83.80% ... 2.00% ... ... ...

Local stock exchange

Johannesburg Stock

Exchange ...

Ghana Stock

Exchange ...

Lusaka Stock

Exchange ...

Number of securities listed 334 ... 35 ... 22 ...

Concentration of Incubators 11 2 3 2 ... 2

Concentration of Early Stage Investors

32 local PE providers,

and 9 additional funds

active in South Africa ... 2 ... ... ...

DRAFT

Conclusion

Five countries stand out as having the economic, political, legal, regulatory, technological, social and

demographic characteristics required to make optimal impact in poverty alleviation, while also being

conducive to supporting entrepreneurial ventures from a commercial perspective:

� Rwanda;

� Ghana;

� Senegal;

� Mozambique; and

� Zambia.

Upon comparison of these five priority countries, Ghana’s strengths can be summarized, as follows:

� Large market and growing market;

� Relatively strong ability to attract inward investment, especially regarding an emerging private

equity market;

� Strong governance regime, and is perceived to have relatively low levels of corruption;

� Record of privatization of previously state-controlled enterprises;

� Higher access to financial services, and specifically access to credit, for entrepreneurs;

� Low corporate tax rate;

� English speaking population, especially in conducting business;

� Broadly, a better educated and larger labor force;

� Strong technology and innovation landscape, with relatively high rates of multi-national

corporation participation in the economy, higher levels of trade, higher productivity in the

agricultural sector, and government commitments to promoting innovation;

� Strength of existing entrepreneurial activity, especially regarding new patents and trademark

applications; and

� Stronger market for venture exits.

Alternatively, Senegal demonstrates relative strengths in the following areas:

� Significant economic diversification, including strong manufacturing and services sectors;

� Higher consumer spending power, lower income inequality, and a larger emerging middle

class;

� The low level of human development indicates that despite economic strengths, little has

been invested in health and educational infrastructure, and therefore a potential for strong

developmental impact;

� Higher internet access and network readiness;

� Strength of existing entrepreneurial activity; and

� Related and supporting industries, such as financial services, ICT exports, power supply and

road infrastructure are all strong.

V. Industry Analysis

Industry Definitions

According to the National Business Incubator Association, "Business incubation is a business support

process that accelerates the successful development of start-up and fledgling companies by providing

33

DRAFT

entrepreneurs with an array of targeted resources and services."79 Early stage funding for our

purposes will be limited to equity investments – angel investment and venture capital.80 We define

our industry as ‘equity funding $5,000 to $500,000 in early stage, high social impact, high growth

entrepreneurs.’

Entrepreneurs typically progress through two inter-related processes associated with the launch of

their business. First, incubation involves a range of non-financial supports, which a new venture

utilizes to plan and launch the business. Second, the finance process includes all activities that a

venture undertakes in planning investment, securing funding, monitoring the elements of their finance

function (e.g. capital structure), and investor relationship management. We intend to assist out

entrepreneurs through both processes, as they progress through the following stages of establishing

and growing their businesses:

Why Incubators and Early Stage Investment?

Entrepreneurs, through the new business ventures they create, are in the unique position of driving

economic growth that benefits entrepreneurs, their families, supply chain partners, and other

stakeholders. Of course, this is true for a lot of private sector players; however entrepreneurs also

have the latitude to design business models which also distribute the benefits of their activities across

broad segments of the population. We are firm in our commitment to local entrepreneurs, as they

are one of the strongest levers in the fight against poverty; and we are resolute in our support for

their efforts with the two most powerful tools available to us – incubator models and private equity

investment.

Incubators have a track record dating back to the 1960s, and have proven an important catalyst in the

development of successful new ventures. Incubators provide start-ups the support they need to

create jobs, and incubators have been successful in this regard. As a point of comparison, the U.S.

Department of Commerce Economic Development Administration recently found that incubators

create 20-times more jobs than do community infrastructure construction programs, and at 5% of the

79

See http://www.nbia.org/works 80

Entrepreneurs will undoubtedly also seek credit through micro-finance and other financial services providers.

Incu

ba

tio

nFi

na

nce

FFF and Angel

Investment

Seed Capital

1st and 2nd Stage

Venture Capital

Start-up Scale-Up

Later Stage

Venture Capital

Feasibility Study &

Business Plan Complete

Business Model

ProvenHarvest

Mil

est

on

e

Figure 7: Generic Phases of Entrepreneurial Growth

34

DRAFT

cost.81 Firms that are provided incubator support are more likely to remain in existence. The U.S.’s

National Business Incubator Association (NBIA) estimates that in 2005 alone, North American

incubators assisted 27,000 start-ups, provided over 100,000 jobs, and supported companies whose

annual revenues totaled $17 billion.82

Access to financial capital is another critical success factor for entrepreneurs. FFF, or ‘friends, family

and fools’ and bootstrapping are coming forms of initial seed capital. In the former, entrepreneurs

borrow or solicit an equity investment from people with whom they are already well acquainted. In

the latter, entrepreneurs use their own personal savings and personal access to credit in order to fund

their venture. Another common form of funding is bank debt, and in developing countries,

microfinance plays a role as micro-finance institutions may lend up to $2,000. Acquiring larger

amounts of business debt is rare, but can be achieved through collateralized loans, or loans

guaranteed against the value of other assets (i.e. real estate). When an entrepreneur utilizes all of the

above sources of funding, he/she typically turns to equity investment for further capital infusion.

Equity investment becomes a viable route the more sophisticated the venture and the higher the

likelihood of sufficient returns based on realistic, aggressive growth plans. Lastly, an entrepreneurial

team may attract a seasoned industry expert that is convinced of the model’s viability, and who

therefore is interested in making an investment and shouldering some of the risk, but who also gets to

share in the venture’s profits. Thus, seed capital options on the equity side, include: FFF,

bootstrapping, and angel investment. Generally, seed capital markets are largely informal.

The term private equity, relates to a range of investment vehicles, of which venture capital is one

form. Venture capital, as shown above, is utilized by entrepreneurial teams that have completed a

pilot, or feasibility study and business plan. Although for the highest potential ventures, attracting

venture capital without having launched in earnest does occur, it is rare. Most entrepreneurial teams

will utilize seed capital debt and equity sources through the first several years of their existence to

demonstrate that their business model works, and that there is sufficient head room for scaling it. In

either of these cases, when a venture capitalist makes an investment for a portion of the venture’s

equity, they typically require a seat on the board of directors and have input into management

decisions.83

According to the National Venture Capital Association (U.S.) venture-capital enable entrepreneurial

outcomes, and in so doing catalyzes job creation and economic output84:

� 11% of private sector employment is with venture-backed firms;

� Venture-backed revenue is 21% of GDP;

� During 2006-2008 total private sector job growth in the U.S. was 0.2%, while venture backed

firms outpaced this rate by 8 times – at 1.6%;

� During the same period, total revenues in U.S. private sector companies grew by 3.5%, yet

total revenues for venture backed companies grew by 5.3%;

� From 1970 to 2008, $456 billion has been invested in over 27,000 countries.

81

See http://www.nbia.org/works 82

Ibid. 83

For further discussion Private Equity, see Chisholm (2009); for more on Entrepreneurial Finance, see Timmons

& Spinelli (2003); and for more on Venture Capital, see Metrick & Yasuda (2011) and Meyer & Mathonet (2005). 84

NVCA (2009), p. 2

35

DRAFT

Business Incubation in SSA

iDisc, the business incubator support network of infoDev, was launched in 2002, and has since

mobilized $20 million, supporting close to 100 institutions in 50 countries. The footprint in SSA started

in 2006 in Ghana, and now supports 44 incubators across Africa, including 3 in Ghana, 2 in Senegal, 2

in Rwanda and 2 in Mozambique. These incubators target high-growth entrepreneurial ventures.

There are communities of practice focused on generating benefits for the rural poor, the urban poor,

women and youth.85 Also, the African Incubator Network (AIN) and the South African Business and

Technology Incubation Association (SABTIA) are also regional bodies by which African incubators

exchange knowledge capital and build relationships. The incubator community, and specifically iDisc,

are focused on the following industry sectors:

� Agriculture (10%);

� ICTs (46%);

� International (3%);

� Manufacturing (20%);

� Mixed Use (18%); and

� Textile 3%.86

Over the past four years, iDisc activity in SSA has been focused on job creation through the launch and

scaling of new businesses, resultant growth in tax revenues, increased economic diversification and

promotion of indigenous technologies.87 A recent study of the outcomes, impacts and lessons of

global business incubation (which we presume are likely to apply within the SSA context), include: 1)

Study and replicate the most successful business incubation models; 2) Expand regional business

incubation networks; 3) Use technology to scale business incubation services in cost effective ways; 4)

Promote the community of business incubators as participants in the economy; 5) Invest in developing

innovative and entrepreneurial leaders; 6) Continue targeted investments in the ICT sector; 7) Develop

and diffuse a policy framework for supporting ICT-enabled entrepreneurs; 8) Address the lack of risk

capital; and 9) Promote a stronger entrepreneurial culture within the community.88

In relation to incubation in the developing world, there are several critical success factors89:

� Volume of companies co-located is important as it leads to natural clustering & collaboration;

� Entrepreneurs will learn more from each other, and other businesses, than ‘consultants’;

� Combining start-ups with mature companies in same building encourages collaboration;

� Diversified models (incubation + office rentals) keep programs sustainable and independent;

� Not being 100% publicly funded keeps incubator focused on tenants and services provided;

� Strict entry criteria (focused on innovation & implementation) can ensure high success rates;

� Investors/entrepreneurs seeking to make new equity investments can be leveraged as

mentors;

� Businesses seeking future clients can provide discounted professional services;

� A strong manager who monitors both mentors and companies is key;

85

See http://www.idisc.net/en/Index.html 86

Ibid. 87

See http://www.idisc.net/en/Page.MEIA.Incubator.Overview.html 88

See http://www.idisc.net/en/Page.MEIA.Study.Recommendations.html 89

infoDev (2009), p. 6 – 7

36

DRAFT

� Use managers who have entrepreneurial experience and can ‘relate’;

� Incubation programs can remain lean and cost effective with few employees (2);

� Ensuring tenants pay for services screens out those that are not somewhat commercialized;

and

� Incubators create a climate of collaborate on & networking from the start

Private Equity in SSA

Private equity in SSA is an immature and growing market. According to the Emerging Markets Private

Equity Association’s recent study on the topic, 2009 saw a notable contraction in private capital

flowing into and out of SSA; however “Sub-Saharan Africa experienced a noticeable up-tick through

July 2010 with $1.5 billion raised, already surpassing the full year 2009 total of $933 million.

Furthermore...the recovery of fundraising momentum in Sub-Saharan Africa was stronger than in

many other emerging markets, including China, India and Russia...”90 Following the financial crisis

Limited Partners (i.e. investors), or LPs, now view emerging market risk in a more favorable light than

elaborate financial engineering, and are keen to include an African element in their risk portfolio. 91

However, SSA Private Equity is still small on the global stage. In January to July 2010, PE fundraising

for SSA accounted for $64 million of the 18,836 million raised for emerging markets, and on the

investment side, during the same period, SSA accounted for $439 million of the $83,095 invested

globally.92 Despite its small size relative to other world regions, and speaking to African acceptance of

Private Equity, SSA has a 0.15% PE penetration rate (as measured by PE Investment / GDP) – higher

than China, the Middle East and North Africa, Brazil and Russia.93 The following trends describe the

rebound for Private Equity in SSA:

� Greater political and economic stability are translating into larger investment opportunities,

and more attractive exit options;

� Growth in the number of experience fund managers, historically a key challenge;

� There is growing sentiment that SSA could reach the fundraising and investment volumes of

China and India;

� South Africa leads SSA as the most mature PE market, leads SSA receiving nearly 50% of

investment over January – July 2010 (however, historically this has been 70%);

� Over the past year there has been a dramatic change in the level of interest in markets outside

South Africa, notably Nigeria, Angola the East African Community, Namibia and Ghana;

� New fund managers are entering the market in various countries around the continent, many

of whom are securing initial support from the Development Finance Institutions (DFIs);

� Exit markets are deepening and expanding geographically.94

90

EMPEA (2010), p. 6 91

Ibid. 92

EMPEA (2010b), Data as of 30th

September 93

Ibid. 94

EMPEA (2010), p. 6 - 14

“Sub-Saharan Africa is on the verge of taking off. Strong reforms are taking place, the playing

field for business is improving, and everyone is starting to recognize that you can find

commercially-driven companies in the region with good profits...”

-David Creighton, Cordiant Capital, President & CEO

37

DRAFT

Regarding fundraising, private equity in SSA is primarily raised for pan-African funds, although some

country-specific funds are emerging.95 These specialist funds currently cover: South Africa, Nigeria,

Angola, Ghana and Namibia. Several sector-specific funds in infrastructure and agribusiness are also

starting to provide investors industry plays in SSA.

Despite the 2006-2008 growth trend (see below), and the recent resurgence in both fundraising and

investment, a number of barriers deterring investment in SSA remain. According to a recent EMPEA

survey, limited partners were detracted from investing in SSA based upon the following factors:

� Limited number of established General Partners (GPs);

� Shallow pool of management talent;

� Political Risk;

� Weak exit environments;

� Challenging regulatory / tax environments; and

� Scale of opportunity to invest is too small.96

Size and Growth Rates

To approximate the growth in SSA private equity, the following scenarios were employed. First,

having conducted a regression analysis of the 2006 – 2010 dataset, we find that 60% of the variability

in total PE volume (funds raised and funds invested), is explained by the GDP growth rate. As such,

scenario 1 is based upon the IMF predictions for SSA GDP growth through 2012. Second, in

consideration of the downside risks mentioned in the IMF analysis, such as a broad drop in the global

recovery or a sudden depression in commodity prices, we examine the effects of a double-dip

recession. Using the methodology employed in scenario 1, we use the lower GDP growth rates to

estimate total PE volume in a recessionary scenario. Finally, the third scenario makes the assumption

that the 2006 – 2008 growth trend of 30% reflects the true potential in SSA private equity, and that

because of its immaturity as a market, there is plenty of headroom for investment demand and

investment destinations. Therefore, in scenario 3 we examine the effects of the 30% growth rate

through 2013.

95

EMPEA (2010), p. 14 96

EMPEA (2010), p. 8 - 9

38

DRAFT

2006 2007 2008 2009 2010 2011 2012

Pri

vate

Eq

uit

y In

vest

me

nt

Act

ivit

yG

DP

Gro

wth

Ra

te

$1.0 B

$2.0B

$3.0B

$4.0B

2.2

1.3

1.5

3.4

2.0%

4.0%

6.0%

8.0%

2.6

3.0

0.9

1.3

1.5

1.04

0.1

0.07

1.5

4.9

5.6

2.2

2.7

4.22

4.32

1.0%

3.0%

5.0%

7.0%

$5.0B

$6.0B

Sub-Saharan Africa Private Equity Activity

Scenario 1 -Track GDP growth trend

Actual PE Fundraising

Actual PE Investment Estimated PE Investment

Estimated PE Fundraising

39

DRAFT

2006 2007 2008 2009 2010 2011 2012

Pri

vate

Eq

uit

y In

vest

me

nt

Act

ivit

yG

DP

Gro

wth

Ra

te

$1.0 B

$2.0B

$3.0B

$4.0B

2.2

1.3

1.5

3.4

2.0%

4.0%

6.0%

8.0%

2.6

3.0

0.9

1.3

1.5

1.04

0.1

0.07

1.5

4.9

5.6

2.2

2.7

2.08 2.08

1.0%

3.0%

5.0%

7.0%

$5.0B

$6.0B

Sub-Saharan Africa Private Equity Activity

Scenario 2 - Double dip as downside risks are realized

Actual PE Fundraising

Actual PE Investment Estimated PE Investment

Estimated PE Fundraising

40

DRAFT

2006 2007 2008 2009 2010 2011 2012

Pri

vate

Eq

uit

y In

vest

me

nt

Act

ivit

y

$1.0 B

$2.0B

$3.0B

$4.0B

2.2

1.3

1.5

3.4

2.6

3.0

0.9

1.3

1.5

1.04

0.1

0.07

1.5

4.9

5.6

2.2

2.7

3.47

$5.0B

$6.0B

Sub-Saharan Africa Private Equity Activity

Scenario 3 – Return to the 2006-2008 Growth Trend

$6.0B

4.51

5.85

2013

Actual PE Fundraising

Actual PE Investment Estimated PE Investment

Estimated PE Fundraising

41

DRAFT

Our best approximation of the size of the business incubation market in SSA is based on a top-down

analysis. Currently, there are 44 known incubators in SSA, and the median revenues infoDev has

reported in relation to their ten year financial model for mixed-use incubators is $537,000.97

Assuming that on average these 44 incubators are generating this level of income, we can

approximate the market to be approximately $23,000,000. Assuming that the incubator market

moves in proportion with growth in private equity transactions, the following table illustrates the

three scenarios discussed; and implications for the size of incubator volume.98

Economic Scenario Estimate of 2012 Incubator Industry Value in SSA

1 – Track GDP Growth Trend $45,218,000

2 – Double dip as downside risks are realized $21,850,000

3 – Return to 2006-08 growth trend $50,531,000

Value Chain Analysis

To gain an understanding of the role of various industry chain participants in the provision of early

stage investment and incubation services, we provide the following view of the flow of business

support services and financial capital to SSA entrepreneurs:

97

infoDev (2009b), p. 86 98

This approximation of industry value and growth is currently necessary due to the lack of market research in

this area. Further bottom-up analysis is required to gain a better understanding of SSA incubator revenue

models, volumes, drivers and growth trends.

42

DRAFT

Client

Venture

FFF & Angel

Investors

Venture Capital

Firms

Investment Bank

Private Equity

Houses

Eq

uity In

vestm

en

ts

Commercial Banks

& For Profit Micro-

Finance Providers

Not-for-profit

Micro-finance

Institutions

Government-

Sponsored grant

Programs

De

bt In

strum

en

tsG

ran

ts

Private Investors

•High Net Worth Individuals

•Family Offices

•Other Retail Investors

Institutional Investors

•Pension Funds

•Endowments

•Insurance Companies

•Hedge Funds / Absolute Return

•Mutual Funds

•Other Funds

Commercial Banks

Inter-governmental

Organization

National & Regional

Public Sector

Private Sector

Civil Society

Private Depositors & Donors

•Corporates

•Small to Mid-sized Businesses

•High Net Worth Individuals

•Mass Consumers

Government

Inter-governmental

Organizations

Investment

Debt

Grants &

Donations

Deposit

High

None

Exp

ec

ted

Re

turn

Note: The diagram illustrates the predominant capital flows to microenterprises,

and is not an exhaustive examination of the broader financial services capital chain.

Figure 8: Industry Value Chain for Entrepreneurial Finance in SSA

43

DRAFT

Client

Venture

Micro-enterprise

and Small Business

Incubators

• Advisory

• Technology &

Infrastructure

• Relationships

NGO Sustainable Livelihoods

Practitioners, Foundations &

Researchers

•Knowledge Capital

•Network Contacts

Inclusive Markets, Impact Investing,

& Market Development Program

Directors

• Knowledge Capital

• Network Contacts

Direct Private Sector Suppliers

• ICT Solutions

• Voice & Data Network Connectivity

• Construction Services

• Power Supply

Public Sector and Semi-state Utilities

•Voice & Data Connectivity

•Power Supply

Inter-governmental

Organization

National & Regional

Public Sector

Private Sector

Civil Society

Figure 8: Industry Value Chain for Entrepreneurial Finance in SSA

44

DRAFT

Conclusion

Early stage private sector development is a key component of economic growth, and therefore income

dynamics in any market. In SSA these entrepreneurs provide an opportunity to support grass-roots

enterprise and income generating activity. Their activity has the potential to raise incomes, reduce

poverty and catalyze other developmental benefits. Two of the most effective tools in supporting

entrepreneurs – early stage equity capital and small business incubators have been introduced to

Africa over the past decade, and have worked to varying degrees. One of the key challenges in

generating social impact, utilizing these tools, is to learn from past mistakes and replicate what has

already to work well. Clearly, there is potential for financial return, as a comparison based on

Bloomberg data, demonstrates that the ten year annualized returns on the African composite index of

13.8% compare favorably against the MSCI emerging market index (7.3%), and the DJIA (-1.0%).

VI. Next Steps Networking and Recruitment. We will recruit a co-founder/CFO with significant venture capital

experience in a leading firm or investment bank, while also having a demonstrated passion for poverty

alleviation in Africa. He/she will share the view that part of the process of soliciting capital for SSA

equity investments with a social purpose, will include tempering investor expectations. Our ventures

will look and feel differently than traditional entrepreneurial teams in the U.S. or Western Europe. We

will also recruit a co-founder/COO who will have day-to-day responsibility for directing the operations

of the incubator. He/she will have a deep understanding of the local culture, language(s) and nuances

of conducting business in SSA. He/she will have extensive relationships in the private- and public-

sectors, and be instrumental in introducing our future entrepreneurs in touch with their key

stakeholders. He/she will also ideally come from a background of entrepreneurship and/or incubating

experience.

Strategy Formulation. The commentary and analyses in this opportunity assessment provide useful

background information from a high-level; however more detailed market research is required to gain

an understanding of following aspects of the markets for incubation and early-stage investments in

selected target countries:

� Markets analysis (e.g. finer estimates of market sizes by country);

� Economics of the markets (e.g. revenue, cost and profit estimates);

� Five forces analysis of market dynamics;

� Competitive analysis (e.g. mapping primary, secondary and tertiary competitors, and profiles);

� Descriptions of existing offerings by competitor;

� Client recommendations in relation to service improvements; and

� Segmentation of client entrepreneurs and prospective entrepreneurs.

The following analysis will provide a robust platform upon which to develop a portfolio strategy to

market entry, including key decisions regarding:

� Market positioning and client value propositions (especially related to differentiation);

� Alliance and partnering strategy;

� Financial modelling, analysis and economic value proposition;

� Operating model principles;

� Organizational strategy; and

� Functional-level strategic decisions required.

45

DRAFT

Feasibility Study. Upon completion of the aforementioned research, analysis and strategic decisions,

a local feasibility study will be utilized in the test market(s) to test the assumptions, identify further

risks, and identify which partnering relationship(s) is/are most conducive to driving the desired social

benefits. Initial inquiries may eliminate certain market entry options, but we would envisage exploring

the following partnering relationships:

End-to-end venture capital and

incubation in a frontier market

(e.g. Ghana)

Incubation-only in a frontier

market, and partnering with an

established fund manager

(e.g. Actis)

Venture capital-only in South

Africa, and partnering with an

established incubator

(e.g. Heart)

End-to-end venture capital and

incubation in South Africa

The feasibility study will also provide insight into: 1) The delivery model that will enable us to provide

optimal support levels in the most efficient ways; 2) Client segmentation and targeting approaches;

and 3) Desired financial model.

Fundraising. Initially, we will work with prospective donors to acquire the grant funding required to

fund the market research and feasibility study. Dependent upon the outcome of these activities

further fundraising efforts will be employed to raise appropriate grant, debt and equity capital.

VII. Sources

Chisholm (2009), Venture Capital & the Finance of Innovation, Wiley & Sons, Hoboken, NJ.

Fickett (2010)

Metrick & Yasuda (2011)

Meyer & Mathonet (2005), Managing a Portfolio of Venture Capital and Private Equity Funds, John

Wiley & Sons, Ltd. Hoboken, New Jersey.

infoDev (2009) = Mixed use incubator handbook

OECD (2009) -= Innovation and ICT in Africa`

OECD (2010) = African Outlook

OECD (2010b) = SMEs, Entrepreneurship and Innovation

OECD (2010c) = Innovation and the Development Agenda

UNCTAD World Investment Report 2010-2011

Timmons & Spinelli (2003), New Venture Creation, McGraw Hill, New York.

World Bank (2007) = Changing the Face of Waters

46

DRAFT

World Bank (2009) = Agribusiness and Innovation

World Bank (2010) = Governance Indicators

World Bank (2010b) = World Bank Group entrepreneurship Survey Snapshot (website)

World Bank (2010c) = Doing business

World Bank (2010d) = Innovation Policy

VIII. Appendices

List of African Small Business Incubators

Aba Technology Incubation Centre

Nigeria

Acorn Technologies

South Africa

AVIEX Ltd.

Congo

Bandwidth Barn

South Africa

Branson School of Entrepreneurship

South Africa

Business Entrepreneurship and Development

Rwanda

Busy Internet

Ghana

Calabar technology incubation centre

Nigeria

Centre International des Technologies

Chad

Chemin (The South African Chemical Technology Incubator)

South Africa

EMERALD BIITRACDEC DEVELOPMENT CENTER-NIGERIA

Nigeria

Fantsuam Foundation

Nigeria

Furntech

South Africa

Ghana Multimedia Incubator Centre

Ghana

Hawassa University

Ethiopia

47

DRAFT

IFC - SSC Kenya Business Incubator

Kenya

Incubadora de Empresas de Luanda

Angola

Instituto Superior Politecnico de Manica

Mozambique

IntEnt Ghana

Ghana

Kenya Kountry Business Incubator (KeKoBI)

Kenya

MANAGEMENT TRAINING AND ADVISORY CENTRE (MTAC)

Uganda

Maxum Business Incubator

South Africa

MICTI Technology and Business Incubator

Mozambique

MINNA TECHNOLOGY INCUBATION CENTRE

Nigeria

Mpumalanga Stainless Initiative

South Africa

National Computer Board (NCB)

Mauritius

National Council of Negro Women/International Division (NCNW)

Senegal

Nextzon Business Services Limited

Nigeria

SACOMA

Kenya

SmartXchange

South Africa

Softstart BTI

South Africa

Solvebrand Ltd

United Kingdom

Soshanguve Manufacturing Technology Demonstration Centre

South Africa

Technology and Business Incubation Facility (TBIF)

Rwanda

technology incubation center gusau, zamfara state, nigeria

Nigeria

Technology Incubation Centre

Nigeria

48

DRAFT

Technology Incubation Centre Birnin-Kebbi

Nigeria

Technology Incubation Centre, Akure.

Nigeria

Technology Incubation Centre, Warri

Nigeria

TECHNOLOGY INCUBATION CENTRE,BENIN

Nigeria

The Seda Construction Incubator

South Africa

The Technology Incubation Center,Maiduguri.

Nigeria

Uganda Industrial Research Institute (UIRI)

Uganda

Université de Thiés

Senegal

DRAFT

List of Private Equity Providers in Africa

Search Criteria: Investor Regions: Africa;

Investor ID# Investor Name Office Name Office Type City Country Investor Type Investor Status# of Professionals at Firm

10633-51 Absa Capital Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Cairo Regional Off ice Cairo Egypt PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Casablanca Regional Off ice Casablanca Morocco PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Johannesburg Regional HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments11105-11 Actis Capital Nairobi Regional Off ice Nairobi Kenya PE/Buyout Actively Seeking New Investments40666-78 Adlevo Capital Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments47553-67 African Agricultural Capital Kampala Primary HQ Kampala Uganda Venture Capital10909-18 AfriCap Microfinance Fund Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments25358-77 AfricInvest Capital Partners Nairobi Primary HQ Nairobi Kenya PE/Buyout40703-32 Angola Capital Partners Luanda Primary HQ Luanda Angola PE/Buyout13092-22 Beltone Partners Cairo Primary HQ Cairo Egypt Other Private Equity11144-71 Brait Private Equity Mauritus Regional Off ice Mauritus South Africa PE/Buyout Actively Seeking New Investments 2511144-71 Brait Private Equity Northlands Primary HQ Northlands South Africa PE/Buyout Actively Seeking New Investments 2551173-11 Catalyst Principal Partners Nairobi Primary HQ Nairobi Kenya PE/Buyout34293-16 Citadel Capital Nairobi Regional Off ice Nairobi Kenya PE/Buyout Actively Seeking New Investments40675-69 Coast2Coast Westlake Primary HQ Westlake South Africa PE/Buyout41003-38 Commercial International Bank Cairo Primary HQ Cairo Egypt42495-04 Concord International Investments GroupCairo Regional HQ Cairo Egypt PE/Buyout11927-71 Destiny Holdings Johannesburg Primary HQ Johannesburg South Africa Corporation Actively Seeking New Investments25294-33 Dimension Data Johannesburg Primary HQ Johannesburg South Africa Corporation42151-42 East Africa Capital Partners Nairobi Primary HQ Nairobi Kenya Other10984-15 EFG-Hermes Alexandria Regional Off ice Alexandria Egypt Investment Bank 99010984-15 EFG-Hermes Cairo Primary HQ Giza Egypt Investment Bank 99011171-71 Emerging Markets Partnership Braamfontein Regional Off ice Braamfontein South Africa PE/Buyout Actively Seeking New Investments 5011189-98 Ethos Private Equity Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments42265-18 EVI Capital Partners Johannesburg Regional HQ Johannesburg South Africa PE/Buyout11360-35 FirstRand Sandton Primary HQ Sandton South Africa Corporation Actively Seeking New Investments10865-26 Haykala Investment Managers Cairo Primary HQ Cairo Egypt PE/Buyout Actively Seeking New Investments10918-63 Horizon Equity Partners Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments40761-73 InReturn Capital Nairobi Primary HQ Nairobi Kenya Corporation20672-29 Inspired Evolution Cape Tow n Primary HQ Cape Tow n South Africa Investment Bank

50

DRAFT

40674-70 Julius Baer Group Cairo Regional Off ice Cairo Egypt Investment Bank10918-54 Medu Capital Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments42874-30 Naspers Cape Tow n Primary HQ Cape Tow n South Africa Corporation Actively Seeking New Investments11990-17 Net 1 Ueps Technologies Johannesburg Primary HQ Johannesburg South Africa Corporation42893-47 Netw orld Roggebaai Primary HQ Roggebaai South Africa Corporation11239-30 NIB-MDM Private Equity Investments Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments 311056-42 OrasInvest Dokki Primary HQ Dokki Egypt PE/Buyout Actively Seeking New Investments12381-49 Pamodzi Investment Athol Primary HQ Athol South Africa PE/Buyout Actively Seeking New Investments12320-11 PCS Equity Solutions Johannesburg Primary HQ Johannesburg South Africa Corporation Actively Seeking New Investments25268-59 Pin Oak Partners Cape Tow n Primary HQ Cape Tow n South Africa PE/Buyout Actively Seeking New Investments11389-42 Rand Merchant Bank Sandton Primary HQ Sandton South Africa Investment Bank Actively Seeking New Investments11356-03 Sanlam Private Equity Bellville Primary HQ Bellville South Africa PE/Buyout Actively Seeking New Investments11458-90 Sphere Private Equity Sandton Primary HQ Sandton South Africa PE/Buyout Actively Seeking New Investments14186-26 Strategy Partners Bellville Primary HQ Bellville South Africa PE/Buyout10048-15 The Carlyle Group Cairo Regional Off ice Cairo Egypt PE/Buyout Actively Seeking New Investments 50043053-40 The Industrial Development Corporation of South AfricaSandton Primary HQ Sandton South Africa Corp Development12438-64 Thembeka Capital Stellenbosch Primary HQ Stellenbosch South Africa PE/Buyout Actively Seeking New Investments11788-93 TransCentury Nairobi Primary HQ Nairobi Kenya PE/Buyout10643-86 Treacle Private Equity Johannesburg Primary HQ Johannesburg South Africa PE/Buyout Actively Seeking New Investments11325-97 VenFin Ltd. Stellenbosch Primary HQ Stellenbosch South Africa Venture Capital Will Consider New Projects 1640996-00 VPB Gaborone Primary HQ Gaborone Botsw ana PE/Buyout10074-61 Warburg Pincus Port Louis Regional Off ice Port Louis Mauritius PE/Buyout Actively Seeking New Investments11339-92 Zephyr Management Johannesburg Regional Off ice Johannesburg South Africa PE/Buyout Actively Seeking New Investments 40