The African continent has big potential for investors. On the other hand, Africa is a largely developing zone that has its own unique problems. One of the major problems that African businesses face when it comes to investment is a lack of funding. Igor Cornelsen describes this problem which is endemic to Africa in his WordPress blog.
Mr. Cornelsen says that Africa has a significant number of interesting technology start ups that have a lot of potential to expand beyond Africa.
The reason why so many African startups have a lack of funding has to do with the way they do business. Igor Cornelsen says that the majority of African start up firms focus on a local or regional level instead of a continent wide or global level.
The fact that a lot of new firms in Africa lack global or continent wide appeal is why so many investors pass up on investing in them. Without this appeal, African start ups are suffering from a lack of funding to fuel their growth further. There is a solution to this problem believes Cornelsen.
He believes that there has to be one tech firm out of Africa that goes global and that develops from a local or regional approach. This way investors will then realize that it is well worth their time and effort to invest in smaller African startups because they can expand outside of Africa. Read more: Igor Cornelsen gives you the basics on Brazilian banking
Another part of the problem that new African companies are facing comes from the African banks themselves. African banks currently charge exorbitant interest rates on business loans for new businesses.
In Ghana for example, the interest for a business loan is about 28%. Such high rates discourage businesses from taking out loans. With no capital available to them to help them expand, many African businesses fail to grow or die out because of a lack of funding.
Igor Cornelsen believes that African tech companies should showcase their products in major innovation hubs such as Silicon Valley in the USA and London, England. That way they can gain more exposure.
The smart investor in Africa will look for companies that have a lot of potential to grow outside of Africa. This way they can make big returns should a company grow to have a global marketplace.
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