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Global Entrepreneurship Summit Highlights Growing African Business

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The U.S. hosted the first Global Entrepreneurship Summit in Washington, D.C. in 2010. This past weekend, President Barack Obama attended the sixth annual gathering of entrepreneurs large and small, business leaders, mentors, and high-level government officials in Nairobi, Kenya, an event that not only underscores the importance of entrepreneurship globally, but the increased importance of Africa as a hub for new and exciting business ventures.

As an investment destination, Africa has been gaining greater prominence over the past years. Heavyweights like China and Japan have invested large amounts of FDI across the continent, and within African countries themselves, many changes are afoot that are helping, said Larry Seruma, managing principal of New York-based Nile Capital Management, to develop more formal business sectors and create an environment that will allow ventures both large and small to prosper and grow. Here are a few key points for investors looking at Africa:

Kenya: Leading Technology Ventures

That the Global Entrepreneurship Summit should have taken place in Kenya is apt because Kenya has a vibrant business sector.

In Kenya, local entrepreneurship continues to grow and the technology sector is one where Seruma believes there’s more growth to come. The Kenyan tech sector hinges on the important notion of addressing the needs of a large and rural consumer base, he said, and no venture illustrates this better than M-PESA, a mobile-phone based money transfer and micro financing service launched in 2007. The highly successful company has been moving forward with mobile banking, Seruma said, and the concept of mobile payments has also taken root in neighboring countries like Uganda, where there are ventures underway. Technology plays a part in other areas such as healthcare and tourism (Kenya generates 30% of its revenues from tourism) and it’s also made it much easier for overseas investors to be involved in local business initiatives, Seruma said.

Ethiopia: From Garments to Infrastructure, and a Possible Stock Market

Ethiopia, a country that President Obama will also visit while in Africa, has been the beneficiary of a great deal of investment coming from China, the U.S. and several European nations.

The garment business there is booming, Seruma said, and “the Chinese are using Ethiopia as a hub for shoe manufacturing.” Things are also happening in the infrastructure space and Ethiopia is embarking on a $4 billion hydro dam project that would eventually export electricity to other East African nations, he said.

Ethiopia doesn’t yet have a stock market but the vibrant Ethiopia Commodity Exchange was the first of its kind in Africa, and there’s little doubt that the creation of a stock market is in the offing.

Untapped Commodities

Natural resources have been and remain Africa’s greatest wealth. But Seruma believes the greater future opportunities lie in its “undiscovered” commodities.

“What we don’t really talk about enough are the agricultural products, the soft commodities that are going to increasingly be a part of the global food chain as the world population grows,” he said. “We’re seeing lots of good ideas in terms of farming operators and the whole farm-to-plate concept.”

In Kenya, there are a number of local entrepreneurs like BIDCO that are in the soft commodities business. Investments into the agricultural sectors of other African countries have been on the rise, Seruma said. In Ethiopia, for example, John Deere has made significant investments to set up a big base that would encompass the entire agricultural value chain there.

Deeper Financial Markets

The ongoing deepening of financial markets is an important step that will allow greater investment into the region. In East Africa, there is a move to link the stock exchanges of Rwanda, Tanzania, Kenya and Uganda, so that a company listed in one country can trade in another country, Seruma said. The exchanges are also being modernized and this has brought greater liquidity into the markets, he said.

However, it’s key that countries also work to improve their regulatory environments, increase both transparency and corporate governance in order to really attract foreign capital, he said. Strong institutions are also needed, including an independent judiciary and real efforts to tackle corruption. The more African nations, Kenya included, work to address these issues, the greater the likelihood of fostering a healthy and lasting environment for business, Seruma said, one that will appeal to international investors and invite overseas funding to support local ventures.