A Tanzanian venture capital firm, Tanzania Venture Capital Network (TVCN) is bringing together Venture Capital firms and small businesses so as to combat the low deal flow in the country.
According to TVCN Co- founder Salum Awadh said that Tanzanian businesses needed to be educated on this misconception as well the benefit that Venture Capital brings.
Salum Awadh, Co- founder of TVCN quoted a report by KPMG and the East Africa Venture Capital Association that between the period of 2012 to 2017, East Africa received a total of $2.4 billion in Venture Capital funding where by Tanzania accounted only 17% of all the capital. Out of the 180 deals, it only secured 10 percent , with Kenya leading the EAC pact attracting 56% of the deals followed by Uganda and Rwanda with both 6% of the value.
In Tanzania Venture Capital isn’t as big as it should be and one organization has set to change that.
The disparaging numbers of deal flow in Tanzania is a result of Tanzania companies shying away from opening their books and demonstrating greater transparency to VC’s and potential Private Equity (PE) shops. Most family oriented companies in Tanzania are unfamiliar with the manner in which VC funding operate and furthermore the continued government regulation in the country’s industrial sector has caused apprehension among many VC funds as PE shops.
The Permanent Secretary in the Prime Ministers office, Prof. Faustine Kamuzora assured the private sector that the government is in full support of the venture capital initiative and that it is working on a framework of policies aiming to promote the private sector in the country.
“We are here to support the private sector in getting funding. It also important for all government ministries to work with the private sector, said the Prof. Kamuzora.
While the government is undergoing regulatory reforms, much more is yet to be done. International investors are keen to enter Tanzania and many are looking at the current actions being taken by President Magufuli as an indication of whether they should enter the country or not. With the extractives industry and the various news surrounding foreign players, many VC firms and PE shops as well as other investors are weary to enter a market of uncertainty.
The Government is working toward change, but only if demonstrated action is taken, that enable an open playing field that investors feel comfortable in entering will they step in Tanzania.
Venture Capital funding proves to be an efficient method of financing company’s growth across many parts of the world. Most of the big brands such as Uber and Facebook grew via seed funding from Venture Capital firms.
The opportunities in Tanzania are plentiful, and investors from around the world are cautiously waiting. Only time will tell whether Tanzanian firms change their approach to doing business and whether the government is keen to work with foreign players entering the local domain.