Tanzania lags behind on private equity

Tanzania is lagging behind the other five member states of the East African Community (EAC) in attracting private equity deals. For that, stakeholders put the blame on lack of transparency among companies operating in the country, as well as unscrupulous business practices and unwillingness of some firms to go for the option.

Data compiled by the African Venture Capital Association show that the East African countries attracted a total of $2.4 billion (about Sh5.4 trillion) in venture capital in the period from 2013 to 2017.

However, Tanzania accounted for only 17 per cent of the capital. As it is, the funding financed a total of 180 deals out of which Tanzania accounted for only 10 per cent!

According to the co-founder of the Tanzania Venture Capital Network (TVCN), Mr Salum Awadh, Kenya beat the other EAC countries, accounting for 56 per cent of the value, and 49 per cent of the deals.

Uganda accounted for 19 and six per cent of the total value and deals respectively – while Rwanda’s share of the total value was six per cent.

The chairman of the Tanzania Private Sector Foundation (TPSF), Mr Reginald Mengi, encouraged players in the private sector to learn and explore this funding option for developmental projects.

“I understand that one of the complaints from private equity and venture capital firms is that many Tanzanian companies are not ready to open up for new shareholders,” Mr Mengi surmised – adding that “private sector companies need to understand that private equity and venture capital investors do not only bring in finance –and just take shares in your companies; they also help to structure and grow your business”.

Elaborating, Mr Mengi said it could support their businesses by introducing corporate governance systems, sharing their strong networks with suppliers and clients and using expertise in developing and executing the right strategies for company growth.

The permanent secretary in the Prime Minister’s Office responsible for Policy and Coordination, Prof Faustine Kamuzora, said the government is ready, able, willing and open to collaborate with the private sector and TVCN to establish what needs to be done in attracting more of this investment to Tanzania – and finance more companies.

The government, he said, is also willing to dialogue with the private sector through TPSF and TVCN in reviewing and improving the relevant legal and regulatory frameworks.

This will facilitate the formation of more local venture capital funds needed in financing and supporting local small and medium enterprises (SMEs). These, Prof Kamuzora stressed, are actually the engines of economic growth and jobs creation.

“If we are to effectively finance industrialization, then we need additional and alternative sources of finance,” Prof Kamuzora averred.