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Tanzania: SMEs Decry Elusive Venture Capital

Tanzania: SMEs Decry Elusive Venture Capital

TVCN is an initiative that has been set up to promote the growth and development of private equity and venture capital as an alternative source of finance for local companies, and an alternative asset class for investors in Tanzania.

While across the world and in most parts of Africa, venture capital is the go to capital solution for startups and the expansion funding option for well performing SMEs, entrepreneurs in Tanzania have raised concerns over access to venture capital.

Speaking to The Exchange from Tanzania’s tourism hub Arusha, John Mpanda, a tourism enthusiast and owner of Serengeti Safaris, a tour operations firm said getting venture capital is difficult and the options are limited.

“Arusha is a world tourist destination but yet banks and financial institutions are still reluctant to fund tourism or even hospitality and catering startups,” he said.

According to him, to set up his tour operations business he had to go out of pocket and rally up financial aid from family members and friends.

“Luckily their interest rate is not so high and they don’t even want stake in the company,” he laughs “…but I am one of a small group of investors who have got so lucky…most entrepreneurs simply give up their investment ambitions when they hit that capital brick wall,” he says.

A Case For Awareness

However, despite the dire need for capital, most individuals looking to start a business are hardly aware of venture capital options and the few that are, do not know how or where to access them.

Similarly, even well performing SMEs like Mpanda’s tour company, that has grown from three employees to 11 in less than two years, they too have little knowledge of Venture capital options and how to access them.

“There is great need to raise awareness among the general public and SMEs about venture capital ,” says SSC Capital CEO Salum Awadh.

“While there is lots of potential out there, most of it goes unrealized simply due to a lack of knowledge of the funding options that are readily available,” he adds.

SSC Capital is one such option. Based in Dar es Salaam, SSC Capital is a financial and investment advisory firm that ‘help investors find the right investment assets while supporting businesses in building their businesses to be more robust, sustainable and of higher value.’

“We offer traditional consulting services, fund management, crowdfunding and private equity and venture capital services,” the CEO details.

The firm has been operational for seven years now, having served a diverse of clients from both public and private sector, and has managed to raise more than USD 400m for its clients in Tanzania.

Earlier this month, to promote growth and development of private equity and venture capital in Tanzania, SSC Capital established the Tanzania Venture Capital Network (TVCN).

Tanzania Venture Capital Network (TVCN)

TVCN is an initiative that has been set up to promote the growth and development of private equity and venture capital as an alternative source of finance for local companies, and an alternative asset class for investors in Tanzania.

The Network was officially launched on 05th March 2018 with much enthusiasm and support from both the public and private sector in unlocking the potential of the country in attracting more PE/VC deals coming into the market.

The report of deal flow to Africa by Africa Venture Capital Association indicates that a total of USD 2.4bn was invested in East Africa for a period of 2012 to 2017, with only 17% and 10% of deal value and volume respectively coming into Tanzania.

The Network seeks to carry out various activities that include training, education and awareness, information sharing, research and data, publications, and advocating for a better PE investment climate in the country that will help see more deal activities in the market.

The Network also seeks to contribute in addressing all fundamental issues at the macro level that are necessary in making Tanzania an attractive destination of PE deals.