I recently wrote about how the African Diaspora can help the continent achieve the Sustainable Development Goals (SDGs). Someone reached out to ask if I could recommend “which industry sectors are showing the most promise and my advice for people wanting to invest in Africa.”
As an aspiring venture capitalist myself, I thought this is an interesting question so I started looking for tips and strategies from experts on the continent.
And then, I came across an insightful Facebook post series written by Strive Masiyiwa on the subject. Masiyiwa is a Zimbabwean business mogul with a net worth of $1.9 billion according to Forbes.
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Having lived most of his life in the diaspora, below are his five-step plan for the African diaspora on starting a business back home or investing in Africa.
1. Be clear about your motive
“The first thing you must be clear about in your mind is the motive behind your decision. Some of the motives behind a decision to invest back home include the following: the need to cut the burden of constantly sending money home, creating an opportunity for you to return home, creating a “nest egg” for when you retire and return home, and getting a better return than what you think you can get where you are,” says Masiyiwa, 58.
Before you make your move, it’s important to figure out why you want to invest back home. Your motive will help you craft an investment strategy. We’ve all heard stories of someone who turned his hard-earned money over to a brother or relative for some investment purposes only to come back to disappointment.
If you don’t know your motive, then every investment opportunity would sound fascinating. Of course, no one should tell you what to do with your money. But, understanding your motive can help you avoid some of the investment mistakes that has left many people in tears.
As Simon Sinek rightly said, you have to know WHY you do WHAT you do.
2. Be clear about how much time you have to spend on it
“It is extremely important for you to have an honest assessment from the beginning about how much time you can spend tending to the business back home. You have to always bear in mind that your current job or jobs demand a lot of time. You might also be far away in a country with different time zones, or where it is very difficult to travel from at short notice if there is a crisis in the business. Knowing how much time you are able to spend will help you check the timing of the decision to start a business and most importantly, the type of business you should do,” Masiyiwa writes in his Facebook post.
Now that you’re clear about your motive, the next thing is to figure out how much time you’re willing to spend on the venture. Managing a business is not easy and if you work multiple jobs, it’ll definitely be extremely challenging to juggle both responsibilities. So, do your research and ask the right questions.
What does success look like for your new venture?
How many responsibilities will you have and what needs delegating?
Who will be your local contact and does he/she have enough experience to oversee your investment?
Do your math – be clear about your options before you commit. If you don’t do some due diligence in the beginning, you might run the risk of losing your investment.
3. Do your homework about the business environment back home
“Prepare a proper business plan. Study the market carefully. Don’t rush, be methodical. Remember, you worked hard for the money,” Says Masiyiwa.
There are several business opportunities on the continent but not all are investable at this point. This is an incredible time for the continent. Africa’s entrepreneurship climate is progressively improving. With remarkable internet penetration, increased venture capital funding; as well as innovations in digital payments, healthcare, agriculture, online commerce, etc experts are of the opinion that the 22nd century belongs to Africa. If that is so, then this is the best time to start investing back home. According to a Brookings report, greater innovation and investment from business is essential to meet Africa’s unfulfilled demand for goods and services, close the gaps in its infrastructure, create jobs, and decrease poverty.
Nevertheless, before you part with your hard-earned cash, be sure you understand the economics. If you are serious about getting value for your money, then you must apply discipline with your investment. It’s true that scared money never wins, but neither does naïve money. Make a wise investment decision.
4. It always pays to get advice from others (especially those that’d done it before)
“Talk to others in the diaspora who are in business. Ask deep-searching, well-researched questions. Talk to other business people back home as well,” Masiyiwa writes.
Irrespective of what you want to do, chances are someone has done it before you. Seek wise counsel. Don’t be afraid of someone stealing your ideas – people will generally be happy to share their wisdom if you asked. To get the best possible strategy requires soliciting opinions from smart people. Seeking advice could save you years of trial and errors.
“Being business minded requires you to always approach things with humility and respect,” Masiyiwa said in a different post. “There is nothing out there that is “simple”. Only fools look at what someone else is doing, and say to themselves, ‘that is simple”’
Ask different questions of the same person and ask the same question of different people. Get unique insights and then draw an informed conclusion. If your investment decision was done on whim or hearsay, you are making a huge mistake.
5. Be clear about who is going to look after the business
“You have worked hard for the money so be careful and diligent about who you give responsibility for running the day-to-day affairs of the business. Don’t mix up the need to have someone loyal with the need to have someone competent. Handing over your hard-earned money to an unemployed cousin, simply because you trust him, has left many people in tears. It’s important to be professional about how you go about choosing someone to look after the venture, even if it is a relative,” says Masiyiwa.
Your last and perhaps, most important decision as an African Diaspora planning on starting a business or investing back home is to decide who will look after your nest egg. Find a disciplined and competent person, and create a funnel for accountability. Communicate your expectations and make sure there’s a mutual understanding of deliverables.
When your business is small or just starting out, it is extremely difficult to hire the best talents because you may not be able to offer the job security people are looking for, or you just might not be as prestigious as the well-established businesses. You must do your best, even if it means offering them an opportunity to own shares, to compensate for the risk they are taking in joining you, says Masiyiwa
Whether you’re following Masiyiwa’s five-step plan for African Diasporas on investing in Africa or creating your own variation of the strategy, the processes are parallel: understand your motive, be clear about the time commitment, educate yourself on the business environment, seek wise counsel and get a competent person to look after your investment.
The principle has worked for Masiyiwa, who lived 32 years of his life in the diaspora and now has a net worth of $1.9 billion according to Forbes.