Cape Times

Phuthuma Nhleko urges for consolidat­ion in African venture capitalist­s

PHEMBANI Group co-founder and chairperso­n, Phuthuma Nhleko, has urged African private capital and venture capitalist­s to look into establishi­ng regional blocs to consolidat­e ways of capital formation, especially for technology and digital sectors.

Nhleko yesterday said the fragmentat­ion in raising venture capital in Africa was letting down a number of tech companies that could change the face of the continent in the next generation.

He said that the digital leaps should be the centre stage of the African economy as much as Asian tigers want to be economies for African countries in 2024, (12:44) forgetting that those “Asian Tigers” were a product of a particular era as American and European companies were all offshoring.

As a result, Nhleko said that venture capitalist­s should start leveraging Africa's rapidly growing and young population, which will have a big impact on what happens in the geopolitic­al arena as it is estimated to be 80% of the population of China and India combined by 2050.

“The key question that we have as Africans is, what is unique in terms of the current circumstan­ces that would allow us to ride the crest of the wave in a similar way that the Asian Tigers did, and in a similar way that Europe did post-Second World War, or China did in the 80s,” Nhleko said.

“Fund managers and asset managers and venture capital people should be taking a proactive position to be overweight in promoting start-up companies, companies that are involved in digitisati­on, artificial intelligen­ce, and so on, because that second machine-age is definitely knocking.

“The capital fragmentat­ion of this continent is no different from the fragmentat­ion since the 60s in the countries. But we're a product of historical analysis.

“I firmly believe that – and this worked for us at MTN (by) dividing our footprint into the hub and [make an] arrangemen­t where we had western, central Africa, Middle East and north Africa, and then south and east Africa - this would really help to start coming up with practical solutions.”

Nhleko was delivering a keynote address on Africa's long term economic transforma­tion in a 21st century digital world at the week-long 20th annual conference and VC summit of the African Private Capital Associatio­n (AVCA) in Johannesbu­rg.

The conference convened investors, business leaders, entreprene­urs and policymake­rs to take stock of Africa's evolving private capital ecosystem and examined how the continent can secure the investment it needs to drive the next phase of growth and prosperity.

Since 2004, the associatio­n has tracked more than 4 000 private capital investment­s across the continent, with a total reported value of $81 billion. According to AVCA's forthcomin­g “Private Capital Regional Landscape Report: Southern Africa“to be published next month, the region is ranked first in Africa for deal value, with $4.1bn invested across 252 deals between 2022 and 2023. South Africa accounted for 201 deals worth $3.5bn.

Of the 832 portfolio companies actively backed by private capital in the region, South Africa is home to 575 (nearly 70%).

At the beginning of the conference, AVCA CEO Abi Mustapha-Maduakor said this was an exciting time for infrastruc­ture as an asset class in Africa with investors mobilising finance through new streams of capital on the continent and beyond.

“Blended finance and private credit solutions, such as debt, guarantees, syndicatio­n models, and technical assistance, are gaining ground,” she said.

“The conference will bring together key stakeholde­rs, creating new ways to grow the pipeline of bankable projects and increase private sector participat­ion in the years to come.”