Private equity financing is not easy to come by, even in a market as hot as Africa. The competition for funding is fierce, and the way the numbers play out is part of the bottom line. Businesses need to demonstrate not only success to date, but a strong potential for growth, expansion, and of course exit potential.
Thus, as Erika van der Merwe, chief executive officer of the Southern African Venture Capital and Private Equity Association, explained to AFKInsider in an email interview, “The bulk of private equity funding across Africa is for established businesses with proven revenue and profitability.”
Financing women-led businesses in Africa thus presents a challenge.
While African female entrepreneurs are as avid as any other entrepreneurs on the continent, their businesses tend to stay small. IMF research finds that “women make up 40 percent of [sub-Saharan Africa’s] non-agricultural labor force, but account for nearly 50 percent of the self-employed.”
This is the highest rate in the world, and three out of the top seven countries in terms of female entrepreneurship are in Africa.
However, women only represent 25 percent of employers, a figure shared by most regions in the world. Thus, to encourage the blossoming of female-founded businesses from micro-enterprises into powerhouses would require not only access to private equity financing, but access to the tools required to build a bigger and better businesses.
Entrepreneurship might be said to require two steps: the establishment of a viable business, and the growth of that business into a larger enterprises that attract investor attention and financing.
To get started as a business owner, the list of requirements is generally fairly obvious: education, the infrastructure to conduct business, and access to critical inputs and finance.
When it comes to basic education, sub-Saharan Africa has certainly made strides. The ratio of female-to-male secondary school enrollment has grown from about 65 percent in the 1970s to over 80 percent in 2010.
On the other hand, women still trail men quite significantly in tertiary enrollment, with just over 60 women for every 100 men at university.
This is an issue that would certainly need to be addressed if sub-Saharan Africa wishes to field more opportunities for the investment world to finance; while education certainly doesn’t guarantee business success, it can surely encourage it.
That being said, there are increasing numbers of women at the upper echelons of power and government, and as women filter into the ranks of the powerful they become role models for those who would follow.
The share of parliamentary seats held by women rose from 10 percent in 1990 to over 20 percent in 2012; Rwanda leads the continent, with female members comprising 57 percent of parliament.
Sub-Saharan African women also work in great numbers, with a female labor force participation rate (representing the rate of working-age women who are actually in the labor force) of over 63 percent, among the highest in the world.
“There are still relatively few women at the top of African private equity but that is steadily changing and the numbers increasing across the continent… With regards to recipients of finance this too is strong and there are great examples of investee companies founded and headed up by women,” Nonnie Wanjihia, executive director of the East Africa Venture Capital Association, told AFKInsider.
The precariousness of getting to that stepping stone, of course, varies.
“There are enormous cultural, institutional, and legal differences across Africa,” said van der Merwe, “With each jurisdiction offering different degrees of economic freedom for women.”
One major and obvious constraint is the secondary role most women assume when it comes to paid work.
By estimate, worldwide women spend twice as much time as men on household work and four times as much time on childcare. They also tend to work in the informal sector and in traditional or low-paying roles.
Thus, encouraging further labor participation and entrepreneurship is not just a matter of providing the right tools in terms of education and finance: social norms will also need to shift to give women time to spend on their businesses, should they choose to.
