The key might be the diaspora business

Research and associated business development programme to support on entrepreneurial aspirations in Africa

At a time of renewed focus on the power of entrepreneurship to lift people out of poverty, a study by a George Washington University researcher finds that strong feelings of accomplishment, pride, duty and honor motivate many diaspora entrepreneurs to invest in their country of origin. The survey of participants in the African Diaspora Marketplace (ADM) found that diaspora investment motivations are complex, reflecting financial as well as personal drivers, including the sense that they can prevail over common barriers to business success.

The ADM is an entrepreneurial business programme, supported jointly by USAID and Western Union, which seeks to boost economic opportunity in Sub-Saharan Africa through sustainable start-up and established enterprises by U.S.-based African diaspora. Earlier this year, more than 700 participants from 19 countries submitted business proposals for grants to match their own funds to support the execution of their business plans. Fourteen businesses in seven Sub-Saharan African countries were awarded matching grants of up to US$100,000.

Investing in economies

“Africa can see progress similar to what China has seen in less than a decade, and without substantial foreign direct investment. Just look at the flow of remittances to these countries. As businesspeople, we in the diaspora community want to contribute to economic development in our countries of origin. And we have the passion to succeed in creating opportunity,” said ADM grantee Ronald Mutebi. Mutebi is President of TEK Consults Group, which has been testing and distributing solar ovens in Africa. He is in the final stages of setting up a manufacturing plant in Uganda and has more than 1,000 prospective buyers for his product.

Mutebi added, “The ADM to me was a first of its kind, a forum where the diaspora came to showcase our various enterprises and to learn and share as well as encourage one another that we are not alone in the struggle for economic empowerment of our brothers and sisters.”

The survey found that diaspora investment motivation is driven by a variety of factors, including expectations of financial, emotional, social-status and political gains as well as family concerns. While more than half of ADM participants maintained that they invest in their country of origin to create jobs and income for themselves (62 per cent) and acquire personal financial independence (65 per cent), approximately three fourths claimed that their country-of-origin investments would generate a feeling of accomplishment (83 per cent), will help them feel better about themselves (79 per cent), enhance their self pride (76 per cent), and fulfill a sense of personal duty (72 per cent).

“ADM participants invest from the heart out of care and concern for their families and country of origin. They want to make a difference," said Dr. Liesl Riddle, Research Fellow at The George Washington University Center for International Business Education and Research (GW-CIBER), and the study’s leader.

“This is a great development opportunity for Africa: to match innovative entrepreneurial ideas and talent with much-needed funding to bring their visions to life.”

“This research will help us begin to understand the key factors that enable diaspora investors to be successful. It is part of our process to identify best practices that can foster economic opportunity and help small businesses thrive in developing markets,” said Aida Diarra, Western Union Regional Vice President, Economic Community of West African States.

Planning for business

Unique ADM business plans are beginning to take shape in several countries. Among them: Mutebi’s TEK Consults Group, which is developing and implementing a comprehensive solar oven programme in Uganda. TEK's programme greatly decreases dependence on wood and agricultural waste products for cooking fuel, allowing time and money previously spent for cooking fuel to be spent more productively. Already, the first oven components have been shipped to be assembled in Uganda. The ovens began to appear in Ugandan markets in January 2011.

Earthwise Ferries is reestablishing, managing and operating a fast-ferry transportation system on Lake Victoria, with destinations in Uganda, Kenya and Tanzania. The first 150-passenger ferry, designed to run on diesel or straight vegetable oil, launched in December 2010 and is projected to reduce travel time on Lake Victoria by at least 60 per cent. Earthwise has enlisted 600 indigenous farmers to grow sunflower seeds to produce the vegetable oil.

Uza-Mazao uses SMS messaging to bring unprecedented levels of efficiency to buyers and sellers of crops, farm produce, livestock or livestock products in Kenya. Transactions are conducted using an existing mobile-phone wallet system. Farmers are able to figure out what is in demand in their region so they can produce and distribute accordingly. In the first month more than 2,000 farmer co-operatives have registered for the service.

Individual entrepreneurs responding to the online survey of ADM participants perceive barriers that are similar to those documented through other major research on doing business in the region. Characteristics described in the environment include bureaucratic, financial capital and infrastructure barriers.

While direct investment was the primary investment interest of the diaspora entrepreneurs, the survey’s respondents also expressed interest in investing in mutual funds consisting of firms based in their country of origin, purchasing government bonds issued by their country of origin and contributing to funds that would lend to small and medium enterprises in their country of origin.

The African Diaspora Marketplace was financed jointly by USAID and Western Union, with contributions from Western Union Agents Ecobank Transnational Incorporated (ETI) in Africa and Irv Barr Management in the United States.

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