In a bold and candid message shared from the World Economic Forum in Davos, Zimbabwe’s richest man, Strive Masiyiwa, laid out his vision for fostering entrepreneurship in Africa.
According to Masiyiwa, a lack of access to venture capital rather than traditional bank loans is the single biggest barrier preventing Africa from developing unicorns (startups valued at over $1 billion).
His argument is clear: if African countries want to empower young entrepreneurs, create jobs, and fight poverty, they must establish strong domestic venture capital (VC) ecosystems.
Moving Beyond Bank Loans to Equity Investments
Masiyiwa, a billionaire telecoms magnate and philanthropist, highlighted the fundamental difference between venture capital and bank loans.
While banks provide loans that must be repaid with interest, often requiring collateral that many young entrepreneurs lack—VC firms invest directly in startups in exchange for equity.
This means they share both the risks and the rewards with entrepreneurs.
The entrepreneur-founder of Econet Wireless pointed out that global tech giants like Mark Zuckerberg, Elon Musk, and Bill Gates were not funded by bank loans but rather by venture capital firms willing to bet on their high-growth potential.
In contrast, African startups struggle to access similar funding opportunities, forcing many promising ventures to stagnate or fail due to financial constraints.
Why Africa Lacks Unicorns
Masiyiwa emphasised that the underdevelopment of Africa’s VC ecosystem is the primary reason the continent has produced only a handful of unicorns.
“In the US and China, the biggest venture capital firms manage much more capital than most African banks,” he noted.
This financial reality has created an environment where African entrepreneurs often turn to international investors, leading to a situation where many successful startups end up headquartered abroad.
He argued that Africa does not necessarily need foreign VC firms or government-run initiatives. Instead, what is needed is domestic venture capital that is well-regulated, protects entrepreneurs’ intellectual property, and incentivises institutional investors (such as pension funds and insurance companies) to participate.
A Radical Rethink: Establishing Local VC Firms
Masiyiwa proposed a practical approach: each African country should establish a national registry of local VC firms operating similarly to banks.
Entrepreneurs would then pitch their business ideas to these firms, which would conduct due diligence before providing funding.
In return, VCs would take equity in the startups, appoint independent directors, and provide mentorship to help them scale.
“Banks are actually much more difficult and complex to set up than VCs, yet we have banks, but we don’t have VCs. That is insane!” he exclaimed, pointing out the need for urgent reform.
Why Government-Funded VC Programs Won’t Work
A vocal critic of government-controlled funding programs, Masiyiwa warned that state intervention in venture capital would lead to inefficiency and political interference.
Instead of allocating taxpayer money to risky startup investments, he suggested that governments should provide tax incentives to encourage institutional investors to back VC firms.
“When governments provide funds, it almost inevitably results in political interference because entrepreneurs with bad business ideas can use political influence to gain access to funding anyway,” he cautioned.
The Bigger Picture: Entrepreneurship as a Tool for Poverty Alleviation
Masiyiwa’s advocacy for venture capital is deeply linked to his belief in entrepreneurship as a means to alleviate poverty.
By shifting the focus from bank loans to equity investments, Africa can cultivate a new generation of business leaders who can create wealth, generate employment, and drive economic growth.
His call to action is not just for policymakers but also for business leaders and financial institutions. “Let’s start creating greener pastures for our young unicorns to grow. We can do this,” he urged.
As one of Africa’s most successful entrepreneurs, Masiyiwa’s words carry significant weight.
Whether African governments and investors will rise to the challenge remains to be seen. But one thing is certain: without a radical shift in how startups are funded, Africa risks missing out on the next wave of global business innovation.