60,000 jobs for Tanzania

THIRST FOR WORK: Jobless youth in Tanzania. Joint ventures will create jobs

DAR ES SALAAM, Tanzania -Tanzania - TMS consultants in collaboration with Tanzania Private Sector Foundation (TPSF) through the advent of Tanzania Venture capital and Equity Project (TVC) have confirmed that by the year 2016, the joint venture will be able to generate not less than 5,000 employment opportunities per month equivalent to 60,000 opportunities in Tanzania annually.

A six year research conducted by TMS Ltd concluded that the Tanzania local private sector was not able to attain this massive goal because it was hampered by a number of impediments including inability to participate as part of large scale investment ownership in the country, and lack of access to large scale, long term and low cost investment financing facilities.

 Others included lack of entrepreneurial and management skills, lack of entrepreneurship and management knowledge, skills and experience required to manage large scale investments and lack of access to improved and appropriate technology.

Mr Sebastian Kingu, TVC Project Manager told East African Business Week in an exclusive interview in Dar es Salaam last week that as a remedy to this, Venture Capital and Private Equity Investment Financing that refers to shareholders equity invested mainly in private companies as distinguished from publicly listed companies at the Stock Exchange was a concrete solution.

“In the 1990 European Venture Capital Association (EVCA) year book, Venture Capitalists are defined as organization units or individual persons Who can provide substantial activity in the management of equity quasi-equity investment financing for the start-up and or development of small and medium sized unquoted enterprises that have significant growth potential in terms of product, technology, business concepts and services,” he said.

He said the initiative focuses its aim or objective in long-term capital gains to remunerate risks and who can provide active management support to entrepreneurs/ investees: therefore, Venture Capitalists are usually private individuals (Business Angels), investment groups or companies who are in the business and in most cases they prefer to put additional capital into a growing business not yet listed in the Stock Exchange. 

He said this means Venture Capital and Private Equity Investment financings are basically not loans but investment financing through joint venture partnership with the original owner of the business project (investee) and the other partner who has the finance (Investor).

Citing an example where this scheme has brought immense achievement, Kingu said that Venture Capital and private equity investments were used to finance industry in the USA in the 1960s and went on spreading to Western Europe and other countries in the world.

“It was also in USA, sometime around 1978 that USA pension Funds were allowed to invest in private equity for the first time due to reforms to the USA Employment Retirement Income Security Act (ERISA) guidelines,” he said.

It has been reported that, by September 2013, Private equity investment from the top 200 USA pension funds had reached over $300 billion. In Africa some few countries including Nigeria and South Africa have already started using Pension funds to fund their private Equity Companies,” Kingu said.

Kingu said that among several factors which have resulted into this scenario there is critical lack of access to large, long-term and low cost investment financing of an average minimum of about $5 million upwards to the maximum average of about $500 million or more per a single business project.

According to Kingu, this situation can be clearly seen from most of the local private sector SMEs owned by Tanzanians that have permanently remained SMEs, failing to graduate into large scale enterprise. The Tanzanian local private Sector has participated poorly in the ownership of the current existing large scale mining investments in the country.

If this problem is left unsolved, the local private sector will find themselves not being able to participate significantly to be part of ownership of the emerging large scale investments in the natural gas and oil sectors in the country.

By Timothy Kitundu, Sunday, November 02nd, 2014