Brain gain: 70% of African Diasporan MBAs will return to work in Africa post-graduation

African Diasporan MBA students from leading Western business schools have affirmed their conviction in Africa’s potential for fostering small-to- medium sized enterprises (SMEs). 70 percent will work in Africa after graduation, according to a new survey by Jacana Partners, the pan-African private equity firm that invests in SMEs to deliver social and financial returns. Of that 70 percent, half plan to become entrepreneurs and start their own company, as opposed to working for an existing business.

89 percent of all African respondents selected the growing consumer story as presenting the greatest opportunity in Africa, above both natural resources and advancing technologies. As a result, more than a third selected consumer goods and financial services as sectors that offer the most attractive opportunity for starting a new business. We had a chance to follow up with Simon Merchant, the Chief Executive Officer at Jacana, to find out more.

Jacana is a member of the VC4Africa investor network, can you tell us about the firm?

“Jacana is a pan-African private equity firm that invests in small businesses to support sustainable economic development in Sub-Saharan Africa. We have been operational for over four years and currently have $42 million under management, of which we have invested over $20 million to date in 19 companies in West and East Africa employing over 1,300 people.”

Why did you support this research?

“Our experiences investing in African SMEs have taught us that there are two critical challenges facing entrepreneurs in Africa – firstly, a lack of access to value-add financial capital, and secondly, a lack of management team capacity. With so many years of the ‘brain drain’ phenomena, we wanted to provide some data to support our instincts that the trend is turning and that Africa now offers a compelling destination for MBA students to build their careers. From Jacana’s perspective, it is also further proof to potential investors in our private equity funds that talent really is increasingly available to support and build portfolio companies across the continent. It also gives us the opportunity to establish connections with the next generation of African entrepreneurs, who will be our future investees.

We are encouraged that the majority of the African MBA Diaspora community are planning to return to the continent post graduation and, even more critically from our point of view, that more than half of these want to be entrepreneurs and set up their own businesses.”

What do these MBAs potentially mean for the continent’s development?

“They represent the fact that talented Africans are committed to building successful companies in Africa. Entrepreneurs are the key drivers of job creation and long-term economic development in Africa. Small to medium sized enterprises (SMEs) are the driving force of a country’s GDP, wealth and Government tax revenues funding public services and infrastructural reform. In fact, every $1 invested in an SME generates an additional $10 in the local community.”

Which specific business skills are needed the most?

“Our Chairman Stephen Dawson would say that selecting, motivating, managing, and communicating with the core team is one of the most important things that an entrepreneur can do and cannot be passed over to another manager. More tips on skills required can be found on the Jacana website.”

To what extent is the current economic slowdown globally a bonus for Africa?

“It is positive in the sense that its growth has not been impacted in the same way as other economies, which means by extension that it is getting positive worldwide attention. However, the positive fundamentals have been there for a while: increasingly strong politics, a rapidly growing consumer class and a young population – all which make Africa a positive investment destination.”

Where do we go from here?

“What is needed now is an increase in value-add private equity capital in the SME part of the market so that these returning entrepreneurs have access to the financial and human capital they need to build their businesses. Jacana is currently raising a new $75 million mezzanine SME fund, led by development finance institutions but open to other investors, that will allow us to significantly increase the scale of our operations. By increasing access to value add private equity capital, we can harness the potential of the returning African MBA Diaspora to build successful business, create jobs and support long-term economic growth in Africa.”