African institutions need to start trusting their own young Entrepreneurs

Capital is available on the continent, but the African institutions that have it don't trust their young people. Because of this, it's mostly Western and Asian VC firms that bet on African entrepreneurs and startups, even at the pre-seed stage. Take the National Social Security Fund (NSSF) in Uganda as an example.

The year ended on December 31, 2021, and NSSF got UGX 9,317,880,000 from MTN dividends. MTN was paying UGX 4.706 per share, which means that NSSF has 1,980,000,000 shares in MTN. Since each share cost UGX 200 at the IPO, this means that NSSF invested UGX 396,000,000,000 (more than $100M) in MTN to get its 8.8 percent shareholding. However, if NSSF earns an average of UGX 15B per year in dividends, which is a very optimistic assumption, it will take NSSF over 30 years. Don't forget that MTN's stock price has been in "free fall" since it went public, to use a phrase from Prof. Joseph Stiglitz. This means that even if they trade the shares on the stock market, they can hardly make a profit.

Imagine if they took $30 million out of that $100 million pool to start an early-stage venture capital firm for African startups. If they wrote checks for $250,000, they would have invested in 120 startups across the continent. If only 10 of those startups became unicorns or went public, they would make more money in 10 years than they have in the 10 years since the fund was created. They would also be able to raise more money from other funds, pension schemes, and so on.

The 10 successful unicorns would be able to change the economy of Africa in many ways and create a ripple effect on the whole continent. They would also be able to create thousands of jobs. So, if NSSF doesn't trust Ugandan or African entrepreneurs enough to bet on them, why should African leaders expect Western or Asian VC firms to?