The capital problem Africa won’t talk about that America solved a long time ago

3 Apr 2025

Africa has the seeds of success, but not the ecosystem to grow them. Until we embrace risk and back bold ideas with serious capital, we’ll keep wondering why nothing’s blooming.

I was listening to yet another local small enterprise funder on the radio earlier today. These things frustrate me no end because I think they have it entirely wrong. I’m also mindful of the state of my lawn in late November when El Niño was in full swing. “You can have all the grassroots you like, but without rain, there is no lawn?”

Africa, as we keep hearing, has everything going for it. Land, youth, resources, solar and wind energy, creativity — you name it. Yet, while other regions sprint ahead, we seem stuck walking in circles, wondering why we’re not keeping pace.

It got me thinking. Maybe instead of looking inward, we should steal a page from a place that figured this puzzle out a century ago — the United States.

The unseen ingredient

The US didn’t become the world’s entrepreneurial juggernaut because it had smarter people or more natural resources (though they’ll happily tell you otherwise). It succeeded because it built a system where risk and capital became dance partners, and failure wasn’t the end of the show — it was just intermission.

In America, you can burn through millions of investor dollars building a hoverboard that catches fire — and still land funding for your next startup. Why? Because they understand that innovation is messy, failure is normal, and bold ideas need deep pockets.

Meanwhile, in Africa, if your business falters, you’re often treated like you’ve personally bankrupted the country.

The five lessons we need to learn

So, what’s the American playbook, and why haven’t we adopted it yet?

First, institutions that back you, not block you. US entrepreneurs can trust that contracts will be enforced, property rights protected, and if things go belly-up, bankruptcy laws and social norms will let them dust themselves off and start again. That’s not just legalese — it’s rocket fuel for risk taking.

Second, an economic culture that doesn’t punish ambition. The US has long been a haven for people willing to build something out of nothing. Lower taxes, fewer regulatory hoops, and a healthy disdain for unnecessary bureaucracy mean startups can go from garage to global with shocking speed.

Third, a talent magnet. America didn’t just attract capital; it attracted people. Scientists from Europe, engineers from Asia, entrepreneurs from Latin America — all contributed to a rich stew of innovation.

Fourth, capital with courage. This is the one that makes my entrepreneur friends sigh the loudest. In the US, venture capital is not just available — it’s aggressive. It seeks out risk. It bets on teams, not just balance sheets. Without venture capital backing, there is no Google, no Tesla, no Airbnb. Here, most great ideas die somewhere between bootstrapping and a polite loan rejection from the bank.

And finally, a market ready to scale. With a massive domestic consumer base and the power of English as a global business language, US startups grow fat at home before going global.

Africa’s desert of capital

Now let’s flip the coin.

Africa is brimming with micro-enterprises and a few isolated titans, but where’s the middle class of high-growth, risk-taking startups? Strangled by a lack of early stage capital, we limp along with businesses that rely on family savings or highly conservative bank loans.

And the banks? They lend against bricks and mortar, not ideas. If you don’t own land, machinery, a government contract or a fleet of trucks, good luck getting a loan to launch your SaaS platform or your biotech startup.

Worse still, we’ve saddled ourselves with a culture where business failure is seen as shameful rather than inevitable. To say nothing of the malaise of tenderpreneurship. Risk is something to be avoided, not embraced.

The fix isn’t rocket science

This isn’t an unsolvable problem. But it does require courage, and an approach that fits Africa’s unique cultural mix.

We need serious capital — venture capital, angel networks, and even sovereign funds — that are willing to back ideas, not just assets. And they need to stick around for the long haul, through the successes and the spectacular flops.

We need governments and stock exchanges that make risk-taking easier, not harder. Simplify Initial Public Offering rules, encourage mergers and acquisitions, remove restrictive legislation including empowerment and reform our capital markets so investors can exit and recycle their winnings into the next big thing.

And, dare I say it, we need to change the narrative around failure. Celebrate those who tried, failed, and tried again. Because they’re the ones who eventually create jobs, industries, and, yes, entire economies.

This won’t be an overnight change. Cultural reformulation takes time, even generations. But without the appropriate starting point we fail. You can have all the rain you want, but without a suitable patch of land, there will be no lawn.

Real-world proof: when the recipe works in Africa

Surprisingly, some local pioneers are already proving that you can take the American playbook and tailor it to African soil.

Yoco is helping small traders go cashless with international venture capital backing, solving a uniquely South African problem — how to bring digital payments to informal businesses that previously relied almost entirely on cash.

Andela turned Africa’s youthful developer surplus into an export commodity for Silicon Valley, proving that African talent can compete globally when matched with capital and international networks.

Twiga Foods transformed Kenya’s informal fresh produce markets into a tech-driven logistics powerhouse, modernising supply chains while working hand in hand with smallholder farmers and informal traders.

SweepSouth digitised South Africa’s domestic labour economy, connecting informal workers to formal job markets through a user-friendly platform funded by global venture capital firms.

These are businesses that didn’t wait for the culture to change — they worked with what they found and scaled anyway.

The bottom line

Africa has the raw ingredients to be an entrepreneurial superpower. And as businesses like Yoco, Andela, Twiga, and SweepSouth have shown, it’s possible to grow something remarkable even in tough terrain — when risk capital and bold thinking show up to nourish the grassroots.

But for this to happen at scale, we need to create an ecosystem where capital flows more freely, where failure is part of the process, and where risk is rewarded, not avoided.

America didn’t do it on genius alone — it built the right ecosystem, brick by brick. We can too. But first, we must admit that without rain — and without a patch of fertile ground — our grassroots will keep struggling.

It’s time to dance for rain, and perhaps more importantly, start preparing the soil. DM

Dudley Baylis is a director of Bridge Capital, an independent M&A advisory, corporate finance, renewable energy and property advisory house.

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