Difficulties in getting european funding for African SME’s

Abstract

Small and medium enterprises (SME’s) are viewed as the main economic driver of any economy. They are the backbone of the society and often the starting point of major companies and further economic developments. Especially, in the African region they are the driver for economic development, since there is still a major lack to other countries worldwide. The main positive contributions to the economy are the creation of jobs and social security for the respective employees and additionally, the ability for employees to create purchasing power which in turn fosters the economy of the country. Additionally, tax provision and contribution to Gross Domestic Product (GDP) are main value drivers of SME’s to the countries. However, looking at Africa, besides their critical and positive role, many SME’s face tremendous challenges compared to SME’s that engage in other parts of the world. Notable disadvantages are power shortages, lack of capital, poor management skills and competencies, and inadequate information and corruption. This paper aims to point out the challenges for African SME’s to retrieve vital European funding and tries to achieve an understanding for both sides to mitigate the risk factors as much as possible and create a bridging understanding of both sides to work towards a more transparent cooperation. The paper is based on qualitative evidence and current research on SME’s worldwide with a major focus on Sub-Saharan African SME’s specifically basing the case on Uganda and the company Bruni Zenz Ventures. The paper further aims to improve their operations and profitability to achieve much needed funding from European investors. The paper is based on the practical experience of Bruni Zenz Ventures engaging in Mukono, Uganda, which did a fundraising round, mostly in Europe, and faced critical challenges while raising capital. This paper should additionally point out the immense potential of the African market and aims to be a guideline for the African SME’s on one side and the investors on the other side to mitigate the information asymmetry to a big extend.