‘Venture capital the way to go for Lesotho’

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Springtime-for-VCRethabile Pitso

A CALL has been made for Basotho to invest in venture capital projects as an alternative to traditional means of accessing funding for startups.

This was said by Peo Capital Executive Director, Motsele Mpeta, in an interview with the Lesotho Times this week. He said venture capital investment could be the antidote Lesotho needed to nip the escalating youth unemployment in the bud.

Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks.

Mr Mpeta said the venture capital route would mutually benefit the investor and the entrepreneurs since the financier gets equity in the business. He said Peo Capital is a venture capital firm established with the aim of providing a pool of funds for entrepreneurs who struggle to access funding from commercial banks.

Among the company’s current projects is a chalk manufacturing company in Ha Matala, a notebook manufacturing plant and an upcoming dairy producing project.

“Having realised the enormous challenges businesspeople face when they try to raise funds for their businesses, be it start-ups or existing companies, we identified a role that we can play,” said Mr Mpeta.

“If we are satisfied of the financial viability of any business or project, we assist such businesses by pitching their ideas or proposals to the business community at large and high net-worth individuals.”

He said commercial banks were, by nature, risk averse resulting in many people with viable business ideas being turned away.

“This happens because banks do not get involved in the running of the businesses they fund. They, therefore, have to protect themselves adequately in the event of a business failure,” Mr Mpeta said.

“With venture capital, the investors get involved in the running of the business to ensure their investment is safeguarded. In addition to this, many businesses funded by venture capital benefit from the mentorship provided by the investors who are, in many instances, seasoned entrepreneurs or managers in their respective fields.”

He said investing in startups would not only benefit individuals operating them, but the wider population through job creation.

“Basotho and many African societies have a culture of saving money through societies. While these societies play a vital role in ensuring that many children are able to go to school, there are also many societies which have evolved from saving for necessities to saving for investment,” said Mr Mpeta.

“These savings schemes handle lots of money which, in many instances, is not even deposited in a bank account, but from which members borrow with interest.”

He added that Basotho needed to reduce the import bill by shifting their mindsets from those of mere consumers to becoming manufacturers who add value to raw materials.

“According to 2010 statistics, Lesotho consumes approximately 8.8 million litres of milk per annum, with local production only 1.7 million litres,” Mr Mpeta said.

“This leaves a shortfall of seven million litres of milk which must be imported from South Africa. And as such, our dairy project aims to create a huge opportunity for job creation and contribute towards a sustainable economy.

“There are many small dairy farmers all over our villages who own one or two milk cows. These farmers have to source fodder for their livestock, take the milk to the dairy plant for processing and packaging, and also secure the services of a veterinarian in the event the animal gets sick.”

He said the envisaged dairy project would take the livestock of small-scale farmers and manage them under one farm.

“In this way, the farmers would benefit from economies of scale where there would be centralised bulk sourcing of fodder and medication. There would also be economies of scale in the delivery of milk to the dairy plant, doing away with farmers delivering milk individually,” said Mr Mpeta.

“This project also creates a business opportunity for anyone to get involved in dairy farming without having to take care of the cows themselves. All one has to do is to invest in a cow or two, and wait for a cheque every month-end.”

 

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