One big mistake that can turn investors away from Africa

Author: Guy Addison, AC Corporate Transaction Services 

Now that international investors are once more warming to Africa, many local business owners are wondering whether it’s a good time to put their companies on the market.

It certainly is. 

But founders need to watch out for a big pitfall when negotiating with international investors. 

Don’t neglect to educate your investors.

I learned that the hard way.

Several years ago, Peter, a client of mine, secured a tourism concession in a country on the border with South Africa. It was a prime location in an outstanding location.

Peter raised and invested several million dollars to set up his business a game lodge in a world class location.

The business took off almost immediately. It pulled in tourists from across the world.

About four years later, Peter ran into a problem. A big problem.

He couldn’t repatriate any of his profits to repay his international backers.

Local exchange controls blocked his efforts to transfer funds back to the US.

That’s when Peter contacted me. Together, we worked with local lawyers and advisers trying to get his money out.

But we were stonewalled.

Peter was forced to put the business on the market.

No international investor would touch it. Locals weren’t interested either.

Finally, Peter called it quits. He shut the business down and walked away.

Peter lost all the money he’d put into the game lodge. And it took him several years to reach a settlement with the consortium that backed him.