Debunking the Misconceptions Surrounding Investment in sub-Saharan Africa

Editor’s Note: This is a viewpoint from an article posted on the Harvard Business Review.


The West and several parts of the world have a misconception about several issues pertaining to Africa and Sub-Saharan Africa. Be it the culture, political issues and of cause the business ecosystem. Many foreign business cannot boldly invest in this part of the due to many such misconceptions.

However, more and more multinational corporations are beginning to turn towards Africa and seriously consider its countries as their greener pastures. Nevertheless, very few businesses possess the knowledge required to make their investments in Sub-Saharan Africa a major success.

One cannot mention doing business in Africa without counting the cost and challenges involved. Every business venture comes with these, irrespective of the countries. Therefore the attempt to exaggerate this fact when talking of countries like Angola, Nigeria, Ghana, Kenya and South, which are some of the countries in Sub-Saharan Africa, does nothing but prevent well-meaning businesses from fully taking advantage of the opportunity.

If we should take the time to ask ourselves, what it would take to make a sub-Saharan investment a complete investment. Data gathered by the Havard Business Review through several different means like economic analysis, forecasting, interview with thought leaders indicate the following myths:

  1. There is no competitive urgency to build a present sub-saharan Africa
  2. Sub-saharan Africa’s growth is all about natural resources and consumer spending
  3. Fast economic growth means quick returns
  4. Sub-Saharan Africa is too volatile and unpredictable
  5. Sub-Saharan Africa markets can be prioritized merely by using data
  6. Relying solely on distributors is a sustainable Africa strategy
  7. South Africa is the natural hub from which to manage a sub-saharan Africa business

A look at all the all seven points and it is clear why most of the sectors and industries of Africa lack funding and investment, both home and abroad. Because clearly this misconceptions are inherent and believed by many indigenes who in turn spread them abroad. It is undeniable that the African market is competitive. Fact is, every market is competitive. It takes grit, expertise, know-how and many others to succeed in Business at anywhere worthwhile, not just in the countries of Sub-Saharan Africa.

A look at competition on the ground

For those on the ground, it is a totally different story. Many are the foreign companies and businesses that are making big killings in profits in the many African countries of the Sub-Saharan region.  To be specific, companies from Asia are those dominating the African business landscape. Leaving the indigenous businesses desperately attempting to catch up.

So one asks, if there was no competitive urgency what are both the local and foreign companies struggling over?

Everyone wants a piece of the cake and would move fast in order to dominate the market place. Because mind you, competition only intensified as the business ecosystem sees growth.

The effects consumer spending and natural resources on growth in sub-Saharan Africa.

As research by HBR has revealed, oil and gas only made up 11% of Nigeria’s GDP in 2014 (bearing in mind that Nigeria is Africa’s most populated country), as compared with 20% for construction. This tells of the expansion and growth in the later sector, as opposed to the popular believe that natural resources account for the greater portion of sub-Saharan Africa’s economic growth.

To add to this, it is shown that the African people, especially in sub-Saharan Africa are driving economic diversification due to increasing demand for new and improved products and services. The younger generation to be particular are more inclined towards such goods and services. And making a large section of the overall population of the region, it is clear that this present a massive opportunity for growth and investment in industries.

Relating economic growth and returns on investment

Unlike the popular misconception that fast economic growth means quick returns, this returns might not be what foreign investments need to compensate for bad business elsewhere. Because unlike other more developed regions of the world, the African economy will need long term investment plans to truly turnover, rich its full potential and convert to the massive profits it is capable of returning to businesses.

Remember, Rome was not built in a day.

There are several companies now in the region that are already enjoying the fruits of a long term labor, some of which include Coca Cola and Nestle.

Unpredictability and volatility in the region

Risk is a factor everyone in business has to make their peace with. It is an integral part of business, especially in an emerging market and before anyone hoping to see any returns in the region can attain that goal, the various factors that affect the perceived unpredictability need to be taken into account accordingly.

Once that is done, businesses can confidently go ahead to operate and invest, knowing that they are well prepared for any eventualities.

Data collected on sub-Saharan African markets and its deductions

Fact remains that Africa has a lot of catching up to do when it comes to information, data collection, analysis and usage. Therefore it comes as no surprise when the major of the African markets and sectors lacking adequate data. Data that could help investors and interested businesses make informed decisions concerning the market sizes and various product categories.

It would be highly risky and reckless for a business to make major financial decisions just by looking at macroeconomic indicators like consumer spending and GDP.

Business Strategies based distributors

Successful business in the region know their customers and have familiarized themselves with their needs. Nearness to customers in 10 times better to remotely formulating theories and misconceptions about the possible outcomes in case of this or that. In light of this, no strategy can really be considered a solid one unless it is tested and found suitable to the local needs of the people.

Therefore, any company serious about investing in sub-Saharan Africa must have feet on the ground doing serious recon. Only then can a valid strategy by raised that will make fruitful any funds pumped in as investment.

Management of sub-Saharan business from a single hub in South Africa

It is true South Africa is a more connected and globalized market, as compared with other African countries, especially sub-Saharan African countries. However, one has to bear in mind that its business environment can be rivalled by many countries in the sub-Saharan region. Taking into account the cost of operations, hiring and acquisition of talents, among several other factors.

Therefore, should a business critically think about how to be better prioritize its resources, then the decision to manage from South Africa might be one that would have to be rethought.

The Rise of Digitization in Africa: Harnessing the Continents Potential to Improve Various Sectors of the Economy

Editor’s Note:

This is a commentary from Chapter 5 of the Foresight Africa 2018 report, which expounds  on six predominant themes that provide opportunities for Africa to conquer its difficulties and spur comprehensive growth.


Harnessing Africa’s Digital Potential

The rise of technology, regardless of its potential threat to labor-intensive jobs, is providing advanced solutions to improvement challenges in numerous sectors of the economy. Of no doubt, Africa continues to be rapid at technological adoption and innovation. Within each areas of problems – such as banking, education, power, and farming – there is a high call for tech entrepreneurs to create a solution to curb the problem, and Africans are truly responding.

In chapter five of the Foresight Africa 2018 report, Njuguna Ndung u, the Former Governor of Central Bank of Kenya explores these technological innovations and their potential to transform the African continent. According to the chapter of the report, “2018 and beyond” will be a crucial period for digitization and will help African economies to advance “not only financial development but also development across other sectors of the economy.”

Numerous digital platforms, such as Fintech, are developing new products to alleviate the challenges some economies are facing. “There are infinite opportunities on the digital platform, and Fintechs are working round-the-clock to develop and introduce new products here.” However, it is crucial to note that the economies that are not well invested in digitization and are not willing to transform to the new age of technological advancement. They would also not benefit from new products being developed by tech companies such as Fintech.

According to Njuguna Ndung u, digitization is changing African economies in four most important ways: Retail payments systems, Final Inclusion,  sustainable business models, and revenue administration.

Retail payments systems

Of a fact, the digitization era is revolutionizing the retail payments system. By using the electronic payments, economies are saving countless of billion dollars causing the payments to be centralized. Although advanced changes are being made to the electronic systems, the infrastructure is not new. This payment system saves “transaction costs in terms of time, travel, and even unit costs.” Just like how the Former Governor of Central Bank of Kenya puts it, it is for all people.

Regardless of the fact that Njuguna Ndung u calls for all African economies to join the Better Than Cash Alliance (BTCA), a global partnership that focuses on digital payments, it is relevant to also know the challenges that comes with electronic payments such as imposed limits on amount of certain figures that can be withdrawn per day, password threats, risk of being hacked, false identity, etc. However, this is no cause of alarm since there are procedures in place to check all these threats.

Final Inclusion

It has become much simpler to support financial inclusion and financial empowerment for women. Because of digitization, hindrances to financing access such as low credit, low-income, etc. can be avoided. Now banks are able to put a price on short-term loans, savings have increased, bank accounts can now be opened to small-savers.

According to the Former Governor of Central Bank of Kenya, Njuguna Ndung u, “there are over 20 million virtual savings accounts (one bank accounts for 18 million of these virtual savings accounts five years after the product was launched) that have been opened in the last five years compared to about 30 million deposit accounts in the banking sector.” The final inclusion has made it easier to keep track of transactions in the financial system.

The women in Africa are proficient investors and savers. Digital payments provides convenience and confidentiality. They have control over their own investment and savings. There’s no encroachment. In a way, this is promoting women’s employment economically. “Digital payments promote women’s economic empowerment by facilitating greater account ownership and asset accumulation, thus increasing women’s economic participation.”

Sustainable Business Models

Digitization is not only making head way in the economy sector. Other sectors such as agriculture and energy is making use of this technology to increase productivity and have a better market section. Sustainable business models based on digital platforms can be developed throughout the economy to resolve limitations and improve productivity.

Products like M-Akiba for micro-investors in government securities, M-KOPA for solar energy supply, and the One Acre Fund program in Agriculture are making a difference outside the financial sector.” Said Njuguna Ndung u.

Better Revenue Administration

Kenya’s eCitizen digital platform has reduced bureaucracy and improved access to government services. Through the platform, Kenyans apply for Government to Citizen (G2C) services and pay via mobile money, debit cards, and eCitizen agents.” According to Njuguna Ndung u. The eCitizen digital platform provides portals that enable people to get access to government services such as registrations, licenses, permits, obtaining driver’s licenses, etc.

Whether you are in information technology or not, digitization is emerging and business are changing towards this section. Some business are making this change because they need access to speed, agility, cost saving, global reach, etc. By moving Africa into the digitization age, businesses can gain competitive advantage by performing faster, better and cheaper than competitors and also gaining worldwide coverage.

It will help improve the efficiency of business consistency, processes, and quality, not only in Africa but the whole world. There will be an integrated conventional digitized records system to improve accessibility and facilitate better information exchange. There’s also the reduction of costs, advantage of analytics, improved plan for business continuity, etc. The African economies should make a significant effort to move into this new face of the digital economy.

 

Youth Unemployment: The Silent Killer of Many Ghanaian Dreams

The continent of Africa, and its different regions like West Africa are plagued with several different socio-economic problems, not to mention the political unrests that challenged the stability of several nations, chief of which is youth unemployment.

Though, some countries have been spared the horrors of war, all especially Ghana have felt the scourge of joblessness and youth unemployment. And according to the African Center for Economic Transformation (ACET), the recent growth performance of the country has done little to enough jobs for the multitudes of unemployed young people.

ACET noted that apart from 2014, Ghana’s GDP grew and got between 4.3 per cent and 14 per cent. Giving an annual average growth rate of 8.1 per cent over the period 2007-2013. So one asks, if the country saw such significant growth, how come this doesn’t positively affect the country’s youth joblessness challenges.

As any other subject, different experts have different opinions. Nevertheless, the reasons and explanations the African Center for Economic Transformation sited for the unfortunate predicament of Ghana will leave you impressed.

Firstly, GDP it would seem isn’t the only determinant of overall nation growth as Ghanaian can clearly testify to. Clearing outlining the state of affairs, ACET made it clear that the GDP growth couldn’t compensate for the continuous exponent growth in labor force.  To be specific, in the formal sector of the Ghanaian economy. The evidence can be seen in the jobless growth crisis.

Now, information of this situation is good. Since it now provides those who are in the position to do something a place to start planning effective offensive, in order to find lasting solution to this problem. Like the saying goes, the first step to solving the problem is to find the cause of the problem. Which brings us to yet another question.

Why the formal sector?

If this slow high employment growth cannot be offset by the strong GDP growth, especially in the formal sector, then this begs the question. What makes the formal sector more vulnerable as compared to the informal sector?

The estimated figures from ACET says 1% of economic growth translates into 0.5% growth in employment (Aryeety and Baah-Boateng, 2016). So, if the better part of the new jobs are only created in the informal sector, little surprise things are the way they are. Knowing that informal jobs are insufficient to meet the rising number of job seekers.

Secondly, the focus on the youth was explained. Seeing that there are several age groups in the Ghanaian population. Nevertheless, it is worth noting that people between the ages of 15 and 35 comprise one third (33.5%) of the nation’s population. This is the section that make up the youths of a nation and for Ghana the largest and most vibrant age segment.

Taking a look at some determinants of a gainful employment like level of education, location and of course work experience, in an attempt to through more light on the current affairs. People between the ages of 15 to 35 have different backgrounds with respect to the different determinants as previously mentioned.

Talk of education, a large portion of Ghanaian youth do not have access to quality and affordable education. Quality and affordable because those are the two cornerstones of education that is capable of making a lasting impact on the lives of the youth. It is true high quality education can be accessed at some places in the country but this is at such exorbitant prices the larger portion of the youth simply can’t afford it.

Therefore, most of the youth entering the job market are not armed with the level of education that will help land them any remotely close to a dream job. The kind of job that holds a bright and promising future for such youths.

To add, this difficulty of landing a first job after school sets a vicious circle into motion; and further impedes their chances moving forward. Since, the top jobs mostly require some kind of work experience from qualified applicants. So then, he that had the chance to land a job, gets to land more jobs; whiles, he who couldn’t for one reason or the other land any after school finds it even more difficult to land any jobs in the future.

A ride on the major streets of Accra and you get the point in full HD.

Many of such unlucky youths parade the highly trafficked routes hawking goods like bread, sachet water and many others. Meanwhile, some resort to violence, armed robbery, hooliganism and other social vices as a way to express their bitter disappointment. Realizing that the system as failed them; and their dreams of achieving great things will never see the light of day.

To add to this, the challenges to accessing labor market opportunities are amplified. Due to several attempts by numerous Ghanaian youths to migrate across the Sahara Desert and Mediterranean. Ready to face unspeakable dangers and risks to their lives. Than remain in a country that seems to offer them no possibilities of a better tomorrow.

In reality, the youth can’t be blamed. They find themselves in a desperate situation; and desperate situations demand desperate measures. After all, many are those who managed to land a job; only to be the first to lose it when the economy sees a recession.

This does justice to the mystery of Ghana’s youth unemployment case in particular. Because many have been perplexed by how, ironically, the educated youth make a larger section of the unemployed figure. To be precise, youth age 29 and below with bachelor’s degree. And in this section, females account for the greater numbers, according to ACET.

For this and other contributing factors, the national economy is yet to harness the full potential of its youth. Mobilize their creativity, youthful exuberance and man power for optimum nation development. This is resulting in a chain of events that is leading Ghana down a very gloomy and impoverish path. A path on which not only its youths will face poverty. But the whole nation, with generations yet unborn doomed to trans-generational poverty.

These reasons paint a vivid picture of why youth unemployment should and is ranking high on the development agenda. At not just the national level but also the global levels. Despite the wide spread publicity and political attention this national challenge has received, a lasting solution is yet to found.

Ghana and her leaders are yet to wrap their head around a practice solution to the issue of youth unemployment. What is the way forward? Time they say will tell.

 

African Entrepreneurship in Technology: Challenges and Opportunities in 2018 – Foresight Africa View Point

Editor’s Note: This is a viewpoint from Chapter 5 of the Foresight Africa 2018 report.


It’s been reported that since 2012, venture capital has grown by a factor of 8.7 ($366,000,086 in 2016) with a 40 percent year-over-year growth in deals closed. Even though such growth exists, bad news has been projected for Tech Entrepreneurs. “Technology entrepreneurs in Africa will still enter 2018 in a precarious position.”

According to World Bank’s Doing Business 2018 Report, the following African countries were among the top 10 improved nations across the globe: Nigeria, Malawi, Zambia, and Djibouti. This saw Nigeria moving up 24 spots (from 169 to 145). Why then, are African Tech Entrepreneurs still expected to be face unstable conditions?

It’s always admirable when in the face of uncertainty and adversity, the African entrepreneur stands strong. They are undeniably solid, since they always find a way to make it work by creating solutions. The type of solutions that shapes the future of the entire continent.

“the 2016 global slowdown LED many African markets TO LOOK inward and set a foundation for inclusive and sustainable growth. Specifically, they focused on macroeconomic reform, supported diversification, and emphasized domestic goods. Certain key indicators of growth have demonstrated healthy progress.”

There have been more venture capital deals, increased connectivity between markets and entrepreneurial ecosystems. All these have been moving in the right direction when analyzed with their macro conditions. However, there are still major challenges, that require collective problem-solving to unlock the real power of technology entrepreneurship in Africa.

Possible Solutions to the Conditions According to African Entrepreneurs 

Technology is essential to the development of many nations. African Entrepreneurs generally list out possible solutions to make the conditions better for all emerging and existing entrepreneurs in Tech.

Increase access to capital for early-stage businesses: 

African Entrepreneurs point out that venture capital, foreign direct investment and financial products from banks are often distributed to established and later-stage companies. It is therefore essential early-stage “market validation” capital must be addressed to get most of the emerging tech companies off the ground.

Significant resources are required in certain emerging technologies like artificial intelligence, virtual reality, and blockchain. Without the significant resources, it would not be possible building out teams of specialists, acquiring required data, and  accessing technical infrastructure.

It’s time to Train the Youth to be Globally Competitive:

Starting off by simply improving access to quality education and professional outcomes. This deals with revitalizing the long-term transformation. For a short period effect, entrepreneurs point out how vocational and skill-based training can rapidly mobilize the job force necessary for key industries.

Radical solutions to energy deficiency:

African entrepreneurs point out that the public and private sector stakeholders are working to bring energy projects to fruition. Also, their great work aims at improving energy regulations and policy.

Africa’s energy needs are urgent, therefore traditional ways of increasing electricity capacity are inherently slow. It’s pointed out that massive investments is needed to increase access to energy beyond urban areas and serve as a catalyst for growth. The type of growth that comes in an equitable and sustainable way.

The need to Embrace Globalization while Protecting Indigenous Industries:

Taking a look at how advanced economies and some parts of emerging Asia  have weighed in on economic growth through Tech. The state of affairs provides African countries with possibilities to grow and opt for global partnerships. The group further points out how African governments will have to balance courting multinationals to do business in their countries. In all, awareness on how  supporting nascent indigenous technologies and industries needs to be raised.

“Investing in education and practical and transferable skills training is an opportunity to fortify Africa’s greatest asset—its people.”

 

African Women Entrepreneurship Cooperative Picks Their 1st 200 Strong Cohorts

The Disrupt Africa reported last month that the Centre for Global Enterprise (CGE), a US based non-profit organization has launched a new training programme, named AWEC, with the purpose of building a community of pan-African community of women entrepreneurs and business owners. The aim is to empower them with leadership, strategy and business management skills essential for growth and economic development.

Women entrepreneurs continues to face challenges that in a way are unique to them. According to Tom Jackson’s report , even though female entrepreneurship is growing globally, there are still some challenges that women entrepreneurship face. The AWEC’s inaugural cohort of 12-month training programme is a huge step in bridging this gap.

According to the report, over 2,300 applications from 41 African countries were received. The applications were narrowed down with intense review process to 200 entrepreneurs. The shortlisted entrepreneurs will begin a one-year programme through an online learning platform, scheduled for Morocco and Rwanda later this year.

“Put simply, the applicants were impressive and inspiring. They articulated urgent market needs, clear business goals, and powerful stories of resilience and grit. Perhaps most compelling are the women who desire not only to gain business management skills to improve their own companies, but to share this knowledge with other women and young people to uplift entire communities,” said Karen Sippel, managing director of AWEC.

The first cohort’s largest representation are Kenya, Nigeria, South Africa, Zimbabwe and Uganda, even though entrepreneurs from 38 African countries sums up the full list. The members are in a wide range of industries with most of them in education, agriculture, healthcare, fashion and cosmetics. The cohorts are current business owners. Applications set for the second cohort of the training programme is scheduled to open in January 2019.

The African Women Entrepreneurship Cooperative (AWEC) programme is a response to challenges from and feedback from African alumni of its online learning courses who asked for a detailed training on critical management, mentorship, and extensive program engagement and continuous peer network. The AWEC is designed to create a community of partnership and mutual support between participants. It offers sustained skills training and mentorship for 12 months. The participants who successfully complete the program becomes part of an ongoing network of alumni.

The programme has huge benefits that is directed towards women entrepreneurs. It is headed in a direction of aspiring women entrepreneurs with tenacity, perseverance, leadership and the need to share learning with others. The AWEC is helping women gain control over the challenges they face in entrepreneurship. Just like the World Bank’s legal reforms to help women in Middle East and North Africa to own their own business, and get a job.

 

The Driving Force of Technology in African Growth and Service Delivery

 

Technology is, and has been, the disruptive force behind most innovations in the 21st century. Technology reaches far and wide into every sector and industry across the planet. We have seen great innovations in the field of finance, health, real estate, education, utilities and also into various government services.

In her article “Foresight Africa viewpoint – Rethinking African growth and service delivery: Technology as a catalyst”, Rosanna Chan makes a profound statement that “For the first time in human history, we can theoretically connect to every single stakeholder.”

This is statement is not only true but opens our eyes to a totally different world that is run mainly by technology. For the first time in our history as a species, we can connect with almost everyone on the planet without the need to move an inch.

Chan admits that although we are yet to fully accomplish our goals from the 20th century and there are several challenges that hamper our development, with technology, we are given new tools and a new way of approaching these challenges and problems.

 

Changing Economic structures

She highlights how our economic structures changed from agriculture to manufacturing and eventually services. Considering how far we have come as a people, it is very easy to agree with her on the next stage of our development. We are in an age where data and information, intellectual and knowledge goods, and digital assets drive value.

As it stands now, our economies are gradually changing to harness the power of the digital revolution. There are two sides of this coin though. As with all things, there are both positive and negative sides to this though.

As Chan puts it “Technology can help countries overcome many barriers to growth across the board very quickly.” Citing the examples she gave, we can see massive improvements in several areas. Many people, including students have access to online learning platforms which means they can learn at their own pace so they can have a better understanding of courses and topics. Healthcare has improved drastically with drones being able to deliver medicines to highly remote areas. The financial sector is not left out with most financial transactions taking place digitally.

One example she used that got me really interested and hyped was M-Pesa and how it is a strong indication of the tech savviness of Africa’s young population. M-Pesa is one of many platforms that shows how Africa has grown to accept and adopt technology.

It is not all roses with technology. There are some pretty damning downsides of this as well and Chan highlights this as well. Considering the digital divide, those who are able to adapt to new technologies and those who are unable to, will create huge levels of inequality and poverty. This is huge and also quite scary.

 

Changing roles

Due to technology, what was once classified as traditional labor has now changed significantly. Although consumers selling goods and services to other consumers was done, it is more common now. Not only is it common now, it is happening on a global scale.

Platforms like Amazon and eBay provide consumers the opportunity to sell products to other consumers while Uber, Lyft and Airbnb allow consumers to provide services. Crowdfunding and Peer-to-peer lending is also made possible.

As Chan states, “Within internet-facilitated peer-to-peer exchanges, shared economies allow optimization of underutilized resources by sharing access to goods and services among users.” The biggest implication from this, is that it provides consumers with several income earning opportunities. What this does, according to Chan is, “blur the lines between formal versus informal sectors, producers and consumers, and employers and employees.”

This means that people do not necessarily have to adhere to traditional working practices. People rather have the opportunity to work on a project-by-project basis, what Chan refers to as the “Gig economy”. People now prefer to work as freelancers, Uber drivers and impact sourcing. Others also resort to using Airbnb to provide them with that extra bit of income.

Currently, 34% of the US workforce takes part in this type of work and forecasts expect them to rise to around 43% by year 2020. This phenomenon is not limited to only those in the U.S. The rest of the world seems to be moving in that direction as well and this can also be seen in Africa.

I more than agree with Chan’s point on investing heavily in education especially STEM and language. This would greatly improve the competitiveness of those who would be the backbone of the future digital global economy.

 

The need to rework public provision and institutional relationships

Saying that economic growth depends heavily on both public and private sector adoption is an understatement. Most times, you are certain that the private sector will adopt these new technologies and use them to great effect. The problem usually lies with the public sector. Most times, they are slow to adopt these new technologies which then becomes a problem.

“Govtech” as Chan puts it, is a developing area that seeks to improve on government functions. According to Chan, “The internet and blockchain technologies facilitate the growth of decentralized networks that reduce the need for 3rd party verification and minimize bureaucracy.”

The proper adoption of these new technologies is bound to have a profound impact on how efficient institutions will be. This can greatly affect the level of citizen engagement in important policies and issues. The level of impact these technologies will have on society will be immense.

Entrepreneurship and African Development: How are the Challenges Dealt With?

The challenging economic development process in Africa has been reported to be both underrated and burdened by colonial-rooted preconceptions. The Preconditions for a successful entrepreneurial development is described as harsher in Africa than on other continents.

South Africa was in a useful position to play a constructive role in the field of economic development for this report.

The state of entrepreneurs in developing economies

Classical economics students view entrepreneurship as one of the four basic “factors of production“. This means; the entrepreneur is supposed to identify business opportunities and to bring together the other factors of production (natural resources, labour and capital) to create the goods or services, and to run the enterprise profitably.

Taking a look at the grassroots level of business development of developed countries, small enterprises were regarded as the backbone of economic development. Thus, making it easy to glorify entrepreneurs as pivotal to millions of existing businesses.

Reportedly, this then directs all eyes on the existence, role/s and effectiveness of African entrepreneurs. Do they even exist? What role are they playing to fast forward the development in Africa?

The stereotype surrounding African entrepreneurship

The reported conventional perceptions about African entrepreneurs held by observers outside comes in two notions.

a. Entrepreneurs in Africa lack a number of critical elements of “modern entrepreneurship” and somehow behave differently (or more “traditionally”)

b. The type of African entrepreneurs needed to accelerate the business development process are extremely small in number.

It’s been said that, these perceptions have in a way been shaped by images of the early colonial encounters between invaders and “local tribesmen”. Also, the early colonial encounters were also suspected to be another reason.

In South Africa, the apartheid system brought on a particular version of the complex relationship between white and black entrepreneurs. The business scene there was totally dominated by whites up until the 1980’s. As compared to foreign entrepreneurs, the local entrepreneurs were therefore considered as late starters. It stated that, even at the start, local entrepreneurs even had just a short list of products they were able to sell. Their businesses were therefore not as dynamic for growth.

The lack of dynamic, forceful entrepreneurship in Africa was then viewed as a major reason for the insufficient momentum from South-African entrepreneurs.

The entrepreneurial environment in Africa

To analyze the perceived lack of entrepreneurs on the continent, it would be necessary to first take a short reported observation at the nature and diversity of existing business entrepreneurs across Africa. Small business or not.

These reported observations on the African development environment covers the past few decades. They reveal a range of significant obstacles which influenced the preconditions for effective entrepreneurial behavior particularly in the formal sector. Below are a few of these:

  • Subsistence agriculture areas comes with low densities, therefore providing a little scope for entrepreneurs to learn from others or through intensive business interaction.
  • Tropical Africa climatic factors and widespread diseases were notable in dampening spontaneous entrepreneurial behaviour of people.
  • Geographic factors (long distance to the sea or to larger settlements) created high thresholds to profitable business, even for those motivated towards entrepreneurial action.
  • Low levels of literacy and the virtual absence of systematic vocational training. The lack of business education or business information services further limited learning processes. In many parts of Africa even radio stations did not reach the bulk of the rural population – with urbanisation levels often only 10 to twenty per cent.
  • In the absence of concerted financing facilities and the prevalence of low subsistence earnings, there was virtually no scope for external start-up or expansion finance for rural entrepreneurs.
  • In-migrating groups, which often displayed strong entrepreneurial behaviour, were treated as intruders if not enemies, thereby reducing the scope for entrepreneurial cross-fertilisation.
  • Conventional education facilities gave little attention to business or entrepreneurial training.
  • Inflexible regulatory structures and bureaucratic rigidities often smothered whatever entrepreneurial initiatives emerged.
  • Weaknesses of the physical infrastructure (transport links, electricity supply, urban infrastructure facilities, etc.) increase cost levels and strain business start-ups or expansions.

South Africa’s black entrepreneurship development

With the country’s apartheid background where black entrepreneurship was suppressed, the past two decades were reportedly described as dramatic. This has been mainly linked to the following factors. The rapid growth of the larger urban areas (particularly black townships) and a virtual explosion of black consumer spending. The broader impact of South Africa’s black economic empowerment (BEE) programmes and diverse small-enterprise support policies have also been credited.

Significantly, direct and indirect ways have led to strengthening business learning, information and advice processes among black entrepreneurs. This was reported as ongoing, through  the spread of mentoring and coaching. Also, through the entering of partnerships between the emerging black and established white small enterprises.

Even though the support is not as extensive in so many areas of South Africa, there is an unfolding entrepreneurship support process. Ultimately, this support process needs much more particular attention.

A broader partnership approach in entrepreneurship development

It’s been said that, one of the most exciting dimensions of South Africa’s transition and development over the past two decades has been its opening and diversification of economic interaction with other African countries. Truly, this is an outstanding mark for a country that has been locked in their shells for decades. Also, the nation deals in outright businesses and investments in other African economies. This makes South Africa the largest foreign investor on the continent.

Reportedly, there are a number of existing differences  in the dynamic and structure of economic development between underdeveloped African economies and semi-developed South Africa. There’s a lot to learn  as they are both stated as facing  similar challenges with similar goals pursued. These were therefore summarized in the sphere of entrepreneurship and small-business promotion:

  • An equally rapid increase and diversification of small-business information, advice and mentoring facilities. All done in order to strengthen the knowledge and information base at grassroots level.
  • The development of national networks of small-enterprise incubators or cluster facilities. In order to jointly address the full range of impediments of small enterprises.
  • The further expansion of micro-financing and micro-franchising facilities.
  • The systematic spread of modern (ICT) technology (cellphones, internet, etc.) to strengthen the communication capacity of small enterprises, in particular in rural areas.
  • Expanding and strengthening the understanding of informal entrepreneurs, their potential and needs.  Also adding what practical steps could effectively help them to grow and develop.
  • The rapid expansion of effective skills training and business education for small-enterprise operators.

It’s therefore seen as ideal if South African institutions and experts in these fields should join forces with emerging support agencies in other African countries. In addition, further support from international aid agencies and specialist SME-support bodies in the developed countries is necessary.

Rising Entrepreneurship in Africa and Why It is Important

 

It has been an open secret to the world that, Africa is increasingly becoming the ideal place for doing business. Although certain people do not believe this, including some Africans, it is gradually becoming the norm.

Ndubuisi Ekekwe in his post “Why African Entrepreneurship is Booming” recounts his encounter with a painter who creates his own paint that he works with. According to him, the painter recounted how his business almost collapsed as a result of the currency control regime that was put in place by the Nigerian Central Bank in 2016.

At the time, this painter was importing the materials he used to manufacture his paints but when this policy was put in place, he was unable to purchase the materials he needed. In order to stay afloat, this painter had to come up with new ideas and innovations to keep his business running. He managed to create a new type of paint which was made using non-toxic materials that were acquired locally. The paint had no smell and dried within minutes of being used.

Indeed, Ekekwe acknowledged that he invested in the business and told him that “People like him are the future of Africa.”

Saying I agree with this sentiment, is an understatement. I believe with a few innovative thinkers and creators like this painter, Africa would be much better off than it is at this moment. Africa, like most continents and regions, has its own unique problems that need to be fixed.

Most African economies rely on imports to survive. This has been the case for more than a century. As it stands, it is not sustainable for companies and businesses to keep relying on these imports. This is mainly as a result of the high cost of these imports.

Imports here is not limited to only those goods that come through our ports (both sea and air). These imports include software applications that we buy from foreign providers to use in our local companies. Considering the current exchange rates for most African currencies, this can put a strain on the finances of some companies.

In his article, Ekekwe highlights the origins of the entrepreneurial drive that is sweeping through Africa. According to this post, it started at the height of the Great Recession (2007 – 2009). In this period, most of the African professionals who lost their jobs in Europe and U.S. ended up returning to their various countries. With all the experience, expertise, knowledge and skills available to them, these people ended up becoming entrepreneurs as they struggled to find jobs in their various home countries.

In essence, what is implied here is that, most of these people started businesses out of necessity. I do not necessarily agree with that notion even though I believe that there is point to it. I believe that some would have ventured into entrepreneurship after settling down in their home countries. It seemed like the natural form of progression since most of these people had bigger ambitions and goals.

There are those who may have started businesses out of necessity but that may be limited to a small number of people. With the kind of skills and expertise many of these people had, going into entrepreneurship is the only way they could be able to manage their ambitions.

It is indeed true that these people have also managed to partner with other local startups and businesses to greatly provide essential services to insitutions across the continent. One thing that I agree to though, is that most of these businesses are not just looking to become voices of global companies, they are looking to compete with them.

Local companies have also resorted to local technology solutions to their problems. This is a huge step forward for economies in these countries. This is because, solutions to problems will no longer be outsourced to foreign companies but rather to local companies. This means the money that would have otherwise gone out of the country would stay there.

Companies no longer have to consider the exchange rates when going in for services since most would be priced natively. This may end up being considerably cheaper than foreign alternatives. As these companies gain more clients and expand, more jobs would be created that would greatly reduce the problem of unemployment across the continent.

This turn of events now is proof of how far Africa has developed. In times past, this type of problem may have greatly disturbed several economies but this is no longer the case. Africans are now thinking creatively and outside the box which is leading to massive innovations. Some of these innovations may seem small but a deeper look will show something even greater.

It is just a matter of time before we walk into that new African Economy. This is currently being led by the various innovative entrepreneurs and business people across the continent.