Entrepreneurship in Africa:
Federal University Ndufu-Alike (FUNAI) Faculty of Humanities International Conference
Emmanuel N. Nnorom
Tuesday, November 10, 2017.
Entrepreneurship in Africa:
Young people represent more than 60% of Africa’s population, leading to the “demographic dividend” as the new buzzword of the development assistance and business world. Yet how can this booming generation of young Africans be integrated into the labour market and spur economic growth? Entrepreneurship, if supported through the right policies, can provide an effective solution.
In the aftermath of the global financial crisis, youth employment has been recognized as one of the major challenges of our times. Within debates on migration and development, migrants are often expected to be super-entrepreneurs who will benefit development, Since there were not plenty of jobs available in the formal sector, some of the migrants were forced to enter self-employment activities, such as petty trading, work as street vendors, or manufacturing household goods. Nowadays, a great deal of the self-employment activities in developing countries are to be found in the informal sector which has been considered a safety valve for the unemployed in many developing countries.
An important question is how to distinguish between migration of entrepreneurs and migration of labour. The entrepreneurs are indeed self-employed and are bound by the rules which apply to workers in general. As long as the entrepreneurs run their own business and hire themselves without employing other people, their function is largely comparable with workers in general.
Entrepreneurship is also a top policy priority for policymakers in Sub-Saharan Africa (SSA) who are eager to improve prospects for decent employment among the region’s youth. The factors hampering youth employment in Africa are mostly structural and on the demand side of the labor market. Hence entrepreneurship, including youth entrepreneurship, can contribute to the solution. Some posit that, if equipped with the right skills, mentors, social networks, technology and finance, young entrepreneurs could drive the region’s economic growth and social progress.
In the African context, youth typically refers to people of ages 15-35. This definition, adopted by the African Union, focuses on the transition to adulthood, when young people develop critical life-skills through applying their knowledge as well as developing a sense of their own abilities and autonomy. In Africa, young people are striving to achieve economic independence and find their identity in the context of globalization, weakening community structures and an educational system that does not always equip them with skills needed in competitive environments.
These Entrepreneurs play key roles in Africa including in the following areas: First, Innovation – Entrepreneurship goes hand-in-hand with innovation, that is the ability to produce new ideas; provide better solutions; and pioneer new products or services.
Second, Entrepreneurship plays an indispensable role in the economic growth and development of any nation. Entrepreneurs help in the spurring of indigenous entrepreneurship, transformation of the traditional industry, generates income both internally and externally, reduce unemployment, create wealth etc.
Furthermore, Entrepreneurs are the engine for job creation in any economy, especially for those at the bottom of the pyramid. Entrepreneurs create job for thousands (or even millions in some countries) of people in a country.
Entrepreneurs have emerged as key employers of labour – over 70% of Africans work for Micro, Small & Medium Enterprise’s (MSMEs). Supporting research by the African Development Bank (AfDB), African Economic Outlook 2017, shows that firms with fewer than 20 employees provide the most jobs in Africa’s formal sector. Between 2015 and 2030, 29million new entrants annually will join Africa’s labour force, with this rise in population entrepreneurs need to be supported in a deliberate fashion as they would be providing the jobs needed by Africa’s teeming population.
Why should you care about entrepreneurship?
Entrepreneurship has been one of the fastest growing fields of academic research and education over the past twenty years. Throughout the world there are thousands of academics who teach and research in this particular area.
Today entrepreneurship studies are principally centered within Business Schools. However, this was not always the case. Interest in entrepreneurship within universities remained static until the 1980s. Commensurate with this growth in entrepreneurship courses was a rapid expansion of research activity in the area.
Although the field of entrepreneurship has expanded rapidly, there remained a great degree of ignorance and a lack of understanding between academics, government policy makers, and business owners and entrepreneurs. There were too many “myths” and insufficient knowledge about how small businesses and entrepreneurs actually worked. Among these myths was much of the accepted wisdom about small business growth, entrepreneurial networking and learning, plus the notion that fast growth companies are the major source of job creation.
As noted by some of the leading scholars in the field, too much attention has been given to the entrepreneur as an individual and not enough to how entrepreneurship applies to teams. Far too much attention has also been given to entrepreneurial opportunity recognition and new venture creation, with insufficient attention to the process of managing small firms and the nexus between entrepreneurship and innovation.
There is a need to recalibrate the field of entrepreneurship as an academic pursuit and refocus attention on undertaking research that makes a difference. If entrepreneurship is the driver of job and wealth creation, productivity growth and innovation then research into this area should be worth the investment.
Supporting entrepreneurship – Academic sector support
With the rise of entrepreneurship so far, it has yielded huge returns for entrepreneurs, and according to experts, there lies great untapped potential to drive the African continent into its next phase of development.
Entrepreneurs can get support from the academic sector through Skills and training. The lack of skills impacts the rate of productive start-ups in the region, including among young people. Recent studies by the Global Entrepreneurship Monitor (GEM) found that while entrepreneurship rates in Sub Saharan Africa (SSA) are high, the majority of entrepreneurs are driven by necessity rather than opportunity. SSA has also higher rates of potential young entrepreneurs than other regions, but a substantial portion (about one third) of them is also driven to entrepreneurship out of necessity. Most new enterprises operate in low value-added sectors such as the retail trade. Further, in contrast to other regions, young entrepreneurs in SSA are less confident than their adult counterparts that they will be creating jobs over the next five years.
The skill disadvantages of young entrepreneurs relative to their adult counterparts have been well recognized and covered in the literature. Besides lower educational attainments, these include less work experience among young entrepreneurs than adults and fewer links with professional networks. Interestingly though, (potential) young entrepreneurs in Africa sometimes underestimate the lack of business skills as a barrier to entrepreneurship, while – less surprisingly – they recognize access to finance as a key impediment. These perceptions vary across countries though – in Swaziland, for example, young entrepreneurs considered skill shortages to be a top barrier to start ups. Entrepreneurs who viewed the lack of skills as a key obstacle reported good sales performance less often than those who did not perceive skills as an impediment
The GEM concept of entrepreneurship, focused on ownership and management as well as the start-up process, was adopted.
Training and Entrepreneurial Performance
As the role of self-employment and entrepreneurship in job creation has risen in the aftermath of the global financial crisis, policymakers in Africa and elsewhere have been considering training programmes for entrepreneurs. The focus has typically been on technical, managerial and financial literacy training, with the programmes drawing on evidence that selected skills tend to be correlated with better performance. One of the key challenges in assessing such training programmes has been the lack of evaluation. A mix of skill training and financial support had a greater impact on labor market activity. Positive impacts on both labor market and business outcomes were found to be higher for young people than for adults.
The recent empirical analysis of data from the 2012 United Nations (UN) survey of entrepreneurs in Swaziland found that sales performance of firms run by trained entrepreneurs exceeded that of firms operated by their less trained counterparts. Training also had a more positive impact on the performance of young rather than adult entrepreneurs. To be effective, measures should be well targeted and tailored to specific groups. In Swaziland, advanced business training impacted positively on the performance of young entrepreneurs motivated by profits, but not those who entered entrepreneurship mostly for other reasons. Finally, training was found to be less effective in improving the performance of young women than men entrepreneurs.
Examining the key challenges
Beyond the progress made, there are challenges, some of which include:
- Operating Environment:
Operating environment can be greatly improved with the removal of unfair regulations and bureaucratic bottlenecks that increase the cost and time of doing business. In addition, many Small & Medium sized Enterprises (SMEs) face challenges and constraints caused by inefficient infrastructure – both hard and soft.
Africa’s infrastructure deficit, estimated at $93 billion, poses a major challenge. Unreliable electricity supply means some businesses close because they are too small to afford power generators. Poor roads and unreliable transport facilities hinder the ability of many SMEs to move their goods to market, increasing business costs and/or leading to losses.
- Access to Finance
Access to finance is another notable obstacle, with Africa’s SMEs facing a credit gap of $135 billion. Slowing economic growth in the region means it would be a tall order to demand for the public sector to bridge this gap. This creates an avenue for other stakeholders – from the private sector especially – to support African SMEs. For every $1 invested by multilateral institutions in African entrepreneurs, up to $5 in additional investment is generated: African SMEs are bankable and their businesses are viable.
How TEF is changing the landscape of entrepreneurship in Africa.
In 2015 the founder, Tony O, Elumelu, CON heralded the decade of the African entrepreneur by committing $100 million to The Tony Elumelu Foundation (TEF) Entrepreneurship Programme with a goal of empowering 10,000 entrepreneurs.
In 3 years of this we have reached over 150,000 applications of were sifted through a 4-stage multi-institutional selection process, firstly the application is streamlined to 10,000 per annum by the TEF application review team utilizing 5 distinct areas of critique:
- Market Opportunity
- Financial Understanding
- Leadership Qualities
The shortlisted 10,000 are further screened by a leading global consultancy – Accenture Development Partners (ADP), to 1000 recommendations and 500 alternatives which are then presented to a Selection Committee, comprising of eight distinguished professionals, business leaders and thought leaders who review ADP’s recommendation and ratifies the final selection of 1000 each year.
We have directly supported 3,000 African Entrepreneurs across 54 countries in Africa. The TEF Entrepreneurship Programme is a response to the challenges of entrepreneurs in several areas including:
- The importance of mentoring cannot be over-emphasised, especially for early stage startups.
- TEF assembles world class mentors from across Africa and internationally who faced similar challenges and can steer TEF startups along this tumultuous path.
Training – online resource library:
- Start-ups, alumni and mentors of our Programme have access to our curated online resource library of case studies, sample business plans, research documents, video presentations, industry articles and podcasts that will enhance the competitiveness of TEF startups, accessible from anywhere in Africa.
- Our goal is to provide a valuable library of relevant content for African entrepreneurs over time that will also be available even after graduating from the programme.
Seed capital funding:
- Through our Founders commitment of $100m, the TEF Entrepreneurs at the end of the programme are eligible to receive a non-returnable $5,000 1st stage seed capital which will go towards starting their business or scaling their business.
- Since January 2015, the Foundation has invested $10 million in 2,000 African start-ups and over $5 million in building the programme infrastructure and an integrated pan-African entrepreneurial ecosystem.
- TEF identifies strategic partners who can contribute to the development to the African entrepreneurship ecosystem, scale the TEF Entrepreneurship programme, add value and support our TEF Alumni.
- Now in our third year, The TEF Entrepreneurship programme has identified and empowered 3,000 entrepreneurs chosen from an application pool of over 150,000 applicants across 54 African countries. TEF partners with strategic institutions and individuals through a matching structure, by which they make a financial commitment to empower an additional 1,000 African Entrepreneurs annually.
- In identifying the challenges Entrepreneurs in Africa are facing TEF has entered into strategic partnerships with the United Nations Development Programme (UNDP) and Agence Française de Développement (AFD) to provide access to additional capital beyond the TEF Entrepreneurship Programme.
TEF Alumni Network:
- The TEF Alumni Network is Africa’s largest entrepreneurship-focused alumni network, providing a safe and secure environment in which to facilitate sharing and collaboration around content, knowledge and information.
- The Alumni Network is a unique ecosystem for African startups to cross-pollinate grassroots businesses with energetic and passionate entrepreneurs all across Africa.
Our TEF Entrepreneur Success Stories
- Momaar Taal (2015) The Gambia, Agribusiness
- Tropingo Foods, a groundnut and mango processing and export company.
- He exports to Asia and Europe and is building a food dehydration processing facility in Gambia.
- Taal has 140 employees, 120 of which are women.
- He turned over $1.6 million in 2015
- Vital Sounouvou (2015), Benin Republic, Commercial/retail
- Founder Exportunity, (Exportunity site promotes export opportunities for Africans by connecting producers with traders. It allows a farmer in Benin to sell his produce to a buyer in South Africa – or the United States – through a cell phone.
- Through the trade events, Exportunity has engaged with over 750 clients, and built a database of 85,000 companies trading with Africa. He also employs 17 people
- Nneile Nkholise (2015), South Africa, Manufacturing
- She is charting the course in a male dominated sector of Additive Manufacturing.
- Her Med Tecma Group established in 2015 is creating breast prosthesis, because breast cancer is one of the leading cancers affecting majority of women throughout the world
- Nnelie is creating breast prosthesis for women who have undergone mastectomy due to breast cancer.
- With additive manufacturing gaining a huge popularity within the manufacturing sector globally, and in Africa, there are a lot of opportunities for the technology.
- In just over 2 years of operation and driven by a need to innovate and expand territories.
- Isazoduwa ‘Oduwa’ Agboneni Nigeria, Automobile
- Isazoduwa ‘Oduwa’ Agboneni is raising the bar high in the Nigeria auto repair industry.
- A chartered Mechanical Engineer, Oduwa is the founder of Nenis Engineering Limited, an auto care shop in Lagos, Nigeria.
- Nenis Auto Care is a one-stop shop for car care needs, the centre, provides high level automotive care including services like car wash and detailing, auto diagnosis and repairs, body repairs, and engine replacement.
- Hauwa Liman (2015) Nigeria, Fashion
- Hauwa Liman is an entrepreneur with a deep-rooted desire to help tackle women and youth unemployment in her community.
- She is the CEO/creative director of the clothing line AFRIK ABAYA that specializes in African-inspired apparel.
- Through Afrik Abaya, Hauwa’s bringing cultural Northern Nigerian wears to the global scene.
- Chioma Ukonu (2015) Nigeria, Waste Management
- RecyclePoints is a waste recycling venture that operates an incentive-based scheme which collects recyclable materials from post consumers and in turn rewards them with “Points” which they can accumulate and use to redeem/shop for household items offered through our iRecycle store.
- Nkem Okocha (2015), Nigeria, Financial Services
- Mamamoni, is a social enterprise that is addressing community transformation by empowering women to carry on small businesses. With a mission to eradicate poverty through economic empowerment of poor women.
- Through Mamamoni, loan recipients get low interest loans in return for signing up for a system designed to create impact on financial inclusion and children’s education.
- Mamamoni recently launched a fin-tech platform www.mamamoni.org which enables individuals all over the world invest in poor women by lending to them and as well giving finance for business to over 100 low-income women. Investment in poor women through.
- Mamamoni has been tested by several persons including staff of the Tony Elumelu Foundation bringing in very timely returns and very detailed report on the use of the funds by the women.
Emmanuel N. Nnorom
Group CEO, Heirs Holdings Group
Twitter: @Heirs_Holdings and Instagram: @HeirsHoldings
Twitter: @TonyElumeluFDN and Instagram: @TonyElumeluFoundation