“Africa’s Growth is unsustainable because it’s mostly reliant on commodity; pumping from the ground and earning income” ~ Winifred Byanyima
Against all odds, the just concluded world economic forum on Africa in Abuja Nigeria was a success. The forum had very interesting topics ranging from Africa-rising/sustainability, educational solutions, investment to harnessing a job-creating growth. The panels had impressive speakers across Africa, covering all dynamic. Impressive speakers such as business leader Dangote, pop sensation Dbanj, media guru Biola Alabi, chief-economist of the federation Ngozi-Okonjo Iweala, Bob Diamond, Kola Karim, Zamantungwa Khumalo, Ashish J. Thakkar, president Paul Kagame, Winifred Byanyima etc. As expected, security concerns and the kidnapping of the 234 chibok girls by the boko haram sect was at the centre of all panel discussions.
The two panels I found particularly interesting were the unlocking job-creating growth; harnessing entrepreneurship for job creation and the Africa Investment outlook. This post explores mostly, the deliberations of the former.
The African investment outlook panel saw finance minister Ngozi and DSTV managing director Biola Alabi in a situation to defend the government from locally driven and global-backlash about its supposedly lukewarm attitude or private actions on the attempting at rescuing the missing girls. Biola Alabi stated that the global media was too harsh on the Nigerian government and focusing mostly on portraying Africa in negative lights, while ignoring attempts by African government in creating jobs. She also added, evidentially, social media plays a crucial role in advocating good governance and driving change.
Youths on social media disagreed with her, stating that the #BringBackOurGirls campaign was a youth movement powered by technology to attract global attention, as majority of the citizens felt the government was ignoring the issues, hoping it sorts itself out. The question of the missing $20B from the federation account as alleged by former CBN governor Sanusi Lamido Sanusi was thrown to the finance minister and she explained that exact “unaccounted” for amount was not $20B as alleged and that the president had ordered Price Waterhouse Cooper to conduct a forensic audit for which the results will become available in the next three months. On the role of insecurity on investment potentials in Africa, British-American banker Bob Diamond focused on the long-term potentials of investing in Africa, stating that “there is a huge gap between perceptions and true realities of Africa and doing business in Africa”.
The second panel “unlocking job creating growth through entrepreneurship, saw Philip Rosler advocating for the need to empower the African middleclass to maintain the status and create more jobs in order to lift more people from relative poverty class to middle-class, stating that the African middle-class is crucial for sustainability. Winifred Byanyima highlighted the need, for African government providing social goods to assist the middle class and lift more people out of poverty. She stated that for Africa’s growth to be sustained, the provision of social goods was mandatory. President Kagame, hinted on the importance of good governance in ensuring provisions of social goods and services.
This panel saw Nigeria’s Aliko Dangote raise key points on the role of the Nigeria government in harnessing entrepreneurship, for which he is a beneficiary of such policies. According to Dangote such policies includes seven years tax free concession for new start-ups, access to low interest rate loans etc. Additionally, Dangote stated that Nigerian environment was conducive for business and investment contrary to popular negative impressions.
Entrepreneurship as an intervention strategy for harnessing job creating growth has never been more relevant than in Africa, where huge change is taking place, having one of the highest growing GDP per capita in the world.
Increase in poverty rate and high levels of unemployment are not peculiar to emerging economies. Globally, the world economies have not fully recovered from the 2008-2012 economic recession. For us in Africa, the “African population advantage” increases the demands for solutions, goods and services addressing the basic needs of Africans.
Typically, that creates possibilities of income generating activities in the process to meet the increase for consumption demands, solutions to mitigate and manage the growing population. In turn that enhances the opportunity for problem-solving ventures to generate entrepreneurial activity inherently contributing to economic growth.
While these challenges are comprehensive in nature requiring holistic interventions, entrepreneurship could certainly form part of the solution (African Entrepreneurship Report, 2012).
The growing interest in entrepreneurship as an intervention thus far, has prompted International Development Research Centre (IDRC) of Canada to launch a three year study into entrepreneurial attitude, perspective and intention in Africa in ten sub-Saharan African nations, in order to understand what drives entrepreneurship in Africa and how these opportunities can be harnessed (African Entrepreneurship Report, 2012).
Academics and policy makers both agree that entrepreneurship with the businesses they establish and their survival plays a critical role in the development and well-being of their respective societies.
“Everything Africa needs to grow and develop is in Africa and will be done mostly by African; THE SECRET IS IN FOLLOWING THE CHALLENGES”.
Entrepreneurs are the ones who create new businesses, drive and shape innovation, speed up structural changes, reduce the labour-market burden of unemployment, introduce new competition and contribute to an economy’s fiscal health. E.g. e-commerce: Konga.com w.r.t consumer trends à service delivery (financial institutions (e.g. Zenith Bank EazyMoney), delivery companies).
Entrepreneurship using the example above, has forced all forces of supply and demand to work in synchronization to satisfy modern day consumerism.
“Once you import, you importing poverty and exporting jobs out”~ Aliko Dangote. What this means is that Africa has no other choice but to study its challenges and harness them into opportunities that creates jobs to accommodate the citizens.
However, looking at the job creation panel, what quickly becomes apparent is Dangote was the only business representative, although his realities does not reflect that of the majority of entrepreneurs in Nigeria or Africa as a whole. As such, if we are focused on job creation on a larger scale (quantity) as an intervention, then we need to study the challenges facing the majority not Dangote.
CHALLENGES; the solution to strengthening entrepreneurship
Until recently, entrepreneurship in Africa was necessity-driven; entrepreneur’s particularly young people had no other choice or source of income (McKinsey &Company, 2010). This indicates entrepreneurship, alongside other factors can change the landscape of stimulating further growth in Africa; however, it is not without challenges.
Nearly one third of the continent’s one billion people struggle to secure enough food simply to survive. Even with steady migration to cities like Nairobi and Lagos, Accra, Dakar, etc. most Africans live in rural areas and earn livelihoods as subsistence farmers, yet the challenges facing agriculture in Africa stifles the opportunities in this sector.
“Nigeria’s creative industries add up to 1.42 % to Its GDP. It’s the second largest potential employer of labour after agriculture”~ Audu Maikori . There is a lack of effective incubation parks and lack of programmes to help commercialize intellectual property, challenging the flourishing creative industry in Africa.
Access to start-up capitals and efficient funding systems: Banks and other financial institutions in Africa need to be encouraged to reform their credit policies to provide – at an acceptable risk level – small, unsecured, non-salary-based loans to new and growing businesses on credit assessments of business models and projected profit.
Lack of market access: Creating access to market by addressing issues such as efficient road and rail networks within the countries and implementing policies that encourage inter-African trade could be beneficiary to boasting African entrepreneurship.
Access to/ creation of urban cities: Buttressing the previous point, access to the available market is pertinent but so is the development of more urban or sub-urban cities. This will reduce the pressure on cities located in a relatively small geographical area than can sustain the population striving to make it there.
Critical to the development of any new business is the existence of accessible funds that provide entrepreneurs with the financial resources to start their businesses. In many Sub Saharan African countries, not only is financial support not readily available, but when it is, it is difficult to access, due to bureaucratic inefficiencies and lack of appropriate know-how on the financing of small-medium size businesses.
There are a number of ways that financing for entrepreneurs has evolved in different parts of the world; for example, the development of seed funding which could be done through NGO the establishment of new credit options (such as moving the banks away from asset-based financing), providing large firms with meaningful tax incentives to assist small businesses and developing a viable and active network of both venture capitalists and angel investors.
Due to the unstable nature of income and other obstacles facing entrepreneurship, it is advisable for policy makers to explore practical methods that could harness and stabilize the informal sector. The following points could harness African entrepreneurship;
Although the direct link between the variables that propels entrepreneurship in Africa is not fully established, the basic requirements, such as a nation’s macro-economic stability, institutions, infrastructure, health and primary education, certainly provide the underlying fundamental conditions required for a well-functioning business environment.
Introduce new funding models, possibly supported by the government, that enable entrepreneurs to obtain seed capital without the stringent requirements by commercial banks on providing collateral.
This is especially important for young entrepreneurs, who often face additional barriers to access to finance. The danger of this is that most government agencies in most of Africa are not good at assessing and working with entrepreneurs. As such, a privately administered model by an NGO with practical business experience in funding start-up, but funded by government could be more suitable approach.
Create incentives for banks to create a pool of funds that is available to young entrepreneurs, not on asset-based assessment, but upon different ideas such as co-operative funding, which is used by many other African villages
Establish financial institutions that provide low cost funding for germinal, new and established entrepreneurs. However, such funds should preferably not be given to the entrepreneurs, but rather to a third party, who supplies the material or assets on a need by need basis
Create incentives for private individuals or NGOs to provide grants, equity, or loans to new ventures through tax deductions. It might be useful to encourage corporations to build up their SME capabilities and to help them develop their supply chain and distribution infrastructure;
Structure and customize different government funding instruments to meet the unique needs of entrepreneurs at various stages of development, since enterprises at these different stages require funding assistance that is customized to their specific needs.
Prioritize investment in high-growth youth entrepreneurship, as a means of addressing the mounting youth unemployment, which has significant implications for social welfare, health, safety and security and overall economic growth.
Expand the education curriculum to improve the capability, as well as the motivation, of students to engage in entrepreneurial activities, also developing skills, as well as positive attitudes and, also, by making entrepreneurial subject a compulsory subject in primary and secondary schools.
Establish partnerships between public and private sectors to aid the transfer of technology and innovation.
In conclusion, if the cure for hunger is food, the cure for illness is medical care; then the solution to Africa’s jobless growth is also in the continent’s challenges waiting for innovative solutions, the catch is in creating more successful entrepreneurs as opposed to glossing over the few Dangotes in Africa.