ENTREPRENEURSHIP IN AFRICA
Africa: Emerging as an Enterprise Ecosystem
by David Martin Kayondo
Author, Strategist and Consultant
Misperception of the African Entrepreneur
One may argue that there is no clear definition of who is, or what makes an African entrepreneur. Many point to the fact that business activities in various forms have always existed on the continent. Legendary kings, traders, cities and empires flourished from trade in salt, gold, ivory and slaves. Whilst in recent times, the citizen may have come to rely on their governments and corporates to make a living, there was a misperception that the educated African only aspired to become a professional – medical doctor, engineer and/or lawyer – but not a tradesman. Enterprise, it seems was a preserve for the privileged few, or those without other options in the employment sector. Yet, over the last decade, there has been a change of attitude towards enterprise across Africa, driven by young dynamic people with the confidence and motivation to take control of their financial futures. Governments, it seems, have failed to find solutions to basic human needs, to provide adequate education, healthcare, housing and jobs. Behind the scenes, budding entrepreneurs are innovating and creating novel concepts to disrupt traditional business models, in the hope of catalysing socio-economic growth.
Emerging Enterprise Ecosystem
This extraordinary development hasn’t gone unnoticed elsewhere. Significant interest from global investors to work with this growing base of ambitious, innovative and sophisticated local entrepreneurs gives ample evidence of their ability to compete with global counterparts to create unique products and services. Yet, Africa remains a complex place to do business. Challenging regulatory environments, infrastructure and production inefficiencies, and other issues such as disease, conflict, unreliable commodity prices, energy supplies and poor transport systems would be development barriers. Despite this, the entrepreneurial spirit has been truly unleashed across many African countries.
Consumerism, Urbanisation and the growing Middle Class
With the highest population growth in the world, it’s estimated that 50% of Africans will reside in towns and cities by 2030. This boom coupled with a rise in economic development will create an unstoppable transformation of Africa’s investment landscape, transitioning from poverty to the middle class consumer, to fuel a greater demand for more consumer goods and create opportunities for local entrepreneurs. However, a demographic shift from the rural to urban areas for those seeking better economic opportunities poses numerous challenges to meet the needs of growing urban populations, including housing, infrastructure, transport, energy and employment, as well as for basic services such as education and healthcare. Food security may be another, as rural dwellers, and subsequently farming declines. The flip side is the opportunity for the Agro-entrepreneur to leverage the advent of the Internet and mobile technology to access critical and timely information on the weather, finance, market prices and produce. According to the International Telecommunication Union, internet-user penetration in sub-Saharan Africa has grown from 0.5% in 2000 to 10.6% (2014). Although the figure is still far behind the world average of about 30%, an increasing number of Africans are becoming more familiar with the technology. As the supply chain becomes more streamlined, production costs will reduce, increasing revenue that could be reinvested in sustainable farming methods. By embracing farm management technology, local entrepreneurs will bridge the gap between the supply and demand needs in rural and urban areas.
The Impact of the Internet and Success Stories
A new wave of investment in Africa’s ecosystem is yielding results, with an exponential growth of start-ups across in Kenya, Nigeria and South Africa. A young population is a magnet for technology investments, a fact that many global conglomerates have taken notice. Both Google and Microsoft have set up collaborative networks, research centres and training programs to offer valuable technology and financial support. There have been some global successes too, with Kenya’s M-Pesa being the most well known. This mobile money payment service innovation allows the unbanked to access a complex financial services system. Ushahidi, among others, has established Kenya’s leadership in mobile technology. As a result, innovation centres have mushroomed to incubate start-ups, promising job opportunities in both traditional and new industries such as online media and e-commerce. Spurred by this success, Kenya is building a technology metropolis, Konza city, to create a regional innovation cluster hub.
The Future of Enterprise in Africa
Human capital, social development and robust infrastructure, enabled by political stability will attract sustainable investments and build local enterprise. Governments around the world have realised that start-ups are critical to socio-economic progress. In order to flourish, Africa should follow suit by offering support and start-up benefits to empower young entrepreneurs by setting up schemes to improve the business environment and attract start-up capital investment. Tax relief offered to Angel investors could be a welcome option for the start-up community. In the UK, for example, the Seed Enterprise Investment Scheme (SEIS) was set up, designed to help small, early-stage companies raise equity finance by offering tax relief of up to 50%, to individual investors who purchase new shares in these companies. To achieve maturity, emphasis should be placed on building collaborative ecosystems, engaging various sectors to provide innovation grants, open-source technology, co-working spaces, incubators with professional mentors and advisors. Angel networks would provide access to seed funding and accelerator programs, to enable new enterprises grow slowly, in return for equity share.
Transitioning to the Mobile Economy
The Internet has ensured that they way we all work has significantly changed in the 21st century. As service penetration deepens into the Africa start-up ecosystem, more people will have the freedom to build enterprises in flexible ways. The ‘m-economy’ will provide access to highly educated and specialist resources as freelancers, ushering in the golden age for the technology entrepreneur. To develop this ecosystem, an enterprise strategy is required to incubate novel ideas using innovative platforms that provide access to viable resources. In Europe, ‘Start-up Stash’ has created an invaluable directory of such tools. Overtime, changing mindsets, actor-network support and on-going resource investment will nurture the dreams of the African entrepreneur to build one of the most dynamic global enterprise ecosystems.