Youthful African entrepreneurship

Oliver Chikodzore

Despite all the challenges facing entrepreneurship in Africa, economic growth rates across much of Africa are rising, and there are successful entrepreneurial ventures across the continent, which suggests that opportunities exist for African entrepreneurs, some of which have already resulted in international and local business successes.

Privatisation of government- controlled business activities offers opportunities to local entrepreneurs, and has been employed in promoting entrepreneurship since the late 1980s.

It was pushed by the international finance community and organisations, such as the International Monetary Fund and the World Bank, under the Structural Adjustment Programmes, which attacks one of the major reasons behind low levels of entrepreneurship in most African countries: the direct participation of governments in too many economic activities in their respective countries.

Lack of venture capital means that good entrepreneurial ideas are going to waste, which in turn causes many small to medium enterprises (SMEs) to fail.

New research into 600 entrepreneurs by the Omidyar Network shows that many entrepreneurial ideas are going to waste in Africa because of venture capital scarcity.

Also, and the inability of state and business agencies to provide adequate financial support for good ideas is closely linked to the high failure rate of fledglings.

Despite existing policies on financial support for small businesses, very few entrepreneurs receive financial help when they need it. Small businesses consider procedures for securing business loans from banks cumbersome, and the collateral demanded for such loans excessive, but banks note that most small enterprises do not present acceptable feasibility studies or good business plans.

There is also no law to protect a bank against loan default, nor are entrepreneurs willing to acquire formal training in how to run a business.

The easing of the debt burden in many African countries through the Multilateral Debt Relief initiative in 2006 opened a window of opportunity for African countries to once again capitalise on trade opportunities made possible by increasing globalisation of markets and reduction of trade barriers.

Providing business opportunities for SMEs, investing in economic infrastructure such as water supply, electricity, roads and information technology services will ensure that local enterprises are not at a competitive disadvantage in today’s global economy (UN Office of the Special Adviser on Africa, 2008).

Government has a role to play in creating transparency, the rule of law, ease of doing business, and the anti-corruption agenda that creates a platform for entrepreneurs to succeed.

Africa is is one of the fastest growing regions of the world. Incomes are rising and populations are being lifted out of poverty.

Africa needs to be a future hub of global growth, and South Africa and Kenya are setting an important example. High-speed broadband and mobile connectivity are on the rise, unleashing the entrepreneurial spirit of even more Africans.

South Africa compares well to Peru where “Total Early-stage Entrepreneurial” activity rose to 20 percent – almost three times as much as here – after regulations were eased to favour new businesses. These challenges will continue to debilitate Africa’s capacity to develop and support entrepreneurs.

Stimulating and supporting entrepreneurship will need considerable reforms, starting at the top levels of government.

This is an edited extract from Oliver Chikodzore’s book African Hidden Potential.