It is now widely recognized that, for economic and other reasons, the public sector in regions like Africa has had to disengage and divest itself from many sectors of the economy and allow for private enterprise. But what does entrepreneurship really mean in Africa? Is it a concept unique to scalable startups and ventures, or does it extend to the day-to-day businesses that keep the lights on in many African homes?
Given that African environments differ significantly from Western ones in terms of economic infrastructure and political considerations, there is an opportunity to define entrepreneurship in a way that is more appropriate to the African context.
Entrepreneurship has become a global synonym for positivity in business and management. It is considered the key to developing a robust and growing economy. Although most would agree that entrepreneurship at its core involves identifying opportunities in people’s unmet, underserved, and emerging needs through the gathering of resources and the creation of businesses, the nature of the activity is highly context-sensitive. What works in one place and for one group of people doesn’t necessarily work elsewhere. Both the needs themselves and the methods and structures that can be acceptably developed differ from place to place and from person to person.
After completing an Innovation and Entrepreneurship course for a European MBA, I realized that entrepreneurship is presented as a challenging activity in the western world. Our entrepreneurial ventures in Africa cannot be categorized equally. So when they tell you that your MBA doesn’t quite prepare you to run a business in Africa, you should really listen to what they have to say. When it comes to understanding African entrepreneurship, there is no clear blueprint that one can use to identify the practices and predict success. There are millions of entrepreneurs across Africa, but researchers and scholars haven’t yet made much sense of them – especially when it comes to highlighting the differences and similarities with entrepreneurs elsewhere.
According to the African Development Bank, 22% of Africa’s working-age population start a business. This is the highest entrepreneurship rate in the world. The business tariff ranges from 9% in Algeria to about 40% in Nigeria and Zambia. The spread is related to the income level of African countries. Poorer economies tend to have higher percentages of their population engaged in entrepreneurship, often out of necessity.
When I was growing up, my mother worked by day as a store manager for a glass factory and came back home to become a chicken farmer, seamstress and eventually general and kitchen appliance dealer. All of these endeavors got us through school, clothed us, fed us, and kept the lights on, indicating that the glazier’s salary was not sufficient to support the financial burdens of the household. This is the case in most African countries.
Who is the African Entrepreneur?
African entrepreneurs are mostly made up of women — 27% of the adult female population – and the youth. The continent’s female entrepreneurship rate is also the highest in the world; This means that African women are twice as likely to start a business as women in other parts of the world. But their companies are generally less profitable and offer fewer jobs than men’s. This problem can be traced back to the gendering of work Exclusion of women from the mainstream economy during colonization.
Family businesses are particularly important to African entrepreneurship. Many of these firms are informal, which limits their growth. Family-based business start-ups are also subject to joint obligations that serve to limit benefits. Although informal start-ups are an important source of employment, these companies are associated with low returns.
Another area of relative importance for African entrepreneurship is the diaspora, with remittances being a significant source of start-up investment. The African entrepreneur demographic also includes diaspora returnees who are more likely to engage in entrepreneurship than formal employment. For returnees from the diaspora, social networks play an important role in the success of their entrepreneurial activities. These networks have more positive impacts on non-family businesses in Africa than on family businesses.
Challenges for the African entrepreneur?
African entrepreneurs appear to have a greater tolerance for risk than non-entrepreneurs and are more geared towards innovation. The continent’s biggest business challenge is persistent institutional gaps, so entrepreneurial innovation usually focuses on connecting Africans with goods and services. Examples are mobile money services in Kenya (grapes) and Zimbabwe (Ecocash), private security in Ghana and laundry in Uganda. In addition to navigating these institutional gaps in search of value creation opportunities, there are other challenges (“challenge” often means “opportunity” for most entrepreneurs). These include access to finance, building organizational capabilities for scalability, and creating opportunities through new market entry strategies to operate in informal markets.
Based on the global definition, growth is a key factor for entrepreneurship. And why is growth important for the entrepreneur? Because growth is an important source of impetus for entrepreneurial opportunities. Turning now to entrepreneurship in Africa, shortages of financial resources appear to be preventing African entrepreneurs from expanding their businesses.
Africa continues to change, often in unpredictable ways. These changes are the main source of business opportunities. It is important to us to develop our own theories on this change and the associated opportunities. Do western approaches make more sense than local ones? Maybe not, but we’re still getting a foothold in that regard.