Today it is becoming much clearer that entrepreneurship can be considered as best solutions to challenging economic scenario faced by Africa, including capital formation, job creation, skills acquisition, social inclusion and quality of governance. But it is important that we find out how it has developed across Africa. Are there any specific features of entrepreneurship in Africa that we may believe relevant to major international debates on sustainability and development?
Characteristics of entrepreneurship in Africa
I have invested a lot of time in connecting with an effective pro-business think tank which has been busy in developing a useful database of start-ups, small businesses, innovation-focused enterprises and entrepreneurs in Africa. Analysing questionnaire responses, anecdotes, case studies and other aspects of entrepreneurship in Ghana and other African regions, I realised there were 2 main features of African entrepreneurship: hyper-entrepreneurship & excess diversification.
Earlier I had a rather negative attitude towards both these issues. I kept searching for reasons why the great start of our African economy has been comparatively slower than what was estimated by the experts. At present, Africa is developing by 5 per cent yearly, instead of 10 per cent growth which we can observe in India and China. I believe the problem is that the style of hyper-entrepreneurship followed across Africa are drastically different from the general business models that are predominant in the West.
Regarding hyper-entrepreneurship, the observation was the rate of staff turnover seemed rather high in the entrepreneurial section of our economy, which includes sole proprietorships, innovation-driven businesses, non-public businesses, small businesses and even startups. The workers who we were observing in the business revealed an impressively high propensity, as compared to their western counterparts, to quit their existing jobs and start a new business, instead of getting another job with a higher pay. This pointed to a major shortfall in quality followership across Africa, which means a shortage of essential managerial talent.
Now i am sure that the entrepreneurial driver for the talent bubble in labour markets in Africa yields adequate net benefits for the economy. This is primarily by reason of being in a job tends to encourage latent entrepreneurship. Moreover, there is a growing intensive investment of social capital for creating financial capital. Hence, although most employees might not be able to save adequate cash, they tend to develop confidence and build contacts which can prove to be as good as cash in a standard informal economy.
However, there is also a tendency towards excess diversification which I observed. My think-tank team and I were surprised to realise that several simultaneous businesses are managed and owned by a typical entrepreneur in Africa. A particular waste utility entrepreneur led almost 66 different organisations. In general, most entrepreneurs that were studied tended to run about 6 businesses on average.
The business leaders who are running these small sized organisations were most probably had less prospects compared to if they focused on lesser and scalable businesses by adjusting their incentives with determined managers. In this perspective, the economy was struggling with numerous clones of foreign exchange bureau, autogarages, restaurants, grocery shops etc. The profit margins tended to be low, which resulted in low salaries, limited growth and growing departing managers who opened more clone businesses, resulting in economic under-performance.
However, I still believe that Africa can move forward and improve the economic state of the continent by taking the right entrepreneurial measures and supporting aspiring entrepreneurs to succeed.
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