This article comes in the context of a speech I made on the topic of “Innovative Industrial Entrepreneurship in Africa” (1), and from which I drew the following conclusions:
88% of the population of Sub-Saharan Africa considers the lack of employment opportunities as the second most critical issue and inhibitor to inclusive growth capable of providing decent livelihoods (2);
As a result, being an entrepreneur@ in the informal economy (3) emerges as an escape valve to alleviate poverty;
Which, while not a bad solution (4), does not contribute to the economic development of the respective countries;
In this context, countries like Nigeria and Zambia have the highest entrepreneurship rates in the world: 39% of the active population runs a business with less than three years;
And, surprisingly, 40% of African entrepreneurs (in contrast to Asian entrepreneurs, only 3%) provide financial support to their family circle, even though they know that such support seriously jeopardises the financial health of their business.
It is in this environment that the Entrepreneur-in-Need lives. In this article, I invite my reader@ to answer the following question: Can we talk about a distinct category of entrepreneur: the Afroentrepreneur@?
In Africa, the weight of the informal economy gives rise to the necessity-entrepreneur as an escape valve to alleviate poverty, without contributing to the development of the countries
Let us see successively:
- The concept of entrepreneur;
- Are there distinctive attributes of the African entrepreneur?
- Conclusion.
- The concept of entrepreneur
In line with Schumpeter (5), I share the view that we are faced with entrepreneurs (e.g. industrial, commercial, social, artistic) whenever:
a) Individual natural persons (i.e., organisations are excluded from the concept),
b) Are part of and are socially and culturally stimulated by an entrepreneurial ecosystem (i.e., there is a will to interact and establish partnerships with various stakeholders: Government; Large Companies; SMEs; Universities and Science and Technology Centres; and Financial Institutions)
c) They invest in the continuous reinforcement of their skills (i.e., there is a willingness to invest in the development of their talent),
d) [Skills] that allow them to evaluate the external environment in order to detect opportunities and/or problems (i.e., there is a permanent will to search and discover),
e) [Opportunities and problems] that are close to you (i.e., there is a willingness to connect empathically with a clientele, cause, community, region or territory).
f) When such people take responsibility (i.e., there is a will, a purpose),
g) Of developing and delivering innovative solutions (i.e., there is a willingness to apply creativity and structured processes to generate value),
h) Mobilising resources with difficulty at their own risk (i.e., there is a willingness to take risk in a controlled manner and to extract maximum utility from assets),
i) [Solutions] that have the potential to generate income and benefits (i.e., there is a willingness to generate value, impact and to “make a difference”),
j) [Value] that is partially saved to be reinvested in the sustainable expansion (6) of the business (i.e., there is an idea of taking care of the future, of “leaving work” done, a will to develop and focus on the business).
It is in this context that we can find the Scale-Entrepreneur (7), a role-model celebrated by the media, who sparks the imagination and inspires new generations of would-be entrepreneurs.
- Are there distinctive attributes of the African entrepreneur?
Yes, and let’s use some of the lenses we have used on the concept of entrepreneur to mention them.
Dimension 1: They are individuals, but with a very strong weighting of the extended family
In the absence of a social safety net, African entrepreneurs have developed a culture of “forced mutual aid”, where those with more resources have a social obligation – estimated at 9% this kind of blood tax – to share their resources with their needy relatives and extended family.
Studies(5) reveal that between 8% and 12% of active Africans exclude themselves from the path of entrepreneurship because of this redistributive social pressure.
Dimension 2: They are not part of and are not socially and culturally stimulated by an entrepreneurial ecosystem
Entrepreneurship, particularly in Sub-Saharan Africa, due to cultural issues, has been regarded negatively, with most people believing that you have to be corrupt to be a successful entrepreneur. However, the modern form of entrepreneurship seems to be developing an independent reputation and gaining public acceptance. Public support for critical entrepreneurial traits such as risk-taking, creativity, innovation and individual initiative seems to be growing steadily (8).
The first African country in one of the most important global rankings of entrepreneurship ecosystems, the Startup Blink Report 20209, comes in at position 52/100 – South Africa. Kenya comes in at position 62/100, Rwanda at position 65/100 and Nigeria at position 68/100.
And compared to the previous report of 2019, such countries have worsened their relative positions in the said ranking: South Africa, -1, Kenya, -10, Rwanda, 1 and Nigeria, -12.
Dimension 3: They Copy, Imitate & Adapt, rather than develop and deliver innovative solutions.
For most African entrepreneurs, innovation is not based on research, invention or co-creation. The entrepreneur/entrepreneur appropriates new, or significantly improved, production, distribution, marketing or organisational processes through copying, imitation and adaptation (10).
In conclusion
In Africa, the weight of the informal economy gives rise to the necessity-entrepreneur as an escape valve to alleviate poverty without contributing to the development of the countries.
By applying the ten lenses of analysis used in this article, it is possible to see that in many African countries the entrepreneur-necessity matrix no longer responds, coexisting with the entrepreneur-scale matrix, but with three exceptions. Indeed, the enormous cultural weight of the extended family and the system of ‘forced mutual aid’, together with the absence of vibrant entrepreneurial ecosystems, culminating in pre-innovation practices based on copying, imitation and adaptation, have for the time being distanced the African continent from the entrepreneur-scale matrix.
But such exceptions, along with other characteristics such as i) the absence of formal planning processes; ii) the weight of short-termism in decision-making; iii) the dispersion of resources and time in several businesses simultaneously; iv) the non reinvestment of results in the sustainable expansion of the business; v) the enormous weight of donor funding; vi) unrealistic expectations about the profitability of the business justify the creation of a separate category: that of the AfroEmpreendedor@.
(1) Workshop “Entrepreneurship and Innovative Industrial Contracting”, held last September 22nd, fruit of a partnership between the +Emprego Programme, the MIT platform – Moz Industry Talks (Jason Moçambique, Isctem and Media4Development).
(2) BHERRINGTON, Mike et all, “The national entrepreneurship framework conditions in sub-Saharan Africa: a comparative study of GEM data/National Expert Surveys for South Africa, Angola, Mozambique and Madagascar”, Journal of Global Entrepreneurship Research, https://doi.org/10.1186/s40497-019-0183-1.
(GOMES, João “Informal é Normal”, Revista Economia & Mercado, September 2021.
(4) Idem, for an analysis of the contribution of the Informal Economy to GDP and Employment in the SADEC region.
(5) KUADA, John, in “Entrepreneurship in Africa – a classificatory framework and a research agenda”, African Journal of Economic and Management Studies, at https://dx.doi.org/10.1108/AJEMS-10-2014-0076
(6) “SDG’s – Sustainable Development Goals”, at https://sdgs.un.org/goals
(7) Growth versus Scale: Growth means adding revenue at the same rate at which you are adding resources. Scale means adding revenue at a much higher rate than cost.
(8) MOLAMU, Keitumetse, ‘African Entrepreneurship Ecosystems: A Comparative Study of The Top Five’.
(9) Startup Blink (https://www.startupblink.com/)
(10) GOMES, João ” Copy, Imitate & Adapt: Innovation in the Informal Economy”, Economia & Mercado magazine, October 2021
