By Mike Herrington, Executive Director, GEM Global
Explore this topic further with the upcoming launch of the
2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa.
Stay tuned for details.
In the last decade, most countries in Africa underwent radical transformation, increased their GDP per capita and moved towards globalisation. Just look at Botswana where GDP per capita increased from USD 7 136 in 2013 to USD 7 505 in 2014, or Cameroon that saw an increase from USD 1 271 to USD 1 405, or Nigeria that experienced a jump from USD 1 692 to USD 3298 during the same period.1
However, to move closer to achieving the Sustainable Development Goals by 2030, the continent needs to change the mindset of people and pursue policies to boost the development of small, medium and micro-sized enterprises (SMMEs) to help reduce poverty and unemployment, particularly in sub-Saharan Africa.
On the one hand, we know that retail, agriculture and services dominate Africa’s industry sectoral distribution,2 with manufacturing, information technology, biotechnology and mining ranking way down on the scale. It is strange that mining does not feature more prominently given that many African countries are mineral wealthy with abundant resources. However, most of the mining sector is run and owned by foreign companies and few skills are passed on to the local sector.
On the other hand, what is important beyond these sectors is the type of entrepreneurship underway in Africa. Levels of early-stage entrepreneurial activity are remarkably high compared to many other more developed countries3. Consider the fact that early-stage entrepreneurial activity in Burkina Faso is 33.5%, in Ghana 25.8% and in Nigeria 39.9%, compared to the 18.8% average for Latin America in 2016. Such activity, however, entails a relatively high level of necessity-driven entrepreneurship, when businesses are started out of necessity due to lack of other choices, rather than because of an opportunity. Even when businesses start as a result of opportunity, they do so because they require little capital and few skills and benefit from low barriers to entry. The prime cause for necessity-driven entrepreneurship is a lack of suitable education and training. Africa’s education system is very poor, as in the case of South Africa where the levels of primary and secondary education are amongst the lowest in the world4 . Moreover, the type of education offered is not directed towards creating one’s own opportunities but rather towards seeking formal employment. This is especially true in the case of women, for whom education is considered unimportant more often than not. In Sub-Saharan Africa, women tend to start businesses more out of necessity to supplement household income for food, clothing and basic education.
So, what can be done? Women in Africa represent an untapped market that has significant potential, which needs to be developed and encouraged. Doing so requires a mindset change. It also requires putting policies in place to encourage women to enter the market, especially in sectors that will promote employment and SMME development. Burkina Faso, for example, introduced a Support Fund for Youth Initiatives to provide loans of between USD 350 and USD 3 500 to those under the age of 35 who completed training in entrepreneurship. The fund grants women applicants a preferential interest rate, and it helped 3 875 businesses get started between 2008 and 2013, a third of them initiated by women. Governments need to re-think their policies to make it simpler for women to access markets, funding, and the correct type of training and support. Without such interventions, little is likely to change for women entrepreneurs, and poverty and unemployment will remain with the gap between rich and poor widening.
1.↩ Figures from the Global Competitive Index report
2.↩ According to the Global Entrepreneurship Monitor (GEM) for 2016/17
3.↩ According to the Global Entrepreneurship Monitor (GEM) for 2016/17
4.↩ According to the Global Competitive Index report