By Giulia Ajmone Marsan and Jonathan Potter, OECD Centre for Entrepreneurship, SMEs, Local Development and Tourism
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Over the last decade, Africa has witnessed the emergence of a dynamic start-up scene in some of its countries. The district of Yaba, in Lagos, Nigeria is one example. In Yaba, young educated people are supported by a network of incubators, accelerators and other support facilities. This entrepreneurship cluster has taken advantage of the nearby presence of many Nigerian higher education institutions, such as the Yaba College of Technology, the University of Lagos, or the Federal Science and Technical College for students and facilities.
Another well-known case is the so-called Silicon Savannah in Kenya, a highly entrepreneurial eco-system that has given birth to innovative tech companies like M-Pesa, the worldwide money transfer and financing service operating via mobile phones, and Ushahidi, the well-known crowdsourcing platform. As in Nigeria, some of the universities based in Nairobi, notably the University of Nairobi and Strathmore University, are important actors in this eco-system.
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The manufacturing sector has traditionally been seen as an engine for development due to its high propensity for productivity gains. Worryingly, recent evidence suggests that this has not been the case in Africa.
Africa has failed to industrialise. At the same time, millions of young people are seeking jobs. Put one-and-one together and the answer seems to be that if these labour market entrants become entrepreneurs in industry then they can in one stroke create jobs and help Africa industrialise. Yet, optimising the nexus between entrepreneurship and industrialisation requires overcoming some vexing policy biases. These can be categorised as biases of over-estimation and biases of under-estimation.
L’Afrique n’est pas différente des autres continents : le dynamisme économique africain repose comme ailleurs en très grande partie sur les PME. La nouvelle classe d’entrepreneurs africains ayant émergé depuis dix à vingt ans apporte avec audace et innovation des réponses durables aux besoins d’un continent dont les économies sont encore fragiles.
A little more than 12 years ago I read an article about 981 “entrepreneurs” who had been through a brief new venture creation programme. According to the journalist’s investigation, not one of these would-be entrepreneurs who had been in that programme was in existence a year later. The journalist lamented that despite the obvious evidence that these high volume, low quality programmes were ineffectual, they were nevertheless prolific, wasting hundreds of millions of dollars every year.
A universal definition of small – and medium-sized enterprises (SMEs) does not exist. What is generally undisputed, however, is the fact that the overwhelming majority of private-sector businesses in the world are SMEs and that SMEs account for a very large share of world economic activity in both developed and developing countries.
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