Why African Entrepreneurship is Leading the Way
By Zoe Lawson
Photo credit: Benny Jackson on Unsplash.com
We’ve all heard the old proverb ‘give a man a fish and you feed him for a day; teach a man to fish, and you feed him for a lifetime’. It makes perfect sense that sharing skills and knowledge to allow people to become self-sufficient is a more effective route out of poverty than merely providing charity. It will come as no surprise then, that entrepreneurship offers hope for a pathway to sustainable development across the African continent.
Entrepreneurship is arguably crucial for economic growth and job creation. Encouraging budding African entrepreneurs to take their first steps and providing them with business mentoring to maximise their chances of success is the mission of Grow Movement. And there is plenty to get excited about as Africa is leading the world in this area.
Necessity: The Mother of Invention
According to a Harvard Business Review article written in mid-2016, African entrepreneurship is booming. It talks of how, after the commodity bubble burst, Africans were forced to invent new ways to survive. This event, in combination with the return from Europe and the U.S. of Africans to their home nations after the global financial crisis, and together with the rise of technologies such as the cloud and free communications software like WhatsApp, has created the perfect storm for the growth of entrepreneurship.
It’s also a potential solution to the jobs gap – the mismatch between stable, wage-paying employment and the number of new entrants into the workforce. Africa will create 54 million new jobs by 2022, but it’s nowhere near enough to accommodate the 122 million new job seekers over the same period, according to McKinsey. And indeed, The African Development Bank notes that Africa has the highest rate of working age people starting new businesses, anywhere in the world; at 22%.
The Base of the Pyramid: A Huge Market of Producers and Consumers
In economic terms, the base of the pyramid (BOP) refers to the largest but poorest socio-economic group globally; around 4.5 billion people, many of whom reside in Africa. The BOP is defined as those people who earn $8/day or less and as such, are value-demanding customers. As the BOP innovation center notes, the BOP also comprises ‘resilient and creative entrepreneurs, producers, business partners and innovators’. Their exclusion from formal markets means there is a strong demand for innovative products and services that meet their needs.
Take soap as an example. In developed nations, soap is a basic household purchase, and it comes in a variety of forms from washing powder to shower gel. Handwashing with soap is an effective way to limit the transfer of harmful microorganisms, as we are reminded every flu-season. However, the lack of affordable soap for handwashing in developing nations and particularly in sub-Saharan Africa contributes to over a million deaths of babies and children under five years of age, each year, worldwide. There is demand for a soap product to meet the needs of these low-income consumers, but it won’t be met by the multinational corporations, who are largely uninterested in the profit levels achievable in the BOP sector, which leaves a market opportunity for entrepreneurs.
Women: The Engine of Entrepreneurship in Africa
Female entrepreneurship, in particular, helps to alleviate poverty and contributes to socio-economic development. Africa is the only continent where women entrepreneurs are not the minority, and here, women dominate the informal economy. Strengthening women’s capacity for full economic participation is a recognised factor for economic growth. Muhammad Yunas, Nobel Laureate and founder of Grameen Bank focussed his microfinance lending on women, as he noted they made better use of small loans than men (often using them as start-up capital for their businesses) and had better track records of repayment. However, women entrepreneurs face more significant challenges than their male counterparts; not least when it comes to finding a business mentor to guide them.
So, there is much evidence pointing to a fertile environment for entrepreneurs in Africa! Grow Movement is delighted to assist in their success, and if you are interested in becoming a Grow Movement business mentor, please contact us for more information.
Links & References
Why African Entrepreneurship Is Booming, Ndubuisi Ekekwe, Harvard Business Review, July 2016
Africa at work: Job creation and inclusive growth, McKinsey Global Institute, August 2012 Report
African Economic Outlook 2017, African Development Bank, OECD and United Nations Development Programme, May 2017
BoP Innovation Centre, March 2019
Contextualising Women’s Entrepreneurship in Africa, African Female Entrepreneurship, pp.3-33, January 2018
17 April 2019
Zoe Lawson is a social entrepreneur with an interest in translating innovations for international development. She has a PhD in biological chemistry and an MBA, and has been involved with Grow Movement since 2015 as a volunteer consultant and supporter.