What Africa’s Entrepreneurs can Teach the World

It’s becoming ever clearer that entrepreneurship is the answer to the vexing economic questions facing Africa today: job creation, capital formation, skills acquisition, taxation-based self-sufficiency, quality of governance-demand, and of course social inclusion. But how has it actually evolved in Africa? Are there peculiar features of African entrepreneurship we may consider relevant to big global debates on development and sustainability?

I spend a significant amount of my time associating with a pro-business think tank that has been building an impressive database of entrepreneurs, small businesses, start-ups, and innovation-driven enterprises in Africa. Sifting through case studies, anecdotes, questionnaire responses, and many other snapshots of entrepreneurial activity in Ghana and a few other places on the continent I was drawn to two major characteristics of African entrepreneurship. I will call them hyper-entrepreneurship and excess diversification.

Until recently, my attitude had been quite negative about both of these. I was looking for reasons why the grand take-off of the African economy has been slower than predicted by the super-optimists (the continent is growing by 5% annually rather than the 10% or more seen in recent years in China and India). African-style hyper-entrepreneurship and excess diversification are so different from the standard models of business success that prevail in the West that I figured they must be the problem.

On hyper-entrepreneurship, the insight was that the staff turnover rate appeared extremely high within the entrepreneurial segment of the economy (start-ups, small businesses, non-public businesses, innovation-led businesses, sole proprietorships etc.). Workers in the businesses we were looking at showed a much higher propensity than their counterparts in the West to leave their current job to set up a business, as opposed to looking for a a waged position elsewhere. This appeared to point to a serious deficit in quality followership in Africa, one that meant a dearth of vital managerial talent.

I am now convinced, though, that the entrepreneurial driver behind talent churn in African labor markets actually yields significant net benefits for African economies. This is simply because being in a job appears to trigger latent entrepreneurship, and also because there is a more intensive re-investment of social capital to generate financial capital than is customary in the West. This is to say, while many workers may not save enough in cash, they build confidence and contacts that in the generally informal economy can be as good as cash. In the West, the same advantage may be worth far less.

Then there’s the tendency toward what I initially saw as excess diversification. My think-tank colleagues and I were stunned to see how many concurrent businesses the typical entrepreneur owns and manages in Africa. One famous waste utility entrepreneur had about 66 different businesses. On the whole, the businesspeople we studied appeared to run an average of six businesses…

 

In a sense, African entrepreneurs run profit ecosystems rather than business units. These ecosystems interact with other ecosystems in a culturally elaborate manner that can produce extreme robustness, resilience, and flexibility.

To read more, please visit: https://hbr.org/2012/03/what-africas-entrepreneurs-can

Article by Bright B. Simons | Harvard Business Review | Image: Pixabay | Copyright © 2018 Harvard Business School Publishing All Rights Reserved.

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