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“Grow my business to a million dollars? No thank you, I’d rather stick to the two stores I’ve got!”
The spirit of entrepreneurialism, with its promise or reduced youth unemployment and economic renewal, is certainly gathering steam across Africa. But true entrepreneurship-led transformation will require a mindset shift amongst Africa’s small business owners.
From South Africa’s Silicon Cape to Kenya’s iHub-centered Silicon Savannah movement – from Ethiopia’s burgeoning textiles industry to Nigeria’s ubiquitous Nollywood film industry – there are visible signs of the growing profile of African entrepreneurs. Government programs abound: YEDF in Kenya, SEDA in South Africa, and YOUWIN in Nigeria to mention a few. New incubators are rising every day and private initiatives like Generation Enterprise and InChallenge are training promising young entrepreneurs. Fittingly, in his foundation’s first white paper on Africapitalism (PDF), Nigerian billionaire Tony Elumelu declares that “value creation through entrepreneurship is Africa’s unique path forward — distinct from emerging markets like China with its state-run enterprises, or Korea with its ‘Chaebol’ conglomerates, or India with its large family-run businesses”. As if to support his claims, Nigeria’s NYSC national service program, which trains over 300,000 graduates each year, has been recently returned to offer training linked to entrepreneurship. Africa’s entrepreneurs, more connected than ever to new ideas, are being told that this is their time to shine.
In a previous post, I identified entrepreneurship as a potential solution to Africa’s youth unemployment problem. Yet for all this apparent momentum, there is a reason to pause. The majority of Africa’s entrepreneurs – old and new – run micro-enterprises which don’t grow beyond the informal sector into productive formal firms. These firms are a social safety net to keep people alive, but rarely ever an engine of sustained growth or employment.
Sparking an entrepreneur-led boom in Africa will require a mindset transformation of these “small dreamers”. It will need, first, a better understanding of their motivations. Many African entrepreneurs embrace business as an escape from desperate circumstances. Far away from the romantic Silicon Valley ideals of changing the world, these entrepreneurs simply want to survive and avoid going back to the poverty they came from. What may seem like a lack in ambition is in fact rooted in a pervasive fear of failure. After all, failure for a Silicon Valley technologist might mean a few months temping while securing a new job; failure for an Ethiopian small business owner could mean a hungry family with no supporting government safety net.
It will also require a better understanding of how this loss aversion mindset influences a firm’s prospects. Many “small dreamers” are highly reluctant to delegate responsibilities or even partner with other firms, preferring instead to retain a close eye on all the details themselves. They will often point to staff unreliability and share anecdotes of unscrupulous behavior from previous business partners. In many cases, they don’t even trust family members to help manage their businesses. Instead of investing for expansion, they prefer to treat their enterprises as small cash cows and retain full control. The problem of course is that the status quo often cannot last. Many of these firms fall victim to economic travails, and go out of business in due course. More tragically, they fail to fulfill their potential in contributing to sustainable macroeconomic and employment growth.
The proponents of Africa’s booming entrepreneurialism – governments, incubators and investors – should pay more attention to the “small dreamer” phenomenon. They must focus on:
By addressing the “small dreamer” phenomenon, Africa’s entrepreneurial revolution stands a better chance at harnessing the potential of the youth and creating a demographic dividend in the coming decade.
– Havard Business Review Blog