Entrepreneurship is increasingly becoming the driving force for Africa’s economic growth despite the myriad of challenges in the continent.
In a couple of years, the biggest business opportunities will be those created by entrepreneurs who start a venture, which consequently offers job opportunities to fellow Africans, as well as address growth opportunities through competition, and increase productivity.
The ‘African Rising’ narrative is still stagnating. In fact, some African leaders such as Tanzania’s millionaire, and businessman Ali Mufuruki, was quoted as saying that “Africa is not Rising.” Although he acknowledged that there has been significant growth in the recent years, he said the growth was slow, and the percentage too meager.
Among the many things mentioned by Mufuruki as challenges holding Africa back include electricity, aid, trade, technology, and the management of the economy, among others.
Unfortunately, these are the same set of the challenges also highlighted by Harvard Business Review (HBR) as what is and will keep Africa lagging behind if nothing is done urgently to reverse the situation.
According to HBR’s article, fatigue is setting in among investors who are yet to reap benefits from their investments in Africa. Even the largest companies like Nigeria’s online retailer Jumia is yet to make profits to early investors such as Rocket Internet of Germany, the article noted.
Here are some of the key reasons why entrepreneurship growth in the continent is stagnating.
Ventures are too small for investors
When looking for businesses to invest in, investors are more interested in ventures that are at the top of the pyramid- meaning they are large enough for such partnerships. That being the case, only a few African startups have reached that level.
Additionally, the products and services have to be unique enough to attract top investors. That is to say that African ventures should invest in making quality brands which are not only modern but also African, to address the needs of their target clients.
Take for example Marini Naturals, a Kenyan company dealing with products for African natural hair. While the company addresses the needs of the local Africans, it has incorporated modern packaging and marketing strategies that have enabled the product to grow beyond the borders of Kenya reaching markets in the US and the UK.
Factors of Production
Investors are also keen on the factors used in the production of goods and services in order to make feasible profits.
These factors which include land, labor, capital, and entrepreneurship are critical to attracting investors. When they lack or are limited, so does the investment energy.
Reliable factors of production create confidence among investors, which in return attracts money into a venture.
Take for example Neo Café which we recently featured in our entrepreneurship segment. The Lagos-based coffee shop started over five years ago. Despite facing challenges like many start-ups in the continent, Neo Café has remained relevant and competitively strong due to its great management, resources, and financial standing. They own a coffee roasting company in Rwanda which provides products for use at their seven separate stores and six office locations in Lagos. They have since franchised the business to Ghana and Côte d’Ivoire.
Innovation in Distribution
In Africa, distribution remains at the top of the list for every individual in business and investors as well. This is because; the continent still lags behind when it comes to infrastructure and connectivity.
Infrastructure gaps in Africa sometimes can lead to delay or surmount the need to launch a product.
Companies that address these challenges in Africa often succeed as they are tackling direct challenges. M-Kopa a Kenyan Solar Energy Company that provide ‘pay as you go’ solar products to its rural clients is one company that’s thriving in a country whose majority of its citizens are not connected to the national electricity grid.
In Rwanda, a company called Zipline has collaborated with the local government to distribute the required medical supplies at hospitals or wherever needed using drones. The East African nation has a poor road network, making it impossible for patients and medical supplies to reach hospitals in time.
Investors targeting African nations have to think broadly on how to distribute their products or services. Sometimes, the poor connectivity makes it difficult for such financiers to consider the continent as the best option to invest.
Moreover, investors are attracted to businesses that employ modern technologies to address market needs.
These three trajectories are common, yet most ignored success routes that many investors consider when searching for great business opportunities. African entrepreneurs should endeavor to address or identify ways through which their business can flourish despite the challenges.
Image credit: Jiro Ose