The Tony Elumelu Programme provides $10,000 to 1,000 entrepreneurs each year over a ten year period. Since it launched three years ago they have received over 100,000 applications, which demonstrates the entrepreneurial spirit of the young in Africa. In this interview Parminder Vir, CEO of the Tony Elumelu Foundation, discusses why more needs to be done to create a conducive ecosystem for the young to build their businesses.
How important is entrepreneurship for economic growth and sustainability?
The roles that entrepreneurship can play in economic growth and sustainability cannot be overemphasised. Entrepreneurship is a vital component in innovation and the creation of a self-sustaining domestic economy. It is the young business leaders who will find African solutions for African challenges; creating jobs, driving social mobility, and adding breadth to the regional economy.
Entrepreneurs have emerged as key employers of labour – over 70% of Africans work for micro, small and medium enterprises (MSMEs). Supporting research by the African Development Bank (AfDB), shows that firms with fewer than 20 employees provide the most jobs in Africa’s formal sector. McKinsey’s Lions on the Move (2016) reports that small companies in Africa account for over 60% of the continent’s B2B spending. This number increases to over 80% in Nigeria, Kenya, Tanzania, and Ethiopia. MSMEs also account for over 90% of demand in agriculture and the agri-processing sector, and more than 50% of demand in other key sectors.
Successful entrepreneurs are not simply hard working, they’re also innovative. Finally, entrepreneurs help to mobilise ‘idle’ funds which aids economic development.
Is Africa becoming more entrepreneurial?
Africa has always been entrepreneurial! More countries are beginning to realise the strong links that exist between industrialisation, entrepreneurship, and economic growth. As Steve Case, Co-Founder of AOL and an investor in African entrepreneurs, says, “Historically, Africa has been viewed by many as a problem to solve – but now there is a growing recognition it is in fact an opportunity to seize and entrepreneurs leading the way.”
Are you seeing a surge in entrepreneurship in a particular sector?
It is difficult to generalise across the Continent, but it is safer to be country specific. In South Africa, for instance, there has been a surge in the educational sector. In Nigeria, for instance, the fashion industry has witnessed the influx of entrepreneurs over the past few years. I would say the agriculture and education sectors have witnessed their fair share of growth, as most entrepreneurs find the two sectors to be attractive.
Should the government play a role in encouraging entrepreneurship?
Entrepreneurship cannot survive in an environment with unfavourable government policies. Even if governments are unable to raise enough funds to encourage and support entrepreneurship, they should be able to provide business-friendly ecosystems. Professor Daniel Isenberg published an article in the Harvard Business Review in 2010 that helped boost the awareness of this concept. The components that make up this ecosystem include, but are not limited to, the local and global market, government policy, regulatory framework and infrastructure, funding and finance, culture, universities as catalysts, education and training, and mentors, advisors and support systems. The challenge for government policy is to develop policies that work, but avoid the temptation to try to effect change via direct intervention.
Can you share a good government policy that has helped drive entrepreneurship?
Different countries have different policies in place that have aided entrepreneurship over the years. Rwanda, Ethiopia and Tanzania have implemented successful policies. In Rwanda, The Entrepreneurship Development Programme was introduced to build a critical mass of young Rwandan entrepreneurs in the next five years, while the general objective was to provide existing and potential entrepreneurs with the right skills and knowledge to become competitive players in the local or global market.
In Ethiopia the government established a state-run training and support scheme called the Entrepreneurship Development Programme (EDP). The programme, launched in 2013 and co-funded by the United Nations, offers free training and development. Meanwhile, Tanzania introduced the Sustainable Industrial Development Policy (SIDP), which places specific emphasis on promotion of small and medium industries by supporting existing and new industries in terms of promotion, simplification of taxation, licensing and registration and improving access to financial services. SIDP enables entrepreneurs with physical disabilities to take part in economic activities.
What are the biggest challenges that entrepreneurs in Africa face?
Poor infrastructure is the biggest challenge. In Africa, even the basic infrastructure is lacking, such as good roads, water supply, electricity and transportation links. Competition from foreign made goods is also intense. It is difficult for locally made goods to compete with those from developed countries which are of superior quality. Moreover, despite existing policies on financial support for small businesses, very few entrepreneurs receive financial help when they need it. Finally, multiple taxation remains a major issue, Some of the entrepreneurs face different forms of taxation from the state, federal and local government. This is a major challenge. Start-ups should be granted tax holidays to encourage their growth.
What’s your advice to young entrepreneurs and start-ups?
For African start-ups there is no better time than now. African entrepreneurs see the challenges here as opportunities. There are huge gaps in the market place from technology to agriculture, especially across value chains. Once they are successful in their local market, they can scale it across 54 countries!
How does the Tony Elumelu Foundation help entrepreneurs?
In 2015, Tony O Elumelu CON launched the Tony Elumelu Foundation Entrepreneurship Programme with $100m, and a decade-long commitment to empower 10,000 African entrepreneurs who will create 1m jobs and contribute $10bn in revenues to the African economy. The programme provides training, mentoring, funding, and membership to the largest network of African entrepreneurs across the continent
We have spent up to $15m dollars and offered training funding to over 3,000 entrepreneurs from 54 African countries.