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Why Entrepreneurship Is Key To Unlocking Africa’s Business Potential

SMEs are responsible for around 77% of all jobs in Africa. Business education in the region has the power to boost entrepreneurship and drive the African economy

Tue Nov 27 2018

Earlier this year, daily online news portal SME South Africa ran an extraordinary story about Brandon Kynoch, a 16-year-old entrepreneur from South Africa.

Brandon, a completely self-taught programmer, developed the game Torus. The first day it featured on the App Store it received 100,000 downloads in 24 hours and was Game of the Day in 137 app stores worldwide.

An outstanding feat, and one that evokes optimism—for once, a tech whizz who hails from somewhere other than the US or China.

Nonetheless, the article also taps into a systemic problem within South Africa—an inability to procure and keep hold of its top talent. Indeed, the article headline suggested Brandon could be ‘SA’s Best Tech Export’, and the piece finishes with him asserting his aspirations to further his craft at MIT or Stanford, in the US.

Owen Skae, the director of Rhodes Business School in South Africa, says he’s in no doubt that there is enormous potential on the African continent as a whole; the sum of a young population and tremendous natural resources.

But, the cost of doing business, he adds, curtails many entrepreneurs from pursuing their ambitions at home.

The potential of the continent is not restricted to those just present and on the ground...

McKinsey & Company reported recently that Africa is ‘a 1.2 billion-person market on the cusp of transformative growth’.

 Acha Leke, chairman of McKinsey & Company’s Africa offices, Mutsa Chironga, an executive at Nedbank and an alum of McKinsey’s Johannesburg office, and Georges Desvaux, a senior partner for McKinsey in Hong Kong, have also just published a book, Africa’s Business Revolution, a definitive guide to doing business in the region.

According to their research, there are 400 companies in Africa that earn annual revenues of US$1 billion—‘they are on average both faster growing and more profitable than their global peers’.

To complement the large corporates, they say, Africa’s small and medium-sized enterprises (SMEs) have to bolster their offering and dream big.

SMEs are the cog that keep the economic growth of developing nations turning. Without them, the system jams and risks grinding to a halt. McKinsey quote the World Bank in their article, that estimates SMEs are responsible for 77% of all jobs in Africa, and as much as half of GDP in some countries.

Unemployment and job creation are among the biggest challenges to the region. The African Development Bank (AfDB) says that of Africa's 420 million youths (aged between 15-35), one-third are unemployed. Add to that their estimate that only one-in-six young people are gainfully employed, and the issue at hand becomes glaringly obvious.   

“Take Johannesburg,” says Owen. “You could be in the best city in the world but five kilometres away there are still people with no access to running water, crime is rampant, and children aren’t being schooled properly.”

To alleviate these issues you have to harness the best of the fourth industrial revolution, he adds, and tap into technology’s potential to bring communities closer together.

SMEs are responsible for 77% of all jobs in Africa, and as much as half of GDP in some countries

Africa as a continent doesn’t lag behind in terms of technological adoption, either. According to McKinsey’s research, there are 122 million active users of mobile financial services in Africa.

The number of smartphone connections is estimated to go from 315 million in 2015 to 636 million in 2022. Mobile data traffic across the continent is set to increase sevenfold.

The opportunities for tech startups are rife. But, for every whizz like Brandon Kynoch, there are hundreds of children being failed much earlier on in the education system. South Africa is a case in point.  

The World Economic Forum ranks the quality of maths and science education in South Africa 128th out of 137 countries.

For Owen, it’s a systemic problem that can’t be resolved overnight.

But if school children are to jump over the hurdles put in place by a lacklustre education system, then entrepreneurship, management, and leadership—that all young people have in Owen's opinion—have a critical role to play.

It’s entering the higher education system more in South Africa, Owen explains, but not at the rate it should be. He says that what they often find is there aren’t the resources available to create a lasting impact on students earlier on.

Whether that’s partnering with successful, large organizations in the region, or highlighting potential role models needed to inspire young people, there’s still a lot that needs to be done.

Entrepreneurship, management, and leadership have a critical role to play.

At Rhodes Business School, Owen says their postgraduate diploma in enterprise management is geared towards training students to become entrepreneurs.

He says the program has been very effective in embedding an entrepreneurial way of thinking into students, who come up with startup ideas and create a minimal viable products in as little as five days. Getting them to the next level after that is key.

“I’m a great exponent of regime startup philosophy and the business model campus," says Owen. 

“Entrepreneurs [here] are often survivalist entrepreneurs who are having to do this as there is no other alternative for them. We partner students with [them] and they engage with them to get suggestions and ideas in their working context. In the second semester, it begins to fall into place.”

No amount of education, though, is an instant guarantee of success. To some extent, there needs to be a reliance on the government, though a recent job summit failed to assuage any concerns that there may be about future growth.

“There are still policy issues regarding small business development,” Owen says. “The cost is still very high, and there are compliance issues—no doubt these things hinder the development of small businesses.

“The government need to come to the party from that point of view, and really listen to what entrepreneurs and small businesses are saying.”

If South Africa, and the African continent as a whole, is to come to the fore and create a lasting legacy, then there needs to be a shift in the wholesale approach to primary, secondary, and thus higher education.

Poor performance in maths and science is clearly an indicator that quantative skills are lacking. There also needs to be a strong manufacturing base, says Owen, to complement the private and services sector.

He adds that “South Africa needs more engineers and scientists, and one would then hope that more of those skillsets would come into business schools—people able to make the link between the tech startup and contextualizing a business model to take the business forward.”

South Africa is haemorrhaging talent because it's so mobile in the digital age. This is something, Owen says, that the country and the continent can't afford to continue doing.

The message of entrepreneurship needs to be spread. As eyes point towards the African business revolution, it's innovate or bust for a continent on the verge of deciding its future.