This article has some points that confirm some of the thoughts from our brainstorming session:
http://www.worldpoliticsreview.com/articles/20033/why-africa-s-young-entrepreneurs-are-the-key-to-diversified-growth
Why Africa’s Young Entrepreneurs Are the Key to Diversified Growth
Ernest Nti Acheampong
Tuesday, Sept. 27, 2016
NAIROBI, Kenya—When U.S. President Barack Obama attended the Global Entrepreneurship Summit in Nairobi, Kenya, in July 2015, it helped place Africa in the global limelight as an emerging entrepreneurship hub. At the event, global leaders, business executives, mentors, young entrepreneurs and high-level government officials reiterated the crucial role of entrepreneurship in economic development, creating new jobs, driving technological innovations and enhancing economic growth. Many speakers specifically called for African governments to put in place strategies to support the growth of enterprises.
Africa is already taking advantage of its youth demographic dividend to push young entrepreneurs to contribute to the continent’s economic transformation. Ghana and Kenya, which tout themselves as gateways to West Africa and East Africa respectively, have featured prominently in this trend, with youth increasingly focusing on the use of mobile technology to improve agricultural production and encourage governmental and policy support for youth-driven innovation and enterprises. But more can and must be done for African nations to diversify their economies sustainably.
As recently as two decades ago, Africa was hardly represented on the global business map due to its insignificant contribution to the global economy. All economic indicators pointed to a continent headed for a disaster. But gradually, Africa has begun to establish itself on the global stage as a hub for economic growth and business opportunities. While poverty persists in many countries, others—such as Ivory Coast, Tanzania, Senegal, Rwanda and Kenya—have undergone rapid economic transformation, inspiring great optimism and attracting investors from around the world.
The progress made in improving both international and domestic conditions has helped Africa’s collective economy grow steadily, maintaining a 5 percent average growth rate from 2001 to 2010; Ivory Coast, Tanzania and Senegal are among the top 10 fastest-growing economies in the world. In 2009, Africa’s collective GDP was estimated at $1.5 trillion, exceeding Russia’s $1.23 trillion and inching up on Brazil’s $1.6 trillion. However, since 2015, African economies have encountered significant headwinds owing to the fall in global oil and commodity prices. In 2015, the continent recorded an annual growth rate of 3 percent, down from 4.5 percent in 2014 and the lowest since 2009. The commodities slump has highlighted the perils of an unsustainable economic model reliant on the export of natural resources such as minerals, timber, oil and gas.
Mobilizing Youth for Prosperity
Despite the turbulence, the International Monetary Fund still forecasts that Africa will remain the world’s second fastest-growing economic region, after East Asia, due to investor confidence and an improved business and macroeconomic climate, among other factors. Africa’s average economic growth is expected to rise by 3.7 percent by the end of 2016 and pick up to 4.5 percent in 2017, provided that the world economy strengthens and commodity prices gradually recover.
However, the ultimate measure of growth for the African population will be reflected in priority issues such as reduced poverty, greater access to good health and education, food security and expanded job opportunities. Current indicators seem to suggest the opposite is occurring, with limited job opportunities and high youth unemployment. In most African countries, the public sector is no longer capable of absorbing the massive number of young people graduating from universities every year.
Africa’s rapidly growing population has led to a massive youth bulge, with over 40 percent of the continent under the age of 15, and 20 percent between the ages of 15 and 24. The statistics present both risks and opportunities for future prosperity. On the risk side, the high unemployment rate and limited opportunities for youth create widespread dissatisfaction and, especially in countries with limited avenues for dissent, can serve as a recipe for social unrest. Absent progress in these areas, an immense pool of talent will be left to waste, at the expense of African economies.
But on the opportunity side, if properly harnessed, Africa’s youth bulge can offer strong and energetic human capital with the potential to speed up economic growth and foster a sustainable future for the continent. Many young, dynamic Africans are highly motivated to define a better path to prosperity. They are well-connected and well-placed to create new technologies to transform Africa’s economy from resource-reliant to service-driven. There are plenty of reasons for optimism; many youth are already making their mark.
The commodities slump has highlighted the perils of an unsustainable economic model reliant on the export of natural resources such as minerals, timber, oil and gas.
Still, the growing urgency to create millions of jobs for the continent’s young population remains a serious challenge. The critical question is how can Africa develop a cadre of homegrown entrepreneurs who will establish businesses, become competitive in the global market, and foster growth in an inclusive and sustainable way? With an environment conducive to nurturing innovative ideas, developing skills and social networks, and improving access to financial capital, the youth cohort would be well-positioned to advance Africa’s economic transformation agenda. Entrepreneurship, particularly when new businesses are established and run by young people, will be a fundamental mechanism driving future prosperity across the continent.
Entrepreneurship is not a new idea in Africa. For decades, Africans have established small-scale enterprises to support their families, make a profit, and create menial jobs. From Cairo to Johannesburg and Dakar to Nairobi, young people have demonstrated their creativity and ingenuity in creating businesses and establishing small- and medium-scale enterprises. Take for example, Samuel Malinga, a 26-year-old Ugandan agricultural engineer who founded Sanitation Africa. The innovative company has developed a full-cycle sanitation system that starts with a locally manufactured low-cost hygienic modular latrine and ends with the conversion of sludge into cooking briquettes and agricultural manure. Another initiative, Tapera Bio Industries, launched by young Zambian entrepreneur Mutoba Ngoma, is involved in the production and promotion of biodiesel fuel and derivatives of vegetable oils.
Tapping into the digital revolution, young entrepreneurs are now developing a wide range of cutting-edge services and products that are transforming fields including agriculture, business, health care and transportation. These services and products address everyday issues and have improved socio-economic conditions at both local and national levels. Inspired by the need to address drought and the impact of uncertain weather conditions on farmers in Rwanda, 22-year-old Rosine Mwiseneza created the Ivomerere System, an automated irrigation system that uses sensors to detect soil moisture. Another 22-year-old Rwandan, Ange Uwambajimana, developed an Intravenous (IV) Drip Alert System, an automated tool for monitoring IV drips in hospitals.
The expansion of mobile phone connectivity is also proving to be a game changer for young entrepreneurs, facilitating the development of mobile apps and the emergence of business start-ups and tools to address pertinent societal needs, while also filling the employment gap. Africa has witnessed a tremendous rise in mobile phone usage in the past decade and a half, with approximately 70 percent of mobile users able to access internet via their phones. Between 2000 and 2010, mobile phone subscriptions grew at an average of 30 percent annually. By 2011, there were over 620 million mobile phone users in Africa, according to a survey by the Groupe Speciale Mobile Association. In the past 5 years, the annual growth rate of mobile phone use in Africa has increased by 65 percent, twice the global average. By the end of 2015, Africa recorded approximately 725 million mobile phone subscriptions with about 226 million of them smartphones.
In Ghana and Kenya, a Notable Push for Innovation
In the agricultural sector, which accounts for approximately 32 percent of GDP in Africa, new mobile applications and market information systems offer novel market tools for agro-business and so-called smart farming, which entails the application of affordable technology solutions for agriculture.
Gradually, Africa has begun to establish itself on the global stage as a hub for economic growth and business opportunities.
In Ghana, one of the most successful companies is Farmerline, a mobile-based service company that uses voice-based messaging, SMS and Android platforms to collect data, share new farming techniques, and better link smallholder farmers to other actors along the agricultural value chain. Established by a group of young Ghanaian entrepreneurs in 2013, the company provides vital market information on prices, weather and farming techniques to small-scale farmers to help them to improve productivity, adapt to climate variability, and negotiate good prices for their produce. Farmerline’s services also allow farmer-based organizations to conduct surveys to capture the impact of their interventions. Since its launch in 2013, Farmerline has successfully reached over 200,000 small-scale farmers across four African countries.
Kenya is often touted as Africa’s Silicon Valley. From mobile-payment systems to innovative agricultural information tools, Kenya is already witnessing how young entrepreneurs are transforming its economy. Within the agricultural sector, many innovative products have been developed to provide services in different agricultural subsectors including seed choice, marketing products and livestock. One of Kenya’s most recent innovations is the award-winning Pawa-Farm, an innovative Virtual Agro-weather Advisory Platform that provides timely, relevant and usable weather and climate information to farmers. Data provided by this platform includes agronomic advisories modeled in line with the projected climate conditions to enable farmers to make informed decisions and improve farm-management practices under risky weather conditions. As of April, over 5,000 Kenyan farmers had access to the platform, and Pawa-Farm has plans to scale up to reach the entire country.
It is too early to assess the impact of these technologies on agricultural productivity. But farmers are becoming more conscious of the digital revolution in agriculture and are embracing emerging innovations and technologies to access information and to make informed decisions on farm-management practices.
These are just a few examples of the nascent businesses, innovative services and new products developed by African entrepreneurs that are making a positive contribution to society and many African economies. It is encouraging that products made by young entrepreneurs have already caught the attention of both the private and public sectors. Recognizing that business innovation is central to economic growth, African governments are increasing their commitment to promoting youth entrepreneurship as manifested in the development of national entrepreneurship programs and enterprise funds.
A farmer at CCAFS climate-smart farms, Kenya, May 21, 2014 (photo by Cecilia Schubert via flickr, CC BY-NC 2.0).
The government of Ghana has prioritized entrepreneurship in its National Youth Policy as a critical part of its agenda to deal with youth unemployment. According to Ghana Statistical Service, 60 percent of unemployed Ghanaians are between the ages of 15 and 24—one of the highest rates of youth unemployment in the world. Putting this policy into action, the Ghana government transformed the National Youth Employment Program into the Ghana Youth Employment and Entrepreneurial Development Agency (GYEEDA) in 2012 to coordinate all youth employment and entrepreneurial programs. With $240 million devoted to youth initiatives by 2013, the program was the most significant public investment targeting youth development in Ghana.
Still, even with the government’s good intentions, an initial lack of legislative backing, coupled with financial malpractice and incompetence, contributed to the agency’s failure to live up to expectations. In 2013, a ministerial report on the operation of GYEEDA sanctioned by the Ghana government revealed that funds were disbursed without proper financial management and oversight, and pointed to the gross incompetency of the managerial staff, which contributed to the mismanagement of funds and accrual of debt to the program.
In its bid to right the wrongs of the previous project, Accra launched the Youth Enterprise Support initiative in 2014, designed to help young entrepreneurs and innovators turn their ideas into thriving business enterprises. Under the auspices of the president, and with support from a number of ministries and government agencies, the initiative is expected to nurture young and aspiring entrepreneurs through business clinics, mentorship and financial advice, among other opportunities. While lauding the government’s persistent support for youth development, many Ghanaians remain wary of the current program, recalling the awful experience of the past initiative. That notwithstanding, key institutions such as the World Bank, the United Nations Development Program and the International Labor Organization continue to financially support Accra’s initiatives to promote youth entrepreneurship as a critical driver for socio-economic growth and youth employment.
Recent graduates from across West Africa complete their five-week Young Africa Leadership Initiative training, Accra, Ghana, Sept. 3, 2015 (U.S. Embassy Ghana photo via flickr, CC BY-NC 2.0).
Kenya’s efforts to promote youth entrepreneurship are another useful case study. In 2005, the government established the Ministry of State for Youth Affairs, and in 2006 launched the Kenya National Youth Policy. The policy highlights five fundamental principles to promote civic and business engagement among youth: respect for cultural belief systems and ethical values; equity and accessibility; gender inclusiveness; good governance; and mainstreaming youth issues. The National Youth Policy led to the establishment of the Youth Enterprise Development Fund, which provides young entrepreneurs and start-ups with loans, facilitates marketing, and offers business-development services to youth-owned enterprises, in order to improve access to financial capital and services and ensure sustainable business models. So far, the fund has disbursed over $700 million to over 400,000 group and individual enterprises in the country. The fund has had a mixed impact on youth enterprises according to several impact assessments conducted in different parts of Kenya. In some areas, it has fueled the growth of new enterprises, due to pre-existing entrepreneurial networks and training programs. In others, however, the fund has not had a significant impact on initiatives, largely due to their low viability, lack of entrepreneurship training prior to and after loan disbursement, and poor follow-up on loan beneficiaries.
In addition to the Youth Enterprise Development Fund, the Kenyan Ministry of Devolution and Planning launched the Women Enterprise Fund, which provides access to affordable loans and credit to support women-run start-ups and expand business opportunities to create wealth and employment for women. This fund is a component of Nairobi’s Kenya Vision 2030 agenda, and part of an effort to meet the U.N. Millennium Development Goals on gender equality and women’s empowerment. So far, over 800,000 women’s groups and individuals have benefited from the fund in the form of loans. A recent assessment suggests it has had a positive impact on women’s incomes and overall household incomes, providing much-needed capital for new enterprises.
The private sector has not been left out of Africa’s push for greater youth entrepreneurship, either. Private foundations, including the African Innovation Foundation and the Bank of Africa, offer a number of awards and prizes to promote business innovation, such as the Innovation Prize for Africa, African Entrepreneurship Award, Africa Awards for Entrepreneurship and the Pan-African MTN Entrepreneurship Challenge. There are several cash prizes and invitations for business proposals directed toward young people across Africa. The African Enterprise Challenge Fund (AECF), for example, is a multimillion-dollar fund established to stimulate innovation among entrepreneurs and encourage them to find profitable ways of improving access to markets, particularly in rural areas. Since its inception in 2008, the AECF has received over 6,000 applications; a total of 218 projects have been approved for funding, and $545 million in private-sector funds have already been committed.
What Still Needs to be Done
Despite the emerging opportunities for entrepreneurship, several challenges remain. Young people in Africa are quick to highlight the lack of funds and capital for the incubation of ideas and establishment of start-ups. But as the public and private sectors pull together financial resources to support young entrepreneurs, it’s important to stress that success is a two-way street, and new businesses must do their part to stay afloat, coping with uncertainty and adapting to market dynamics. According to the Omidyar Network report, while many African entrepreneurs complain about limited financial capital, financiers and investors point out that many proposed ventures are not fundable. Indeed, many investors and financial institutions are averse to offering loans and credits to youth-led businesses because they are deemed too risky and in many cases not financially viable.
So, while access to capital is a major constraint on youth entrepreneurship, it doesn’t tell the whole story. Young Africans seeking to start new businesses lack well-tailored training, undermining their innovation potential and deterring would-be investors. And even with the spate of well-intentioned government programs and private and public funds that have been set up, many have been hit hard by corruption and poor programming and implementation.
From a government standpoint, entrepreneurship in Africa will take more than just funding. State agencies must create and support programs that provide the knowledge and skills necessary to set up a business, including financial management, risk and uncertainty analysis, and market strategy. Taking advantage of technological advances, young African entrepreneurs must establish business connections in the region and abroad, and prepare themselves to access financial services and emerging markets.
If properly harnessed, Africa’s youth bulge can offer strong and energetic human capital with the potential to speed up economic growth and foster a sustainable future for the continent. Strong mentorship has been, and will continue to be, central in boosting innovation. Well-renowned and successful entrepreneurs in Africa and around the world are providing mentorship and inspiring young entrepreneurs with their experiences in running and taking businesses to the next level. In 2011, Gallup found that 25 percent of entrepreneurs surveyed in sub-Saharan Africa who developed their own mentor plan or had access to a mentor were likely to succeed in starting a business, compared to 13 percent among those without one. But the mentorship trend is catching on across the continent; a recent EY global survey discovered that 58 percent of entrepreneurs surveyed in sub-Saharan Africa were engaged in mentoring young people, compared to 34 percent worldwide.
Africa’s future economic prosperity will rely profoundly on its young people’s capacity to innovate and translate new ideas into businesses that create jobs and wealth, and boost economic growth. Given the continent’s large youth demographic and continued population growth, as well as the declining capacity of the public sector in many African countries to create jobs, growth of the private sector will be crucial.
The call for bottom-up entrepreneurship has never been more intense than it is today. Young African entrepreneurs have already taken off, breaking barriers and vigorously dismantling forces that are impeding their growth as entrepreneurs. They are in no way waiting for government’s interventions. This is the spirit of the young African entrepreneur. While there is no “one size fits all” model for promoting entrepreneurship in Africa, some of the successful models seen in Ghana and Kenya, for example, can be beneficial guides for young and aspiring entrepreneurs.
In March 2017, African leaders will gather for the Global Entrepreneurship Congress in Johannesburg, South Africa—the first time an African country will hold the annual event. The conference will bring together entrepreneurs, investors, start-up champions, innovators, researchers and thought leaders from across the globe to help bring new ideas to life, find new ways to help start-ups grow, and scale new ventures around the world. The meeting is an important development for African countries that must take advantage of their youthful demographics and seize the opportunity to embrace and mainstream entrepreneurship into national planning. Entrepreneurship spearheaded by motivated and energetic young people in Africa has the potential to create social transformation and foster economic growth. It is time to turn that potential into reality.
Ernest Nti Acheampong is a research officer at the African Technology Policy Studies Network.