ENTREPRENEURS IN AFRICA HELP BOOST EMPLOYMENT, GDP GROWTH RATES SAYS GEM RESEARCH
Sub-Saharan Africa (SSA) is in the midst of an entrepreneurial revolution that is invigorating the region with new opportunities, increased employment, and a robust rise in gross domestic product to one of the highest GDP growth rates in the world, according to the 2012 Global Entrepreneurship Monitor (GEM) Sub-Saharan African Regional Report launched this week in Lusaka, Zambia.
Africa’s real GDP rose by 4.9 percent from 2000 to 2008, more than twice that of the 1980s and 1990s. In 2012, six of the ten economies studied in this region - Angola, Ethiopia, Ghana, Namibia, Nigeria, and Zambia - reported GDP growth rates of 5 percent or higher (as high as 8.5 percent for Ethiopia). Many countries in sub-Saharan Africa are becoming less reliant on raw material mineral extraction and agriculture and are moving toward high technology innovations. The telecommunications, banking, and retail sectors are flourishing. Construction is booming and private investment inflows are surging.
“The entrepreneurial landscape in sub-Saharan Africa is changing rapidly and the region is now becoming a mecca for business development and growth,” remarked Mike Herrington, lead author of the report and GEM Executive Director and Professor at University of Cape Town, South Africa. “Opportunities abound and a positive sprit is emerging amongst the population of these countries.”
“Entrepreneurs in the sub-Saharan nations have among the highest entrepreneurship rates in the world, with women participating at equal or nearly equal rates in most of the countries we studied in this region,” commented the GEM Report’s co-author, Donna J. Kelley, Associate Professor of Entrepreneurship at Babson College. “This shows an incredible ability for people here to create their own jobs, and in many cases, jobs for others. As a result, entrepreneurship in sub-Saharan Africa can contribute substantially toward providing income for families and lifting communities out of poverty.”
GEM academic teams oversee surveys of demographically representative samples of the adult population in their countries, analyzing societal attitudes about entrepreneurship, how many individuals are participating in entrepreneurship at various phases of the process, profiles of the entrepreneurs and their businesses, their motivations for starting, and their future ambitions for their businesses.
The report’s key findings on entrepreneurship in sub-Saharan Africa:
- Total Early-Stage Entrepreneurial Activity (TEA) measures the percentage of adults (18-64 years) who are in the process of starting or just starting a business. At 28 percent, SSA rates are significantly higher than all other regions around the world. Countries like Zambia (41 percent), Ghana (37 percent), Nigeria (35 percent) and Angola (32 percent) show some of the highest TEA levels in the world.
Established Business Rates
- SSA countries have higher rates of established businesses than startups: Angola (32 percent vs. 5 percent), Botswana (28 percent vs. 6 percent), Malawi (36 percent vs. 11 percent) and Zambia (41 percent vs. 4 percent). Due to high TEA rates many new businesses are started; but fewer have survived into the mature stage.
- SSA nations have a high perception about the existence of good opportunities for starting a business in the next six months, with the exception of South Africa (35 percent), falling well below the average of 70 percent for the region. Over 80 percent of people in Nigeria and Uganda, on the other hand, see opportunities for starting businesses.
Fear of Failure
- SSA entrepreneurs exhibit the lowest levels of fear of failure, with only 24 percent responding that it would prevent them from starting a business. The only other region that comes close to this optimism is Latin America and the Caribbean at 28 percent.
- The levels of intentional entrepreneurs (those who intend to pursue a business in the next three years) are high at an average of 53 percent. Exceptions include South Africa (12 percent) and Ethiopia (24 percent). In contrast, 70 percent or more intend to start businesses in Angola, Bostwana, Malawi, and Uganda.
- In all SSA countries, without exception, entrepreneurship is seen as a good career choice (76 percent on average) and 77 percent believe they garner great media attention as entrepreneurs, more so than in any other region.
- Discontinuation rates are high. Over 16 percent of adults in SSA have discontinued a business in the past year, reaching as high as 29 percent in Malawi. SSA has a high level of people discontinuing relative to those starting. Exits in this region are most often due to profitability or problems with financing the venture.
Women and Men Entrepreneurs
- SSA nations have almost equal levels of male and female entrepreneurs with the exception of South Africa (50 percent more men than women).
- Levels vary considerably among SSA nations. In Malawi, Uganda, and Ghana, only 3 percent of entrepreneurs had completed secondary-levels of education, while in Zambia and Botswana, over 30 percent of entrepreneurs have secondary degrees and some post-secondary education.
- Introduce new funding models and encourage and possibly incentivize financial institutions and individuals or corporations to provide capital to entrepreneurs without the stringent collateral requirements of commercial banks
- Build programs providing mentorship by experienced entrepreneurs
- Expand the education curriculum to improve the capabilities as well as the motivations of students to engage in entrepreneurial activities; promote practical training programs with quality, experienced educators
- Improve the physical infrastructure-power, transportation, water and broadband internet, especially in the more rural areas
- Reduce bureaucracy associated with starting a business and combat corruption
- Form partnerships to facilitate the transfer of technology to the private sector, such as with government and university collaborators
- Identify and implement policies that encourage youth to start businesses
- Support those with high employee growth expectations
The Global Entrepreneurship Monitor (GEM) is a not-for-profit academic research consortium that has as its goal making high quality information on global entrepreneurship activity readily available to as wide an audience as possible. GEM is the largest single study of entrepreneurial activity in the world. Initiated in 1999 with 10 countries, GEM 2012 conducted research in 69 economies all over the world. Follow GEM on Twitter at @GEMNOW
The International Development Research Centre (IDRC) is a Canadian Crown corporation established by an act of Parliament in 1970 to encourage and support researchers and innovators to find practical, long-term solutions to the social, economic, and environmental problems developing countries face. The IDRC has assisted many countries around the world in studying entrepreneurship using GEM data. They have supported GEM studies in the Caribbean, MENA, and South East Asia. The GEM 2012 Sub-Saharan Africa Report is based on GEM data collected during the first year of a 3-year study of entrepreneurship in sub-Saharan Africa: made possible through a generous grant of $1.44 million USD from the IDRC.
About Babson College
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