Economists have long referred to Africa as the ‘next global growth market.’ Numerous findings support this claim. For example, a recent report by World Bank shows that six of the 10 fastest-growing economies are in Africa. Over the past decade, Africa’s gross domestic product grew at twice the rate of the preceding two decades.
Several models of Africa’s potential as a viable environment for entrepreneurship continue to prove that the continent is the next frontier for aspiring entrepreneurs.
November is Entrepreneurship Month whereby we celebrate enterprises and entrepreneurial people. In my interactions with business owners, most say that the biggest support they need is a conducive environment for them to start successful businesses.
Four factors are critical to business owners who desire to build a successful business in Africa:
Gain a firm grasp on Africa’s social makeup
African consumers are evolving. A report published by a US public policy think-tank, Brookings, revealed that Africa’s urban population is growing. There is an increase in disposable income and a rising middle class.
Spurred on by rapid industrialisation and the upsurge in mobile technology adoption, Africa’s consumer base is expanding. Consequently, consumer demand and spending habits have evolved. This presents new and exciting opportunities. Entrepreneurs who want to succeed need to embark on market research to build a value proposition that aligns with the tastes, and preferences of African consumers.
Leverage the Free Trade Area
The establishment of the African Continental Free Trade Area (AfCFTA) will help eliminate some of the barriers to trade and economic integration between countries.
The agreement, between 54 African countries, has created a single market for goods and services and reduced tariffs for member countries.
There is an unparalleled opportunity for African entrepreneurs to trade under much more conducive conditions. Once members agree on some pending issues, the AfCFTA will be key in the growth of trade and aspiring entrepreneurs should keep their eye on these developments.
The most profitable businesses are those that solve problems through innovation. Africa is a continent of unmet needs and underserviced communities. Solutions to infrastructural development, education, healthcare and job creation are some of the opportunities waiting to be seized.
While we appreciate the role that governments and the private sector play in meeting these needs, entrepreneurs with an innovation-first mindset have the biggest potential to make it in Africa.
Funding options
Access to capital continues to be one of the biggest hurdles that entrepreneurs face. Recent research shows that in Africa, small and growing businesses are responsible for more than 60 percent of all food production and trade on the continent, yet they account for only 10 percent of commercial bank lending.
In an age where traditional lending institutions are being outpaced by independent financiers, and non-bank lenders, aspiring entrepreneurs should set their sights beyond conventional funding and turn to private investors and specialist funds who take on more risk and provide more flexible terms than traditional financial institutions.
The writer is CEO of Business Partners International, a risk finance company for formal small and medium owner-managed businesses in Kenya and selected African countries.
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