The Role of Entrepreneurship and Opportunity in Sub-Saharan Africa
As I have written before in my article Rise of the African Entrepreneur, ‘the World Bank reports that 43 per cent of sub-Saharan Africa’s population is between the ages of 0 and 14. That African countries will likely face an increase in job creation pressure is an understatement. Put more simply by the New Vision in Uganda, we are essentially looking at a ticking time bomb. But it would be short-sighted to lump Africa’s youth as part of a growing problem. If anything, this young African generation is part of a new process that breaks down historical barriers and harnesses a new potential to drive solutions.’ It is in the line of thinking that I see a need to focus on entrepreneurship as an important way forward. That is why I was so pleased to read this recently published report by Legatum.
From the Prosperity Index in Africa report:
Celebrating entrepreneurship in sub-Saharan Africa is about recognising the key role entrepreneurs play in fostering wealth and wellbeing for ordinary Africans. Entrepreneurs are ‘enablers’ of growth who help break down economic barriers and social constraints.
Entrepreneurship and local private enterprise are critical components of African economic development. This is because “entrepreneurs innovate and assume risks… hire and manage labor forces… open up markets… [and] find new combinations of materials, processes, and products. They initiate change and facilitate adjustment in dynamic economies.”
The entrepreneurial landscape in Africa is multi-faceted. It includes informal and formal sector, traditional and modern, as well as local and foreign-owned enterprises, all of which are geographically dispersed across rural and urban areas. It ranges from small enterprises (providing employment for a single individual) to large corporations (employing hundreds).
Small and Medium-sized Enterprises (SMEs), however, are the dominant form of entrepreneurial activity in sub-Saharan Africa. SMEs constitute around 90% of sub-Saharan African business operations and create over 50% of employment and GDP. SMEs tap into domestic and global markets, engaging in activities from retail to telecommunications. They help to fill a growing demand in the goods and services sector, as consumer demand and discretionary income within Africa rises. Finally, SMEs act as incubators of specialization and innovation within an economy, allowing the country to diversify and industrialise.
Indeed, entrepreneurial activity of this type has played an important role in the period of sustained and relatively high economic growth that Sub-Saharan Africa has experienced over the last decade. Increased foreign direct investment, rising basic commodities prices, and the growth of export-led industries have all continued to aid economic development. More importantly, however, are the liberal economic reforms and reductions in government expenditures that have helped to foster a new entrepreneurial culture, allowing SMEs to drive new growth in the region.
The Legatum Prosperity IndexTM demonstrates that the keys to helping entrepreneurship and opportunity thrive are building a strong infrastructure for Information and Communications Technology (ICT) and creating an environment in which access to opportunity is available for all citizens. Many sub-Saharan African countries fall below the global average in these areas – but the African countries that do the best, or that have improved in recent years, are the ones that have made great advancements on these measures.
See the report: