Africa’s brand of entrepreneurship

Entrepreneurs do the same thing everywhere regardless of whether they are in Africa, in Europe or the United States. Their business is to make as much profit as is possible by optimizing other factors of production and their attendant risks. But these approaches to production organization and attitude to risk seem to underlie the differences in the brand of entrepreneurship in different contexts and geographies. They are not the only factors. Supply chain management and the quality of entrepreneurial support structure at a more aggregate level play a strong role as well. For instance, the entrepreneurial support structure in Africa appears to be the worst across the world. Many statistical indicators show that the quality of the continent’s public goods provisioning, as a facilitator of entrepreneurial production, is relatively low compared to what obtains in many other parts of the world. This poor infrastructural support constitutes a substantial share of the cost in most African entrepreneurs price model. Many provide the electricity they use at prohibitive costs. Many also arrange the supply of the water used in production. Some even deliver or maintain the roads that lead to their production premises. Quality of entrepreneurial support, partially explains the differences in the risk-to-profit optimization by the entrepreneur in Africa and those in other parts of the world.

In general, entrepreneurial models are responsive to the realities of the business environment context. Regrettably, the leadership of African countries seem to be united in their consistent failure in arranging appropriate levels of infrastructure and public goods investments which are crucial for robust entrepreneurial progress. The adequacy or otherwise of public-goods provisioning also influences the difference in entrepreneurs levels of risk and profitability appetites in various geographies and business environment contexts. Substantial evidence shows Africans appear not to be as entrepreneurially adventurous as many of their counterparts in the Western world. Entrepreneurs with high-risk appetites are also compensated with high returns if they succeed. A good example is the funding and commercialization of daring inventions in many Western and Asian economies which are not typical in Africa. Often, the research that underlies these inventions require hundreds of trial and error iterations over several years with substantial financial consequences. The fact that the risk appetites for this kind of investigation by entrepreneurs from these environments make them unarguably more adventurous. They are more willing to make riskier financial investments, knowing that in the end, they will be worth it. Nevertheless, it is also arguable that the confidence underscoring these risk appetites have much to do with the level of certainty in their business environment.

So, the level of infrastructural support that is available for entrepreneurial engagement and the quality of political governance are significant in determining how risk-averse entrepreneurs may be. It also influences entrepreneurs’ choices of either making or buying factor resources. Africa is incontrovertibly the extended raw material sources – directly or indirectly – for most foreign countries. Raw materials from Africa support high-tech manufacturing activities in foreign countries. Despite its proximity, our entrepreneurs rarely consider them worth investing in for launching more advanced and cost-competitive production. Perhaps given a combination of low-risk appetite and more challenging access to finance African entrepreneurs appear to be more comfortable with buying already refined raw materials from China and other Asian countries. Many of them also know that most of these raw material inputs originate from Africa. This kind of ‘strange’ entrepreneurial preference somehow helps in defining Africa’s brand of entrepreneurship. It is the type which ignores the urgency of deepening the supply chain structure for medium-term price competitiveness but deliberately chooses to depend on countries that mostly are dependent upon us for the same resources.

The old colonial mentality of dependency on the Western world appears not to have vanished with the proclamations of independence. History seems to unravel how challenging it is for many African entrepreneurs to dig deep into the environment around us and make the sacrifices necessary to investigate and exploit it successfully. Our scientists are largely armchair investigators and creators. Our universities rarely carry out the kind of research that is necessary for us to deepen the exploitation of our environment. Many of our research institutes merely hibernate funds for the private pockets of politicians. Our political leadership is not exculpable in all of this. Take, for instance, the case of Eleme Petrochemical in Nigeria, which was run at a loss for several years until the Indians bought it. Every fortnight, the Indians currently managing it make what the previous Nigerian managers realized in annual sales. Every month the current managers of Indorama [formerly called Eleme Petrochemical] can record sales turnover that the former managers of Eleme Petrochemical were only able to make in two years. Now, this is not because of the entrepreneurial wizardry of the Indians.

On the contrary, it has a lot to do with the laxity of our political leadership. That explains why we have litters of failed projects everywhere. Unfortunately, some of these failed projects constitute crucial parts of the architecture for the entrepreneurial support that many businesses need. Huge intermediate input makers such as Eleme petrochemicals and the Steel rolling mills in Ajaokuta, Nigeria are substructure industries required for the take-off and survival of many other sectors. The inability of our political leadership to patriotically oversee these large-scale substructure investments is part of the tale behind the absence of our brand of entrepreneurship. Possible conspiracy and the undermining of our capacity to successfully launch these substructure industries by the developed countries may also be a factor. It is a no-brainer that the successful and profitable management of these big industries would easily cut off significant proportions of the African markets from them.  This argument is plausible and easily understandable, given the nature of rivalry in business.

In a way, therefore, the governments in Africa must refocus the mindset of the people to understand that we have the market and the natural resources which if exploited successfully easily gives Africans their brand of entrepreneurship.  Secondly, it is also the duty of the government to a considerable extent, and a lesser extent, the civic society through the demand for accountability to strengthen the cause for the solid entrepreneurship support structure.  Again, it is also vital that we begin to refocus entrepreneurial interests around those natural resources where our native advantages first and foremost exist.  Agriculture, solid minerals, gas-related businesses are all areas where Africans have vast natural endowments, and these areas have extensive value chains that can create tremendous entrepreneurial opportunities for Africans. Enhanced mainstreaming of this thinking makes it easier for the African people to be in control of what nature gave to them. Consider, for instance, a country like Mali with vast deposits of gold but does not have a single Gold Reserve. Yet another state, France – former colonialist – which does not have any natural gold deposits, has rich reserves of gold carted away from Mali. Ideally, is Mali’s entrepreneurial ecosystem not supposed to be wrapped around gold where it has a natural business advantage?

The same situation is evident in the oil and gas business for many African countries like Nigeria and Congo. It is the same story across the whole of Africa, where each country has vast natural resource endowments with equally enormous value chains. Our brand of entrepreneurship should, therefore, be consistent with that of the rest of the world where production fully recognizes inherent competitive advantages. Combined with a modified Igbo apprenticeship system that is already natural to Africa, mainly the West African subregion, each of the areas of agriculture, solid minerals, natural gas exploitation, and oil refining should be the bedrock of Africa’s entrepreneurship and trade. Entrepreneurial engagement in these areas should deeply cut across the primary, secondary and tertiary sectors of each of them. Many Africans only engage at the fringe levels in the primary sectors of these areas of natural advantage. Consequently, we have myriad subsistent miners collecting raw gold, tins and columbites and selling the same to foreign processors for peanuts. Until we develop our capacities for processing these primary products to qualities acceptable at international markets, we cannot claim to have arrived at our brand of entrepreneurship.

Rather than sitting back while the raw materials in Africa are exploited and taken to other countries around the world and returned to us for purchase, we should control the businesses at the primary, secondary and tertiary levels. Take, for instance, the enormity of the supply chain challenge that COVID-19 imposed on the African manufacturing sector. At the beginning of the pandemic in China, many manufacturing companies shut down as they depended on China for raw materials. Meanwhile, a sizeable number of those raw materials originated from Africa. China and other Asian countries merely refurbished and repackaged them for African manufacturers to buy. By doing that, China practically controlled the supply chain for Africa’s manufacturing. When the coronavirus hit China, it triggered a severe supply chain problem for Africa. Strengthening the capacity of more African businesses to rely on their natural endowments increasingly would quickly give them better control of their supply chains. They will also be able to corner a more significant share of global manufacturing while playing enviable roles in global value chains.  It is even more auspicious now that the world appears to be looking at China with some suspicion and many countries of the world are trying to be less dependent upon China in managing their supply chain.