By Jereaghogho Efeturi – Ukusare
Doing business in all parts of the world is tantamount to waging a war, only difference is in this case, it is not against the enemy, hence, the term “healthy competition”. Starting a business is a herculean task. In most climes, there are special private funds that are available for start ups. These funds are referred to as Venture Capital. This is common in Europe, America and more recently, China. And this has been the culture for several decades. It should therefore not be surprising to find start-ups in countries with Venture Capital Funds doing very well and being employers of a huge amount of labor. One should also not be bewildered that the economy of these countries record steady growth on a yearly basis. However, in other climes like Africa, the reverse is the case.
Start-ups in Africa face a myriad of challenges ranging from the lack of funds to grow the business and all that is in between, to lack of skilled manpower to drive the business. Most African countries especially the Sub-Saharan countries face similar issues and these issues affect businesses and the start-ups are worst hit. Most of these challenges are infrastructural in nature. A few of these are highlighted here.
One of the challenges faced by start-ups in Africa is lack of power supply. The supply of electricity in most African countries especially Sub-Saharan countries is epileptic. So, starting out a business in these countries would certainly prove to be very tough. An elderly friend of mine who has travelled extensively to almost all parts of the globe doing business once mentioned to me that life in Africa is very hard, especially if you are trying to do your own business. And the first thing he mentioned, which is certainly known to any startup in Africa is the lack of power supply. Even in cases where you are very prepared to mitigate this challenge in your business, the rising cost of production or cost of service, which leads to higher market prices of your goods and services, will definitely be a major source of concern. Most especially if you have foreign products in the market or foreign competitors in the service you render. This is the most common business killer in Africa.
Weak telecommunications infrastructure is another major challenge for start-ups. Imagine a scenario where a start-up service provider promises to call a prospective client at an agreed time and at that time, the start-up puts the call through and gets no connection. He or she tries repeatedly and is still unsuccessful; meanwhile his/ her prospective client is waiting patiently or impatiently as the case may be and never gets this call. What happens to this start-up? He loses a customer who would possibly have brought him/her other customers. This also applies to start-up manufacturers as most rely on putting calls through when they require supplies. This is most common in Nigeria as the situation in many African countries is better than that of Nigeria. In case you are a Nigerian would- be start-up, please brace for impact.
Whereas banks and other private non-bank financial institutions in Europe and America have funds for start-ups, Africa lacks this key component. The African economy is not as robust yet in providing such funds to businesses that are just starting. Banks in Africa would always require collaterals that are equivalent to the sum you want to borrow from them. In addition, African banks have very discouraging interest rates that are always double digits and usually ranking among the highest in the world. These stifling conditions make it very difficult for the start-up to have access to finance to grow his/her business. This leads me to my next point.
Lack of enabling laws and government policies is yet another challenge facing the new business in Africa. In the words of Richard Branson: “Nigerian Governments are dream killers”. As much as this is true to Nigeria it also applies to many African countries. From the National governments to the local or municipal governments, you find a dearth of enabling laws and policies that create the right atmosphere for business to thrive. In cases where these laws and or policies are in existence, they reflect lack of a process leading to the making of the law and or policy. Consequently, you find laws and policies that are incomplete or that make worse an already bad situation. Again, this leads me to the next challenge.
The challenge of inconsistent government policies in Africa makes an already murky business environment turbulent. As administrations change from one to another so also do the policies of the governments change, thereby creating an atmosphere of constant change in policies. This takes its toll on big businesses as well. In addition, corruption in government is another factor that kills start-ups in Africa. Most government offices you go into expect you to “grease” their palm for them to do the job they are paid to do for you. Worse still, it is your money that is used in paying them still they want you to bribe them.
The last thing I would like to talk about is the lack of the minimum level of business management knowledge and skills. Most start-ups have the problem of poor management. With many years of experience in skills and brilliant ideas to start a great business, no business can grow without proper management skills in place. In addition to this, most of those recruited to work in these new enterprises lack the requisite qualification – technical or otherwise – for the jobs they are employed to handle. This is also as a result of overall inability to effectively manage an enterprise; precisely, inability to recruit qualified persons and maintain a great team.
In conclusion, the first I recommend on one hand is an upgrade or formal acquisition of entrepreneurship training. Business leaders need adequate business management knowledge and skills to stay ahead of the pack or to be able to put their enterprises in positions of favorable competition. On the other hand African governments at all levels should acquire and upgrade the infrastructure as well as make laws and policies that are based on proper research so as to create and sustain conducive business environments. The second is that the African private sector should evolve a robust system that supports start-ups. The system in view here is Venture Capital funds. Once these are in place, start-ups in Africa would no longer have to go through the daily harrowing experiences that they go through today.
Jere Efeturi is the Publisher & Editor In Chief, St. Hilary’s Magazine and an Entrepreneurship Training Facilitator.