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Massachusetts Institute of Technology Legatum center for development & entrepreneurship

Legatum Center Blog

Below is an article from the Legatum Center

Making Entrepreneurship Work in Africa: Challenges and Solutions

When Affiong Williams founded her snack-food company ReelFruit in Nigeria in 2012, she soon discovered she had to go beyond the typical managing and marketing required to put any new business on the map.

Williams realized she had to take on a leadership role across the entire value chain of her products – from the farming techniques used to grow the raw materials to the training developed for workers in the processing plants. There was no part of the process that she couldn’t touch if she wanted to succeed.

“It’s sort of emblematic of what a lot of African entrepreneurs have to do when they start a business,” she said. “You start in a particular sector and you find that you have to keep solving problems to actually defend what you’ve started in the value [chain].”

Williams was among several business leaders who spoke during the recent Lauder Africa Futures Conference hosted by the University of Pennsylvania. The Legatum Center sponsored two panel sessions that focused on the everyday challenges faced by entrepreneurs who want to scale their businesses across Africa. Throughout the lively and thoughtful discussions, some common themes emerged. Chiefly, the barriers to scaling a business in Africa have roots as wide and deep as the legacy of European colonization across the continent. But those barriers can be hurdled with a change in mindset, a spirit of cooperation, and active partnerships that will lead toward a more prosperous future.

“It’s a shared responsibility on all stakeholders,” said Hassan El-Houry, group CEO of National Aviation Services, a Kuwait-based firm with operations throughout Africa. “Institutions need to take some responsibility. Governments, I think, have a huge role to play, international investors, existing business in Africa. It’s a shared responsibility, and if everyone does their part, I think the whole will be far better than the individual parts.”

Different Countries, Different Rules

El-Houry highlighted one of the biggest challenges for companies operating in Africa, which is the different regulatory and legal systems of each country.

“We talk about Africa as if it’s one country when in reality it’s 54 countries, and each country has its own laws, its own culture, its own ways of doing business, and its own challenges,” he said.

Regulations that are specific and exhaustive in one jurisdiction may be ambiguous or missing entirely in another.

“Not only do the policies differ, but you may want to do something for which there is no complete guidance,” said Ruthie Rosenberg, director of Citywise Advisory Services at Sanergy, a Nairobi sanitation company that is partnering with the government to scale across Kenya by 2025.

Beyond the different regulatory frameworks, other challenges include the large informal economy that exists in many African nations, distinct currencies that hold different value, the weak purchasing power of some consumer segments, and important nuances in the myriad of cultures, religions, and languages among 1.2 billion Africans.

The Legacy of Colonialism

Several of the panelists pointed to the fact that before the era of European colonization, African nations traded more freely and openly with each other. Now, there are regional divisions that are largely based on that legacy and easily seen through the languages spoken in those regions — French, English, and Arabic.

“Pre-colonial times, free trade in Africa was the norm. We didn’t have these divides,” said Dina Sherif, executive director of the Legatum Center and senior lecturer at the Sloan School of Management. “Sub-Saharan Africa wasn’t even something we referred to. It’s really a product of Western construct.”

When pharmaceutical tech company RxAll wanted to expand beyond its home base of Nigeria, co-founder and CEO Adebayo Alonge focused on the English-speaking areas of the continent. He said that’s an example of the effects of colonization that Africans must shrug off in order to have truly open trade that is unbound by cultural affinities.

“That’s what I see as the real potential if we build cross-linkages across our various ecosystems,” Alonge said.

Find a Local Partner

Increasing collaboration and exchanging ideas across jurisdictions and borders is key to helping entrepreneurs help themselves, according to the panelists. And one of the most effective ways to do that is through local partners and local investors.

Some of the panelists have participated in the Legatum Foundry Fellowship, and they said the program is instrumental building a cross-border mindset because it helps entrepreneurs see different perspectives. Launched last year, the fellowship allows Africa-based entrepreneurs to visit and network outside of their home countries to learn how business is conducted in other markets.

Chinedu Azodoh, co-founder of Lagos-based mobility tech firm MAX.NG, said the fellowship helped him take a more holistic approach to expansion. Now, he thinks about things like how the MAX.NG business model should change from country to country, whether they need to build a new system or merge into the existing system, and who can be a local partner.

“The fellowship has been super impactful for us because it’s meant that now we’ve got access to partners and introductions that ordinarily we wouldn’t have access to,” he said.

The panelists said they are hopeful for the future of African entrepreneurship because so many stakeholders are working toward improving it, especially for the next generation. Williams believes that a creating a better regulatory environment is a top priority.

“Right now, that’s one of the biggest blockers of intra-African trade and collaboration,” she said. “I hope for government, private parties, NGOs to really rally around that agenda, to reduce the bottlenecks and regulations that stop entrepreneurs from really unearthing more opportunity and economic prosperity on the continent.”

Brukty Tadesse agreed. She’s the founder of Whiz Kids Workshop, an Ethiopian firm that develops educational materials for children. She wants the world to know about the incredible ways that African entrepreneurs are working to transform the continent.

“People like us — the founders, the movers and the shakers – our stories should also be told widely,” she said. “That story of Africa, we are the face of it. And it is hopeful, it is so much possibility. And hope has to be told, so young people can strive to achieve that and be part of the possibility.”

Author: Angie Basiouny

Affiong Williams, Founder ReelFruit

“That’s what I see as the real potential if we build cross-linkages across our various ecosystems,”

Chinedu Azodoh, co-Founder MAX.NG
Brukty Tadesse, Founder Whiz Kids Workshop

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