The Role of Nascent Entrepreneurship in Driving Inclusive Economic Growth in North Africa

04/01/2017
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The AfDB publication, “The Role of Nascent Entrepreneurship in Driving Inclusive Economic Growth in North Africa”, analyses the role of nascent entrepreneurship in driving inclusive growth in North Africa. Inclusive growth is economic growth that allows vulnerable population (poor, women, youth), to participate in, contribute equally to, and benefitting from economic growth. The vulnerable population can participate in economic growth through the private sector in  two ways, including as employees (job creation) or as business owners (entrepreneurship).

The major conclusion of this publication is that entrepreneurship skills are present among the youth but the initial conditions are making the main difference. In fact, there is too much loss during the process, to the detriment of a private sector led growth.

In this trajectory nascent entrepreneurs are not ultimately new firm owners. Statistically, nascent entrepreneurs are young (25-34 years) and coming from families with low income. To the contrary and from a statistical point of view "new firm owners" are individuals working (part-time/full) for rich families and having access to informal investors.

Two main constraints are identified for the vulnerable to contribution to economic growth as business owner. The first constraint is the low education level. Indeed, the results have shown that most of the individuals that engage in business creation have at least post-secondary education. This implies that they are able to deal with the basic paperwork required to set up a business. The second constraint referred to access to finance. It has been shown that individuals with informal investor and/or wealthy family are willing to be business owners.

Within these countries, the mortality rate of created enterprises is high as a result of a lack of accompaniment for these nascent entrepreneurs. As a matter of fact, governments’ role is crucial in supporting nascent entrepreneurs during the transition to new business owners firms. In fact, governments should provide nascent entrepreneurs with the skills and experience they need to be successful entrepreneurs through a high quality of training programs including skills development, enhancing international languages, improved career guidance and direct linkages with employment opportunities. Indeed, governments have to ensure the quality of trainings covering the whole chain of the economic sector considered by the nascent entrepreneur and addressing its specificities.

The low level of education does not guarantee the innovation aspect for the new enterprises. Governments, through mentoring and internship opportunities, are able to make nascent entrepreneurs innovative and transforming the entrepreneurial spirit to a culture of entrepreneurship allowing new firms to grow and thrive in a difficult business environment. Governments should involve partners such as financial institutions, NGOs, businesses and various youth-serving organizations, including educational institutions as well as the civil society.  Finally, the publication fully recognizes that new ventures face difficulties in attracting external finance at the very initial stage, be it through bank loans or equity capital. Crowdfunding may then appear as a useful alternative route.

Read the full report.