Some of Africa’s most successful business people from different industries and sectors came together to discuss how Africa can nurture entrepreneurial talent on the continent at the Annual Meetings of the African Development Bank Group (AfDB) on 9 June 2011 in Lisbon, Portugal.
The event was the Chief Executives’ Officers’ Dialogue which is a regular feature of the AfDB’s Annual Meetings each year. This year’s subject was African Entrepreneurs: Promoting Shared Growth and Prosperity?
The participants were Robert Gumede, Executive Chairman of South Africa’s information technology giant Gijima Group; Aziz Mebarek, Executive Director of Tuninvest-Africinvest Group in Tunisia; Jubril Adewale Tinubu, chief executive officer of perhaps Africa’s best-known oil company, Oando of Nigeria; Catherine Samba-Panza, Administrator-Director of insurance group Societe Gras Savoye in the Central African Republic, and Euvin Naidoo, Director of Credit Portfolio Management-PBB Africa, part of the Standard Bank of South Africa.
The debate was chaired by AfDB’s president, Donald Kaberuka, and moderated by well-know African TV personality, Lerato Mbele, from CNBC Africa.
All entrepreneurs around the world face obstacles in achieving their business plans, but specific challenges face creative business people in Africa.
One obstacle can be excessive regulation, which can lead to delays and extra costs to businesses. Even registering a company and obtaining various licences before setting up shop can take months, or sometimes years.
Other challenges include governance issues, the lack of a sound legal and regulatory framework. Business can also find it hard to get finance. Neither the banking sector nor capital markets in many countries is large and sophisticated enough to finance major projects or export activity.
Then there is the political stability issue; investors – particularly foreigners – worry whether their capital is safe, despite Africa’s improved record overall. Recent and unexpected high-profile events in places such as North Africa and Côte d’Ivoire can make business people jittery.
But on the plus side Africa is a huge market and opportunity. It has almost 150 million monied consumers and a further 400 million people with some limited spending power. They represent untapped demand for consumer products.
And the panellists are living proof that Africans can succeed despite the obstacles and can even become a billionaire starting with nothing.
On entrepreneurs, the panel agreed Africa need them for sustained economic growth. Mr Tinubu said: “Entrepreneurs manage risk, create jobs and innovate”. Mr Gumede added that they invested in human development and created sustainable jobs. Mr Kaberuka said they were “wealth creators and innovators”.
While entrepreneurs everywhere complain about getting finance to back their ideas, African innovators probably have a harder time getting funds. Mr Gumede agreed, saying financial institutions were very pessimistic, especially in South Africa. To get started, he said, he had to use his own resources. “I was never supported by any financial institution” he said.
Mr Tinubu echoed Mr Gumede’s comment – he had to rely on private contributions at the beginning, as did Mrs Samba-Panza.
And even when banks do give you a loan, the price of failure is high in Africa, said Mr Tinubu. “Donald Trump has said he has gone bankrupt five times. Banks in Africa never allow you to fail. If you do, you will never get a loan again”.
It is not just banks that create obstacles. Over-regulation in Africa can kill a business at birth, although in some countries, things are improving. Mrs Samba-Panza said: “It took me many months to get permission to open a company”. Now, she said, the system had relaxed and it was easier to get started. Since the changes, she said, “In the past two years, twice the number of women have started businesses”.
But whatever the banking system or country, entrepreneurs will always have to persevere, said Mr Naidoo: “There is no silver bullet, in terms of getting capital”.
However, governments can play an encouraging role on the regulatory front, he continued. Entrepreneurs need the rule of law, property rights and labour law.
Mr Gumede remained sceptical of government when it came to business. He is based in South Africa and Ms Mbele had earlier described the country as “heavily regulated”. Mr Gumede commented: “Our government doesn’t seem to have faith in business”.
Mr Tinibu agreed: “Government is a big problem in Africa, a big obstacle”.
Another stumbling block to success in Africa is poor infrastructure. Ms Mbele commented that bad infrastructure can add 40 percent to the costs of businesses. Mr Tinibu said a basic test was whether it was as easy to cross a border as it was in Europe. “Governments on both sides should fix the roads at the border rather than the one leading to the president’s house”, he said.
Infrastructure problems included energy shortages. Mr Mebarek said: “In Nigeria, you cannot rent a flat unless you have your own generator. The lights go out at five o’clock”. Mrs Samba-Panza agreed: “Infrastructure is an impediment for African entrepreneurs”.
Despite the various obstacles, the panel agreed it was worth fighting the battle, because Africa is a big consumer market.
Mr Kaberuka said in Africa, there were “120 million people roughly classified as middle class”.
On whether there was a worthwhile market in Africa, Mr Tinibu said: “There is no doubt about it”. There was a shortage of all sorts of products to meet the demand. “There is nothing in Africa that is in excess supply”.
Mr Mebarek said the key to tapping into the market is to bring down the price of lots of everyday goods by manufacturing locally rather than importing. His company had successfully done so.
However, Mr Gumede said labour could be a problem in parts of Africa, despite high unemployment, and to succeed in local manufacturing, there had to be a “harmonious environment”.