According to the 2018/2019 report from the Global Entrepreneurship Monitor, African countries such as Angola and Madagascar have some of the highest rates of entrepreneurship in the world. These entrepreneurs often operate on an informal, micro-enterprise scale, however, and their contribution to economic activity is minimal.
This is a shame because, excluding South Africa, most industrial sectors in Sub-Saharan Africa are not dominated by large firms that tend to keep entrepreneurs at bay in more advanced economies, thus presenting opportunities for significant growth.
Although foreign multinationals have (and are already playing) a key role in GDP growth in these countries, the tendency to repatriate their earnings ultimately diminishes their contribution to local gross national income (GNI). Furthermore, these businesses are often attracted to larger, better organized markets on the continent, where they can readily capture value using products and processes developed in their home countries. This leads to a scenario where residents in larger African cities have access to much of the same products and services one might obtain in the developed world, while outside these regions, residents are left to deal with the consequences of commercial neglect.
Local entrepreneurship therefore offers at least three benefits for African economies:
- Most of the income generated is retained and reinvested in local communities.
- Being local, entrepreneurs can more readily navigate the complicated cultural, economic, and infrastructure circumstances, thus contributing to economic activity and social good in underserved regions.
- At the individual level, entrepreneurship seems to be associated with higher rates of well-being, work satisfaction and overall happiness.
Given these potential upsides, it is unfortunate that entrepreneurship on the continent continues to lag. As seems to often be the case, researchers have implicated the usual suspects: inadequate infrastructure, poor education and high levels of corruption.
Emerging tech to the rescue?
Innovative technologies often upend what we think is practical or even possible. If harnessed, they could provide solutions to some of Africa’s most intractable problems.
To cite just three examples, the blockchain, drones and AI have enormous promise. The blockchain technology’s distributed ledger system may be able to reduce corruption in certain activities. My research indicates that firms in the region often tend to cite “informal payments” to government officials as an important business challenge. Any aspect of business-government relationships that can be made more transparent would therefore be favourably received by entrepreneurs in the region.
Applying blockchain solutions to government transparency is not a novel idea. To boost government transparency, the government of Canada has started sharing information about research funding through an Ethereum-based blockchain ledger. Similarly, other business-government dealings could be monitored via blockchain, reducing the potential for backroom deals that may disfavour struggling entrepreneurs, and increasing transparency and overall trust in government.
As a second example, autonomous vehicles such as drones may be able to solve logistics challenges for e-commerce or other businesses. This is the case with blood delivery in Rwanda, where drones minimise the effect of a difficult terrain and lacking transport infrastructure. Although this does not address the underlying dearth of infrastructure, it is easy to see how with policy support this system can be replicated in other industrial sectors and countries in the region facing similar infrastructural challenges.
Artificial intelligence is yet another example of the potential of emerging technologies. AI may be able to bring advanced education to the most remote areas of the continent by adapting world-class courses to student’s strengths and needs. AI has negligible marginal costs, after all, and doesn’t mind living in the pocket of an entrepreneur in the Niger Delta.
Making emerging technologies work in Africa
Although these technologies offer solutions for developing entrepreneurship in Africa that were once far-fetched, these solutions will likely remain out of reach without policy measures to optimally apply the underlying technologies at scale. The newly minted African Continental Free Trade Area presents a unique opportunity for policymakers to redefine what it means to be an entrepreneur on the continent. A coherent effort to boost high-potential entrepreneurship on the continent will require leaders to think about questions such as:
- How can entrepreneurs use autonomous vehicles and blockchain technology to facilitate logistics in the new African Continental Free Trade Area?
- What is the role of the African Union and national policymakers?
- How can big data and artificial intelligence help in identifying the most promising entrepreneurial ventures for public support in Africa?
- What role can the African Development Bank play in supporting the private sector development and commercialisation of innovative technologies in priority sectors such as healthcare and education?
Setting Africa on this audacious course will require leadership that is fully oriented to the opportunities and challenges of today’s knowledge economy, leaders who answer the right questions, and have the execution to deliver at local, national and continental levels.
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