Report paints bleak picture for sub-Saharan Africa’s startup scene

Where’s the best place to launch a startup company? Not Sub-Saharan Africa, by the looks of things.

A new in-depth study by the Global Entrepreneurship Development Institute found that the region is home to the most difficult environments to launch a startup.

In an attempt to highlight obstacles and opportunities, The Global Entrepreneurship Index (GEI) 2015 has revealed that Sub-Saharan Africa is the poorest performer in terms of entrepreneurship. While South Africa has the leading regional score — with a relatively good global ranking of 52nd — its fellow countries sit at the bottom of the list.

“There is a rapidly growing demand from startup communities and policymakers alike to help new firms start and scale,” said Jonathan Ortmans, president of the Global Entrepreneurship Network. “This Index identifies each country’s unique challenges and serves as a compass for prescribing the most effective interventions.”

Based on data collected from 130 countries, the study found that entrepreneurship is higher in richer countries with the challenges being very unique to each region.

GEI’s research formula looked at a total of 14 pillars of entrepreneurship which include areas such as skills, opportunity perception, culture, human capital, internationalisation and so forth. These pillars are categorised as Entrepreneurial Attitudes (ATT); Entrepreneurial Abilities (ABT); and Entrepreneurial Aspirations (ASP).

The table shows the top 20 countries as well as their sub-index scoresWhile the US, Canada, Australia, the UK and Sweden gained top scores, the report found that 22 of the 29 sub-Saharan countries are in the bottom quartile. Malawi, Uganda and Bangladesh are ranked at the bottom of the list.

The table shows the ranked African countries as well as their sub-index scoresRead more: The most comprehensive guide to the SA startup landscape ever [Resource]

The report found that Africa’s Attitude measure — Risk Acceptance, Networking, Cultural Support, and Opportunity Perception — to be among the poorest performers and below 0.20, compared to the global average of about 0.40.

On a positive note, Africa ranks above the world’s average when it comes to the countries’ “combined capacity to absorb technology with startup activity in the tech sectors.” This means large parts of the populations are keen on new technologies, which clearly shows that there is a market.

The main obstacle faced by the majority of sub-Saharan Africa’s countries is education. More specifically, tertiary education. GEI explains:

Sub-Saharan Africa seems to suffer from a bottleneck in startup skills. On the surface, this might appear inconsistent with the fact that the region exhibit some of the highest self-employment rates in the world. However, the measure is actually indicative of a quality problem, as most African self-employment activity is of poor quality. While starting a need-driven self-employment activity is easy, building a sophisticated startup is difficult.

This is where South Africa, specifically, fell most short: a lack of startup skills. The country did, however, excel in Competition, Product Innovation, Process Innovation and High Growth, which are all far above the world’s average. See below:

Click on image to enlargeNigeria, on the other hand, performed worst in Risk Acceptance, Startup Skill and Technology Absorption. It does excel in Networking and Opportunity Perception.

What are your thoughts on these stats?  You can download the full report on the Global Entrepreneurship Development Institute‘s website. Let us know in the comments below.