Is the success of young African entrepreneurs up to the state?

A typical entrepreneurial journey is one not devoid of highs and lows, laced with a lot of ‘luck’, and an enabling environment bolstered by favourable policies.

However, for many young entrepreneurs across the African continent, it is more of a sacrificial tale, grit and a burning desire to solve humongous socio-economic issues than a fairy one.

There are many dynamics – both internal and external – that must play out to birth a remarkable success story.

Having observed some of the entrepreneurial challenges, it is safe to say that for every successful young entrepreneur, there is a determined, innovative and risk-loving individual who, against all odds, is willing to make a difference in a rapidly changing world.

Although most entrepreneurs can transverse the internal factors that may affect the establishment and growth of a startup, it is the external forces, which they have little or no influence over, that ultimately determine the fate of these businesses. These factors are associated with the economy, politics and government policy, among others.

Thus, for young entrepreneurs to survive amid these grueling reality, a number of stakeholders must work together to provide an enabling environment in which businesses can flourish. Notable among these stakeholders are policymakers.

Government policies have a huge effect on the success or failure of entrepreneurs. While favourable policies can boost sales exponentially, unfavourable ones could make doing business very daunting.

An adverse business environment will lead to an increase in unemployment, lean workforce and birth a struggling economy. As such, more African nations have begun to implement policies that attract investors and encourage young entrepreneurs.

This article focuses on some of the policies and strategies which supports young entrepreneurs in selected African countries and looks at their positive impact on youth entrepreneurship.

Profiling these policies and strategies could inform young entrepreneurs of their existence and how to take advantage of them.

Business registration

Many African countries have taken steps to create an enabling environment which minimizes the hurdles young entrepreneurs go through when registering their businesses.

Countries such as Nigeria, Rwanda, Tanzania, Togo, Botswana, Kenya, just to mention a few, have created an online platform to ease business registration procedure.

In addition, the cost associated with business registration as reported by World Bank Group in 2019 (see www.doingbusiness.org) have been cut down or eliminated in some countries. Notable among these countries is Nigeria where the registration fee has been reduced by up to 50%.

Startup capital

Lack of capital and finance is one of the many disincentives to starting or growing a business in Africa.

To support young entrepreneurs, Swaziland and Kenya established a youth enterprise fund which provides startup capital for emerging young entrepreneurs with innovative business ideas.

The Youth Enterprise Development Fund in Kenya provides flexible collateral loans at highly competitive rates to young entrepreneurs aged 18 to 35 years to expand their businesses.

In Egypt, the Central Bank has recently enforced a regulation that requires banks to lend at least 20% of their overall portfolio to youth-owned enterprise.

Also, the African Development Bank (AfDB), through the Youth Entrepreneurship and Innovation Multi-Donor Trust Fund, annually offers financial support to SMEs or startups created and run by young Africans.

Non-financial support

Notable among the NFPS existing in Africa are comprehensive technical training, networking, and mentorship schemes for both prospective and active young entrepreneurs.

These strategies aim at improving the technical and managerial skills of young people as well as equip them with skills required for their entry, survival, productivity and growth in the labour market.

Nigeria, Kenya, Malawi, Zambia and Angola are examples of countries with strong NFPS which supports young entrepreneurs.

For instance, the Fadama Guys scheme implemented by the Federal government of Nigeria in 2017 provided technical support to over 6000 agripreneurs across 23 states in Nigeria.

The government of Angola also provides networking support to young entrepreneurs by organizing them into cooperatives and shared workspaces with appropriate equipment.

Similarly, Tanzania, through the Private Sector Foundation, equips young entrepreneurs with practical skills to start and run their business enterprise.

Besides this, the Foundation provides mentorship services to these youths to ensure that they don’t get discouraged along their entrepreneurial journey.

Tax compliance

In agreement with the words of one of the young entrepreneurs who benefited from his Foundation in 2019, Tony Elumelu during the 21st Annual Tax Conference of the Chartered Institute of Taxation of Nigeria held in Abuja in April 2019 stated that:

“The average business owner in Nigeria is a local government authority on his own because he caters for his basic amenities including power, water and waste disposal. The least the government could do is make his life easier by creating favourable tax policies which support SMEs”.

In response to this, many African countries have put in place tax incentives which encourage SMEs and startups. Few countries including Nigeria, Tunisia and Senegal have incorporated tax regimes which exempt small business owners from paying income tax in their first year of operation.

In 2009, South Africa introduced a Turnover Tax regime which enables small business owners to meet their tax obligations and at the same time reduce their compliance costs.

In a nutshell, building a strong economy requires a collective effort between entrepreneurs and policymakers. In the emergence of entrepreneurship, policymakers must play their role in nurturing a large mass of skilled and successful young entrepreneurs who would drive economic growth and development in Africa.

This story appeared originally on the Anzisha Prize’s blog on 17 April. See it here.

The Anzisha Prize seeks to fundamentally and significantly increase the number of job generative entrepreneurs in Africa, and is a partnership between African Leadership Academy and Mastercard Foundation. Through Ventureburn, they hope to share inspirational and relatable stories of very young (15 to 22 year old) African entrepreneurs and the people that support them. [learn more]