If African entrepreneurs and innovators want to make any new year’s resolutions this 2017 it should be to re-orientate their enterprises towards good business principles.
Things are looking tougher for Africa this year. After a decade of exuberant growth, recent GDP data shows that key economies in sub-Saharan Africa (SSA) continue to slow, dragging growth in the region down to a disappointing average 1.1% per annum – its lowest for six years. Add to that global threats, including uncertainty surrounding a Trump administration in the US, and you could start to get quite gloomy about prospects on the continent.
But such pessimism, I believe, would be misplaced. As businessman and philanthropist Tony Elumelu–champion of the concept of Africans investing in Africa –has pointed out, the commercial rewards for investing on the continent are still significant. And done right they can bring significant economic and much needed social benefits.
In fact, despite volatile global conditions, there is significant investment interest in the continent both at home and abroad –particularly in the impact investment space, which looks for businesses that deliver social value along with financial returns.
According to Rachel Keeler, writing in the Stanford Social Innovation Review (SSI) recently, Africa has been the top geographic focus forimpact investment for the past few years already. The only problem is that the number of interested investors far outstrips the number of investable enterprises. There are simply not enough “ safe bet” high-impact companies on the continent at the moment.
So how can African entrepreneurs and innovators position themselves to take advantage of this interest and create robust businesses that also deliver social and economic value?
The website riseafricarise says that first and foremost, entrepreneurs need to think like investors. This starts with having a clear and articulable vision of what they are trying to achieve and a strong business model for how they plan to do this, along with clear measures in place to track and demonstrate impact.
In short, they need to embody good business principles first and innovative potential second. Let’s face it, innovation is frequently touted as the cure all for creating new markets, jobs and solutions to age-old development problems, but despite its seductive lure as a quick fix for Africa’s challenges, innovation in and of itself is never going to be a substitute for sound business. It is not –as Christian Seelos and Johanna Mairputit rather elegantly in their article in the SSI - a shortcut to development.
Innovation, they argue, does not magically solve big problems faster. More dangerously, the belief that it does can mean that the value that is created by incremental improvements of the core, routine activities of organisations (which are altogether less glamorous) can be side-lined –creating more harm than good.
A recent analysis of KPMG International Development Advisory Services (IDAS) investment portfolio across Africa confirmed, perhaps unsurprisingly, that successful businesses also have the most impact. If we want to create impact in Africa, we need to attend therefore to the task of creating successful business –that includes paying more attention to the businesses that fail and understanding why this is, in addition to celebrating the ones that succeed. This will require a coordinated effort from business,government, civil society, media and academia working together to support and build business on the continent.
If we don’t do this we risk the tragedy of exciting new ideas –no matter how good they are –burning brightly and briefly before crashing to the ground never to be seen again
because they do not have the right business infrastructure in place to support them.
When it comes to the development challenges facing this continent, we don’t need bright flares or dazzling innovations –we need slow burning and sustainable fires that bring about systemic changes.
The scale of our challenges continue to grow. By 2050 theUnited Nations estimates that Africa’s population will reach 2.48 billion –the majority of them youth. And despite progress toward millennial goals, there are more poor Africans today than they were in 1990, two in five adults are still illiterate, and violence is on the rise. Clearly – new approaches are needed. So if Africa’s innovators and entrepreneurs want to do one thing differently this 2017, it should be to re-orientate themselves towards sound business principles to ensure that their business are robust and able to stand the test oftime. And if the rest of us want to help we need to work together to make sure we are giving them the support that they really needed.
So if Africa’s innovators and entrepreneurs want to do one thing differently this 2017, it should be to re-orientate themselves towards sound business principles to ensure that their business are robust and able to stand the test of time. And if the rest of us want to help we need to work together to make sure we are giving them the support that they really need.
This column was first published in the South Africa edition of Fast Company in February 2017