If we want to create impact in Africa, we need to attend to the task of creating successful businesses
When it comes to Africa’s development challenges, we don’t need bright flares or dazzling innovations; we need slow-burning and sustainable fires that bring about systemic changes
Things are looking tougher for Africa in 2017. After a decade of exuberant growth, recent GDP data shows that key economies in sub-Saharan Africa continue to slow, dragging growth in the region down to a disappointing average 1.1% per annum—its lowest in 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’s 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 recently, Africa has been the top geographic focus for impact 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 Rise Africa Rise 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 distinct 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 Mair put it rather elegantly in their article in the SSIR—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 created by incremental improvements of the core, routine activities of organisations (which are altogether less glamorous) can be sidelined—creating more harm than good.
A recent analysis of KPMG’s International Development Advisory Services 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 co-ordinated 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 don’t 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 continues to grow. The UN estimates that by 2050 Africa’s population will reach 2.48 billion, the majority being youth. And despite progress toward millennial goals, there are more poor Africans today than there 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 toward sound business principles to ensure 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 they really need.
Mills Soko is the director of the UCT Graduate School of Business and an associate professor at the school, specialising in international trade and doing business in Africa. With a career that has spanned business, government, civil society and academia, he is uniquely positioned to understand the role these sectors have to play—collaboratively and individually—in addressing critical issues of Africa’s development and competitiveness.