The start-up ecosystem in Africa has been growing rapidly in recent years, driven largely by those deploying technology in various industries, but mostly Fintech. BusinessDay’s CALEB OJEWALE caught up with SOMACHI CHRIS-ASOLUKA, CEO, Tony Elumelu Foundation (TEF) at the first ever GITEX Africa, which was held in Morocco. In this interview, she gives insights into areas that have attracted attention and the importance of strong networks in business survival. Excerpts:
There is a certain attractiveness of the African Fintech space right now and it has been getting a lot of investments, but Africa has several other challenges. As an organisation that supports entrepreneurs across Africa, do you think there could be a mismatch in terms of problems on the continent and where investments are mostly focused?
I think that’s an interesting question, but I would compare it to chicken and eggs. I speak as a member of the Heirs Holdings group which includes the United Bank for Africa. UBA is one of Africa’s largest banks, present in over 20 African countries, and at UBA we also understand the importance of financial inclusion.
We can eradicate poverty and uplift families out of poverty in a number of ways; investing in their businesses, giving them training, and access to new markets. I think one could argue that if you give them access to financial services including payment platforms, it would also lift them out of poverty. How? It brings them into the financial system. So they’re able to earn an income, access that income, and then spend that income.
We know that Africa needs jobs more than anything, and we don’t believe that those jobs would be created by the corporate or public sector. We believe that only SMEs can create the jobs Africa needs
However, as Africa continues to attract investments in Fintech, it should not be at the expense of other sectors. We still need a lot of money in agriculture. African entrepreneurs are telling us agriculture is a lucrative sector for them, but we need to mechanize it. We need to make it more large-scale, and invest in storage, warehouse infrastructure, transport, etc. We should not have Fintech monopolize all these investments coming (to the continent) but it should continue to. Likewise, other sectors like fashion, agriculture, healthcare, and education, which I think are other big sectors that need investments from outside and internally as well.
Tying this to what you do at the Tony Elumelu Foundation, how much focus do you place on these non-Fintech areas that affect the everyday African and can solve real problems for them?
I think Fintech can solve real problems as well but I see your point. So at the Tony Elumelu Foundation, we are the leading philanthropy empowering young Africans from all 54 African countries. I think that’s one of the most unique things that we do; not just focusing on one country or one region but the entire continent. And we’re also focusing on all sectors, so our program is sector agnostic.
We don’t look for only Fintech entrepreneurs or only agric entrepreneurs. As long as you’re a business owner in Africa, an African citizen, and resident, your business is under five years of age, then we encourage you to apply to our program. And what do you get from our program? It includes business management training that is conceptualised for the African continent.
A lot of times when we think about business or start-up training, we look to Silicon Valley, but I dare say that I don’t think that curriculum works on the African continent. We also have our own nuances that are unique to the continent. And so our business management training at TEF, takes into cognizance, all of that. We also give entrepreneurs mentors. We know entrepreneurship is a lonely journey, and our TEF mentors are able to handhold each entrepreneur and guide them in the start-up journey. To counsel, give advice, and access new networks, and this prevents entrepreneurs from repeating their mentors’ mistakes.
We also give entrepreneurs $5,000 in seed capital each. This is not returnable seed capital as we don’t expect you to pay us back. We also don’t have any stake in your business. All we ask is that you plough that fund back into your business and grow it so you can employ other people to serve three purposes.
One, is to help create more jobs on the African continent. We know that Africa needs jobs more than anything, and we don’t believe that those jobs would be created by the corporate or public sector. We believe that only SMEs can create the jobs Africa needs. Two, we want you to help eradicate poverty. So we want you to think of your business not just as a profit-making vehicle for you and your family, but as a way to employ other young people in your community so that you can lift those people out of poverty. Three is women’s economic empowerment. We believe that women are a force for good and we cannot continue side-lining women in economic activity. So all of our entrepreneurs are encouraged to employ more women so that we can have more women play an active role in advancing our continent.
What’s very interesting about our program is that we’ve disbursed over $100 million so far since 2015, as seed capital to over 18,000 young Africans from all African countries. We’ve trained 1.5 million young Africans, but let me tell you, over 50 percent are in agriculture. Agriculture is our most popular sector by far. A few years ago, some research studies were coming out saying African young people are moving away from agriculture, they don’t want to get involved but that’s not true. Our statistics say otherwise.
We’ve had millions of entrepreneurs apply to our program and over 50 percent in agriculture, so that tells you that young people are looking to agriculture as a lucrative business. They’re not just going to agriculture the same way their fathers did it at the subsistence level. They are bringing technology and investments into it. Some of our entrepreneurs are creating storage systems, cold rooms, warehousing, and distribution networks. They’re transporting farm produce from the farmers to city centres, distributing this to different homes.
They are being very creative about agriculture, creating wealth in that sector, empowering the small scale farmers, and giving them incomes that they are worth.
Will it be safe to say they’re not going into primary production, but secondary aspects of the agricultural value chain?
Primary and secondary. They are revolutionising primary production by coming up with agrochemicals and technologies that enable farmers to monitor and carry out tasks on farms. They are being very creative in how they’re touching lives in the primary and secondary value chains of agriculture. They’re doing amazing things across the continent. It is inspiring.
Considering the mortality rate of businesses in Africa, these over 18,000 start-ups you’ve funded since 2015, what is the growth rate you’ve seen after their participation? Years later, what has data shown in terms of their business growth and trajectory?
In Nigeria, for instance, nine out of every 10 start-ups in any given year will fail. Fortunately, that’s not the case in our program. In fact, our program shows us that about eight out of every 10 entrepreneurs that we work with are still in business five years after our intervention.
I think that it’s because of the training they get in our program, the kind of mentorship, and the network they get. They will tell you that even when they want to give up because they’re part of a larger family, they are able to get into partnerships with one another, get advice and meet investors with each other.
When you are in a community and part of something bigger than you, the chances of failing are much more reduced. This is in addition to the access we give our entrepreneurs to their policymakers. They get opportunities to meet with their presidents and other policymakers to tell them what’s going wrong, what could be done better, and what policies are stifling. What rules and regulations are archaic and need changing, so that entrepreneurs are able to flourish and do better in their countries?
If we are going to get more start-ups and small businesses in Africa to scale up and survive more, what would governments need to do?
No matter how much we fund, train, and mentor entrepreneurs, if the enabling environment is not there, those entrepreneurs can never thrive. We can only do our part but the government has a key role to play.
We don’t believe that the government needs to create jobs for young people. We don’t want a bloated public sector. That drains economies and is not what we’re advocating. We want governments to create rules, regulations, and laws that support entrepreneurs. Then lower taxes or give exemptions for a few years. Also, make it streamlined so that the same entrepreneur is not paying the same taxes, in three, four, or five different ways.
However, to be fair to the government, sometimes they mean well, but they don’t have the tools, insights, knowledge, and data to do better. So that’s why we make sure entrepreneurs are able to give them their first hand experiences, to let them know what’s working, what’s not working, and how they can work together, towards creating enabling environments for SMEs on the continent.