eBusiness Weekly
Kudzai M. Mubaiwa
Estimates are that over 20 million jobs need to be created in Africa and governments will not be able to do this, theirs is only a support role to private sector that creates jobs across sectors. Small businesses contribute notably in most African countries. As a matter of fact, no business starts out large anyway and we can never tell which one will grow save when we have the benefit of hindsight. As such, it is critical that every business gets a fair chance to reach its’ full potential and create jobs.
One government that is taking its role seriously on this is the one in Ghana. I spent the past week in Accra attending an entrepreneurship conference, which was graced by various ecosystem stakeholders — innovation hubs, start-up and small business owners, policy makers and academia.
The agreement was that emerging businesses are a shared responsibility but government must lead in providing the framework for operations that makes it easy for more businesses to succeed rather than fail.
To that end, the representative of the minister of business confirmed that as government they have scrapped off any requirement to pay tax for a business that is in its first three to five years.
This tax break at inception is to allow local enterprises to find their footing and reinvest any proceeds from transactions in those years back into the business. Essentially they are giving local businesses a chance.
Accra is a city that is endowed with many different types of economic activity across productive sectors, being the capital. Small business owners engage in all sorts — basic trading, tourism, agriculture and technology projects. They are also doing very well in smaller cities and towns such as Kumasi that have a vibrant community of innovators and business people.
Cognisant of its’ limitations in locating and then building the capacity of entrepreneurs through training, as well as through financing and market linkages; government now works closely with entrepreneur supporters such as hubs.
The innovation and enterprise development hubs organized themselves into an association that has amazing leverage and bite.
Neither government nor a civil society player can isolate one of the spaces in the hubs community and transact with them, for the community is well knit.
As such, the Ghanaian government saw it fitting to partner with them and selected an initial 50 hubs which they assist with some limited administrative funds.
More importantly, they have made these hubs co-custodians of capital/funds they availed to be passed on to thriving entrepreneurs.
This move has been well received and seen as a good gesture of support of both the incubators and accelerators that walk with founders from day one, and their incubator clients.
The funding is arranged as a loan with reasonable repayment period and ensures a company can have a minimum viable product, gain traction, finalise a working economic model before seeking to scale. The hub will be doing the business management skills training.
Ghana is also so serious about promoting entrepreneurship that they have tweaked their compulsory National Service to include start-up owners.
Ordinarily, learners pushed out from the various tertiary institutions would undergo a full year of working anywhere in industry and in government, with allowances of a $100 per month from government.
They have since expanded this to allow those who have solid businesses to continue exclusively working on them in that service year and still be paid allowance. Their estimation is that this will be 20 percent in any given year, much like the Pareto principle, in this case implying more than 80 percent wait to be given jobs and the balance 20 percent prefers creating the jobs.
To further inculcate the values and learning around entrepreneurship early, the government is pushing for small business clubs to run in primary and secondary education/high school settings. Resources must be channelled towards those that create rather than just consume. It is also easy for the players in the entrepreneur ecosystem to follow-up government as they themselves have a representative organization that speaks with one voice.
Already the same government has begun to take steps to set up a bigger standalone fund that caters for start-ups that require more than seed capital in the form of loans — and they are structuring it as a proper venture capital fund which can, of its’ own volition take equity where necessary.
They have also created a platform were various small business owners can freely showcase their wares to local and international players.
What’s not to like about all that? These are simple stances that can be taken even by the Zimbabwean Ministry of SME’s, or indeed any other African country.
The biggest takeaway from all this is the understanding that the local players matter the most. Foreign direct investment is good but investing in the local economy is equally important, enabling those that directly care about the same nation to be equipped and empowered through necessary support. The past year or so has seen the emphasis on receiving business from outsiders. Perhaps, it may be time to be more inward looking? Government must lead in investing in the domestic economy through training, funding and market linkages.
They must actively work with the fragmented business incubators across the nation, as these house many entrepreneurs and innovators waiting for a big break. We too require tax breaks and possibly wholesale tax reforms that will ensure that the incentive pay tax is higher than that not to. We need to educate whole generations on enterprise and the financial literacy that must accompany it.
Only government has the requisite scale, depth and reach to make this happen, in fact the ministries of small business, education, information in government need to close ranks on this matter as policy custodians.
There is no shared prosperity in any nation without working together with every stakeholder to achieve a shared vision. The ball is now firmly in our own government’s court. Can they invest in the local economy as much as they have attempted to woo external investors? As the year rolls out, the hope is that the Zimbabwe is open for business mantra becomes a reality for the locals too.
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