African Businesses: What Needs To Change
You could easily find a bevvy of reasons why most African businesses don’t prosper; why poverty is rampant on the continent and why it seems Africa contributes very little in terms of economic activity on the global stage. We have not been a beacon of wealth nor a standard to look to for commercial success on so many levels. And if you are blaming the West, you are very right to do so. We had to bleed and die for a fighting chance yet the playing field is still not level. However, we are not so pretentious to overlook the part we must play if we would experience the explosive wealth that can make us independent and a force to reckon with. This piece is not to deter you from taking initiative but to remain cautious of the potential pitfalls that plague businesses in Africa.
Businesses are open for a variety of reasons. The overarching, generally-accepted reason is to make a profit and remain an important player in whatever industry the business operates in. Another could be a government trying to stabilize market conditions for a particular commodity. The list goes on. In Africa, the total number of distinct businesses across the continent is estimated at 3 million yet Africa makes up a little over 2% (approx. $2.6tn) of global wealth – a gloomy fact that highlights the struggle of African businesses.
African businesses struggle for many reasons:
Sound Business Acumen – this is alternatively called Business management skills. Business acumen encompasses everything that is done to ensure a business thrives. From product marketing to financial and people management. Successful businesses are built on proper understanding and execution of a good business strategy. Hiring the right talent and investing in relevant resources will be key if Africa wants to experience the explosive wealth talked about earlier. For small businesses looking to expand, a good grasp of accounting knowledge and taking advantage of small business privileges would be prudent. Businesses across the continent especially small ones must be treated as the separate entities they are and accounted for as such. Countless stories are told of business owners mismanaging funds typically by spending on personal needs or on things that do not add value to the business in any way. Another alien concept to some businesses is the reinvesting of profits and taking a stipulated salary so as not to dip into company coffers further. We need to recognize that sustainable wealth cannot be gathered true the mediocre mindsets and practices we indulge in now. The goal is to think big, think beyond Africa and act as such.
Refusal to harness Technology – One major element of growth every business owner must embrace zealously is Technology. New technologies make it incredibly easier to do business. This is not debatable as some may think. Technology is not relevant only if the business is not scalable and unscalable businesses are likely to be replaced by high-tech advancements completely. Indeed, the advent of new technology can open up new opportunities and shut down existing ones. Whichever way one chooses to see it, economic progress in this age is hinged on science and technology, and for any business to thrive and expand to a multinational status, technology will play an extremely important role.
The Wrong Partners and Unrealistic Expectations of major stakeholders – Stakeholders could be investors, employees, third party support specialists and many more. While partnership is encouraged to obtain the multiplicity effect, sound judgment and clear boundaries must be set and communicated to all involved. An example is OyaPay, a very promising Nigerian fintech when it was launched in 2017. It didn’t do too well because its major source of funding, which had come from an uncle of one of its co-founders, did not want his investment to be diluted. In essence, this uncle did not want the business to accept new investors because his percentage interest in the business would reduce. As evil as it may sound, it remains obvious that if these expectations were overtly outlined at the beginning, OyaPay might do well very well today. African business owners must clearly state their expectations and likewise, understand those of their stakeholders as one way to ensure that executing the business strategy is not hindered.
Submitted By: Philip Boateng
Performance Analyst at Absa Ghana