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Entrepreneurship is critical to Africa’s transformation – African Development Bank.

June 23, 2021

Young fashionable african business woman working hard at the cafe on the laptop, making notes

A June 2021 African Development Bank White Paper, Entrepreneurship and Free Trade: Africa’s Catalysts for a New Era of Economic Prosperity, states that entrepreneurship must be at the heart of efforts to transform Africa’s economic prospects.

The paper posits the Covid-19 crisis has triggered shifts that open up prospects for enhancing resilience and economic growth. As African economies begin rebounding from the crisis, the continent stands at an inflection point. The report also notes a number of trends that could bring about more inclusive economic growth are beginning to take hold—including digitalization and the emergence of business opportunities linked to greening economies.

The right interventions could open the door for the continent’s young and dynamic entrepreneurs and help build linkages with the large firms that are the key drivers of supply chains to create jobs and revenues to help scale up businesses. 

According to Dr. Khaled Sherif, AfDB’s  Vice-President for Regional Development, Integration and Business Delivery,  “the White Paper aims to reframe the narrative around Africa’s private sector and, going forward, guide initiatives promoting entrepreneurship on the continent to capitalize on new opportunities.”

The release of the paper follows the May 2021 launch of the Alliance for Entrepreneurship in Africa, in which the African Development Bank will play an important role. The Alliance will mobilize financial and technical resources from partners to develop Africa’s private sector, with a focus on micro, small and medium enterprises.

The Alliance also aligns with the Bank’s concept of coordinating more effective financial and non-financial support to young entrepreneurs through African youth entrepreneurship investment banks.  The paper argues that the intelligence, creativity, knowledge and technological skills of young entrepreneurs will be central to harnessing the Fourth Industrial Revolution in and for Africa for the first time to meet the continent’s development objectives of a sustainable and more equal future.

On the supply side of investment in entrepreneurial activity across Africa, the paper notes that Africa’s nearly 650 tech hubs include “accelerators, incubators, university-linked start-up support labs, maker parks, and even co-working sites. “Egypt, Nigeria, Kenya and South Africa account for more than a third of these, but most countries and regions have tech hubs in one form or another.” While this represents great progress, a more robust ecosystem and network must evolve to reach smaller, less developed economies.

On the demand side, the paper advises that both entrepreneurs and investors may need to scale back expectations in terms of financing and revenue. “By adjusting expectations, there is a better chance of increasing the roll-out of ecosystem development and for more start-ups to be able to access financing through stages that would have been inconceivable before 2015.”  Change will be transformative, but will not occur overnight. Innovation and digital apps alone will not lead Africans to wealth and stability; and systems, digital connectivity and infrastructure, together with improved human capital and access to services, will be critical for success and sustainability.

Ecosystems to support African entrepreneurs—particularly small and medium firms—must be tailored to the African context. To achieve this, the paper recommends that stakeholders work with entrepreneurs along the entire growth path, rather than through a fragmented approach.

Trade can be another catalyst for entrepreneurship, particularly given that the African Continental Free Trade Area (AfCFTA) became operational in early 2021.

Entrepreneurs will make the AfCFTA work by forging new value chains and exploiting opportunities to scale up via increased trade in regional markets. While the final terms of the agreement will be negotiated over the coming decade, the paper offers recommendations to advance intra-African trade and private sector involvement.  These include accelerated support for innovation hubs; partnerships with business associations to support trade-enabling information platforms; and automated one-stop border processing. They all underscore the importance of integration, connectivity, information dissemination, and scale.

Frederik Teufel, Advisor to the Vice-President and task manager of the White Paper, argues that ”entrepreneurship has been a driver of economic growth throughout the world and Africa should be no different. There is already a highly entrepreneurial culture in place. With the right policies and conditions, the private sector can act as an engine for inclusive prosperity across the continent.”

*AfDB

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