Financing, Infrastructure, Education Pose Challenges for African Entrepreneurship, Study Finds

Although an entrepreneurial culture in Africa is emerging, lack of access to financing and other inputs continue to limit the type of high-impact entrepreneurship needed to create sustainable growth and improve lives, a report from and finds.

Based on surveys, workshops, and interviews conducted in 2012 with entrepreneurs, business leaders, government officials, and other stakeholders in Ethiopia, Ghana, Kenya, Nigeria, South Africa, and Tanzania, (48 pages, PDF) found that the greatest challenge confronting entrepreneurs was the difficulty involved in securing key inputs such as financing, infrastructure, and skills and talent. For instance, the cost of accessing capital is seen as prohibitive, with 70 percent of respondents saying the cost of debt capital hindered company formation and growth and 60 percent saying the same of equity capital. Limited investment options, lack of access to markets and business networks, and an inadequate, unreliable, and costly power supply also create significant obstacles to the growth of enterprises, while educational systems in the six countries are not designed to nurture an entrepreneurial skills base.

Other barriers to high-impact entrepreneurship highlighted in the report include the lack of business advisory services, incubators, and government programs, as well as administrative burdens. At the same time, the pursuit of entrepreneurship as a career has gained acceptance and legitimacy, the report notes, with 78 percent of respondents in Ethiopia and 76 percent in Kenya saying most people consider becoming an entrepreneur a desirable career choice. Governments are beginning to recognize the potential of entrepreneurship to contribute to economic growth, although attitudes among entrepreneurs toward government involvement vary.

"Although capital, networking organizations, and innovative business approaches such as incubators are lacking, there is an air of optimism about operating businesses in the country," Omidyar Network Africa managing director Malik Fal said in reference to Ethiopia. "Entrepreneurs, investors, business leaders, civil society, and the government must harness Ethiopia's emerging culture of entrepreneurship and channel it into the development of sustainable business that will drive economic growth, create jobs, and reduce inequalities."

"." Omidyar Network Press Release 04/25/2013. "." Omidyar Network and Monitor Deloitte Report 04/25/2013.