Lack of funding, raw materials hinder African entrepreneurs – report

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Difficulties in obtaining necessary funding and raw materials are the major challenges faced by African entrepreneurs, according to a report by the Africapitalism Institute, the research and policy arm of the Tony Elumelu Foundation.

The foundation has been busy lately with its Tony Elumelu Entrepreneurship Programme (TEEP), which was launched in December with a target of creating one million new jobs and US$10 billion in additional revenues in the process.

The 86-page report, Unleashing African Entrepreneurs, was released at the Global Entrepreneurship Summit (GES) in Kenya, and is based on original research leveraging the foundation’s pan-African network of early stage African businesses. It identifies and analyses the factors inhibiting the potential of entrepreneurs across Africa.

One major, though expected, finding was that 87 per cent of respondents said obtaining necessary seed capital was their primary challenge. Only three per cent of those surveyed had a commercial bank loan, while 69 per cent used personal savings to finance their business.

Perhaps more surprising was that 53 per cent of entrepreneurs said it was “not at all easy” to obtain necessary machinery, equipment, technology or raw material, with high cost of land and office space the primary cost concern.

Sixty-three per cent of respondents said that government needs to “improve the general quality of infrastructure” in order to reduce overall costs, which are hurting their competitiveness, while 82 per cent of entrepreneurs said access to an accelerator or resource centre was “very important” to their business.

“We want to improve the enabling environment for all of Africa’s existing, emerging and aspiring entrepreneurs,” said Parminder Vir, chief executive officer (CEO) of the Tony Elumelu Foundation. “With the results of this study, we have an opportunity to educate policymakers across Africa about the importance of empowering entrepreneurs, and the critical role government plays in removing the barriers that inhibit their success.”

The Africapitalism Institute also held two focus groups with 100 entrepreneurs from different countries and sectors in order to solicit ideas for addressing the challenges that confront them as entrepreneurs. Proposals included the creation of a single location to register new businesses, a stronger patent regime, and the need for schools to make teaching entrepreneurship part of the curriculum.

Africapitalism Institute director David Rice said this was just the first in a series of studies to be conducted on African entrepreneurship.

“The wealth of information we have allows us to gain unique insights on the needs of Africa’s entrepreneurs,” he said. “And we intend to leverage these insights to turn the Tony Elumelu entrepreneurs into advocates for positive change, with particular emphasis on public policy and the role of government.”

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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