Why Africa needs to scale up investments in incubators and entrepreneurial ventures

Incubators and accelerators have now emerged
as a potent entrepreneurial resource for kick
starting and accelerating high-potential
innovative startups across the world. However,
each region has its nuances, and that includes
Africa.
While other
regions
such as
Europe are
still
learning to
deal with
fear of
failure,
Africa
already has
more than
its fair
share of
entrepreneurs. However, this seeming
advantage has not translated into global mega
corporations for Africa. The reasons are not far
fetched. Out of the wide range of possible
reasons for starting a business, empirical
studies have shown that survival and the need
for alternative income are leading motivating
factors. Essentially, entrepreneurship is viewed
as a potential parachute that could be used to
escape the pit of poverty. The negative
implication of this is that the few enterprises
that initially succeed do not have world
domination wired into their operating
framework, and lack a strong motivation to take
over the world, since that was never the
objective. Enterprises also tend not to survive
more than 2 generations, due to weak
regulatory and institutional support
mechanisms, and poor corporate governance.
Incubators and venture support systems in
Africa should take note of these peculiarities as
they work with entrepreneurs in Africa. Unlike
Europe, entrepreneurial activity is already high,
so the focus should not be to motivate Africans
to start businesses. Rather, strong mentorship
should be provided to aspiring entrepreneurs in
visioning, corporate governance and long-term
strategic thinking. In addition, access to basic
resources and physical infrastructure is a
significant barrier for entrepreneurs. The very
high cost of doing business, especially in major
African cities such as Lagos and Nairobi are also
a major obstacle. Venture incubation programs
should provide shared resources such as
internet access, electricity, office space and
food as these are absolute necessities for
budding entrepreneurs, who often have no
reserve income to draw on while working on
their venture. Incubators may also need to go
beyond idea validation. They need to provide
robust target market evaluation and product
launch support for African entrepreneurs, as
there are not very many independent success
stories just yet.
Let’s now explore the relevance of
western entrepreneurship ideas to Africa
Unlike in the West where there is a wide range
of mature industries, Africa’s best growth
opportunities are concentrated mostly in four or
five broad industries, based on the McKinsey’s
“Lions on the Move” report. Therefore,
entrepreneurial efforts in Africa should be
focused on sectors that offer the best
opportunity, based on market demand, quality
of regulatory framework and the overall macro-
economic ecosystem. Technology and mobile
startups across the world have a fairly similar
approach to launching and scaling their
products but sectors such as consumer goods,
agriculture and infrastructure tend to be more
sensitive to local or regional nuances. In 2014,
Nigeria’s ranking on the Ease of Doing Business
Index was 147, Ghana was 67, South Africa was
41 and Rwanda was 32. These figures show
that African countries have very different
environments, and the Regulatory and
institutional frameworks are at different stages
of maturity. Each country has its peculiar
strengths (and weaknesses) based on its
resources and strategic priorities. The general
lesson here is that there is no such thing as an
Africa strategy. Africa is a continent of 52
unique and peculiar nations with varying
interests and differing levels of political and
economic maturity and stability. Therefore,
entrepreneurship approaches should be
evaluated and optimized for each country, and
should incorporate internal and external risk
assessment frameworks that are relevant to the
economic and political realities in each country.
A one-size fits all approach is never going to
work.
I’d like to offer an opinion on a question
that many people have asked me which is
this: Is the Rocket Internet Copy-Cat
model relevant for Africa?
This is like
asking
whether
products
built in
Europe
would find
application
in Africa –
of course!
Interestingly, this question isn’t that relevant
today, because Rocket already has built more
than a dozen startups across the African
continent, and a good number are doing seem
to be doing well.
Rocket companies are now in Nigeria, Ghana,
Kenya and counting. I know about Rocket
because I worked at Nigeria’s fastest growing
ecommerce platform just last summer and my
host company’s greatest competitor was a
Rocket Internet Company. As I said earlier,
Africa has 52 markets that are unique in their
own right. The odds are that there is at least 1
of these 52 markets that is amenable to the
wonderful startup ideas that have their roots in
the West. One of my mentors once told me –
“ideas are a dime a dozen! Execution is what
matter most!”.
Africa is pretty much open for business, and all
ideas that create value and produce wealth are
very welcome. Rwanda, Ghana and many more
African countries are seeking the influx of
foreign capital and foreign ideas to rapidly grow
their economies. Today, nobody really cares
about where ideas come from. They just need
to make sense, and they need to be executed to
perfection!