How Africa can become an innovator’s paradise

A blog from the recent workshop on catalyzing the innovation spirit in Africa, organised by the Commonwealth Secretariat and delivered by ABE's Chief Executive, Rob May:

Rob MaySet against a backdrop of worrying geopolitical and geo-economic tensions, as well as the increasing disruptions of Industry 4.0, the margin for policy failure in Africa is extremely low.

Examining "what-if" future shocks is always a useful starting point for building economic policy. It's likely that automation, artificial intelligence and mass 3D printing is set to unravel large parts of the global trade network, displacing low-skilled workers across Africa’s emerging economies and limiting the usual route for poor countries to develop.

Until now, mass unemployment has largely been avoided due to the volume of Africa’s unskilled and low-skilled labour base, for example used in textiles, manufacturing or call centres.

But all that could be about to change. Imagine a near future where instead of a UK-based customer calling one of South Africa’s battery of call centres, they could instead speak to an emotionally responsive artificial intelligence in the Cloud, whose every electronic word is automatically mapped to the incoming caller’s tone and dialect. 

Instead of manufacturing jeans in Ethiopia and shipping them to the UK, a new generation of prosumers will soon be able to buy the code from Amazon and 3D print the jeans themselves, fully customised, in one of London’s 3D print cafes, or even, on their 3D printer at home.

Sounds fanciful? Maybe. But then again, 30 years ago no-one walked around with a powerful miniature computer in their pocket.

Thirty years is a blink of an eye and today’s young entrepreneurs have the daunting task of bridging this gap and changing the long-standing economic profile of their countries to secure prosperity for future generations in Africa.

Developing countries must advance quickly from cheap-labour to high-skills and knowledge-led economies, or else many will slide from economic exploitation, into economic irrelevance. This means a radical overhaul of human capital policy is urgently needed.

The gathering perfect storm

Climate change issues demand urgent one-world attention. A range of global hazards pose imminent threats that will require collective action to address if we are to avoid devastating Africa’s blue economy. But co-operation will become harder if we follow the current path of populism and protectionist agenda-setting, resulting in unequal market access, political confrontation and disjointed regulatory structures.

More extreme weather, sea-level rise and pollution is heaping pressure on western governments to move swiftly to sustainable energy sources, reduce our addiction to oil consumption and axe the carbon emissions wake of global trade transportation, all of which will decimate Africa’s petro-economies.

It’s helpful to think of the world as entering a process of de-globalisation, not just politically but economically.

What does this mean for Africa?      

It means that the commercialisation of new ideas is more urgent than ever. African economies must shift to a strong consumer-driven domestic economy from a longstanding focus on exporting their natural resources. Youth entrepreneurship is central to the process of solving these problems.

Commonwealth Association of Young Entrepreneurs

Picture: Members of the Commonwealth Association of Young Entrepreneurs (CAYE) Africa – the continent’s greatest natural resource - discuss the challenges they face in bringing new ideas to market with public sector decision-makers.

Great ideas may not be enough

There are plenty of innovation efforts that yield exciting new ideas for growth but never generate any value for society. Why? Because many inventors don’t understand how to make the leap from having ideas to actually executing them, and many entrepreneurs don’t have the strategic skills to realise how they could disrupt a market or scale a new process, how to validate an idea in the marketplace, protect their invention, raise capital and establish distribution.

“Innovation amateurs talk good ideas; innovation experts talk testable hypothesis” Michael Schrage

According to the 2019 Global Entrepreneurship Monitor, Sub-Saharan Africa has the world’s highest percentage of young entrepreneurs. The downside is that half of these businesses are developed out of necessity rather than to capitalise on a market opportunity or to introduce a new product or service. So where can Africa’s entrepreneurs find innovation?

Africa can replace Silicon Valley as the world’s innovation sandbox

Developed countries have a sophisticated infrastructure to support the smooth movement of products, labour and capital.

This is made up of institutions which facilitate, improve and protect both simple and complex transactions; between the buyers and sellers of products, patients and healthcare workers, students and teachers…

Emerging markets can be defined as those where these intermediaries are poorly functioning or absent. When an economy lacks these intermediaries, ‘institutional voids’ persist.

Capital Products Labour diagramInstitutional voids cannot easily be mandated away through deregulation and liberalisation, but it’s misleading to assume that entrepreneurship in emerging economies is hindered by institutional weaknesses.

On the contrary, institutional voids are not just roadblocks, they are also opportunities for innovation. Not only that, the process of innovating in emerging economies provides a sandbox for ideas which can be commercialised and exported to industrial nations which are tackling similar problems from a different angle.

There is one other advantage: Developing countries can leap-frog the hard-wired dominant logic which developed nations often have to work through and around, and which can stifle innovation.

A vision that’s helped others to see

Here's a good example; In 2016, there were just 40 ophthalmologists in Uganda, but 1.2 million children were visually impaired (WHO estimates).

Vision loss in children and young adults is a massive problem, socially and economically, and yet 80% of all visual impairment can be prevented or cured.

But in Uganda, access to eye specialists was difficult, scaling eye-health services across the country was simply not practical, eye testing equipment was too expensive for the majority of health centres, and for those patients who did receive a diagnosis, the cost of glasses was simply unaffordable - with credit not an option.

But amongst this mass-myopia, a young entrepreneur, Brenda Katwesigye, had a startling vision. The idea for her company arose when Brenda went to an eye care centre to get tested herself. Brenda started to wonder, what made eye testing so difficult and glasses so expensive that even she, having a full-time job and health insurance found it a struggle. How were poorer people ever to get treatment if it was so expensive?

This was the beginning of Wazi Vision, a company which provides affordable eye testing and glasses.

She set up a company to develop a mobile application that uses virtual reality technology to perform visual acuity tests. The test results are analysed in a central clinic with no loss of quality.

The patients who receive a diagnosis can access a range of affordable glasses which are made of recycled plastic by local female artisans in Uganda, reducing the cost of glasses by 80%

It seems to me that more and more young people in Africa don’t just want to run a business, but one which alleviates social challenges, from healthcare to housing, to nutrition, education, the environment, and acts as a catalyst for social and economic change.

Wazi Vison glasses modeled by Rwandan young entrepreneur and Dominique Alonga.

Picture: Wazi Vison glasses being modelled by Rwandan young entrepreneur and Imagine We CEO Dominique Alonga.

"Innovation is a gradual process, and it involves constant learning and adaptation"  Peter Drucker

 A strong-economy is fundamentally driven by a cycle of personal risk-taking, multiple failure and creative destruction. So, when we hear stories like Wazi Vision, it’s tempting to glamorise entrepreneurial success as a “light-bulb” moment when a game-changing idea is released into the world, perfectly formed. Society tends to view entrepreneurs as iconoclasts and rebels, with some sort of secret super-power. However...

Innovation and entrepreneurship is a process, and it’s a process which is teachable and repeatable.

Policies which encourage new businesses to get started are laudable, and it’s no surprise that governments throughout the world are advocating entrepreneurship on national agendas as an engine for economic growth, providing seed capital, incubator hubs and easing the processes of business registration (although across much of Africa this process is still incredibly burdensome, often forcing start-ups to burn through their front-loading capital long before they can even start selling). Moreover, entrepreneurship is not an end in itself and the number of start-ups created is not really a helpful indicator of the success of entrepreneurship policy.

On average, globally, 60% of new businesses will collapse within 3 years or less. Many don’t make it past 12 months. Let’s be clear, new businesses fail for many reasons, some ideas simply don’t pass the market test. Neither should policies attempt to shield businesses from competition by creating barriers to entry or tilting funding in favour of struggling market incumbents as this would lock-up capital in inefficient companies.

In his book The Wealth of Nations, Adam Smith introduced the concept of the Invisible Hand that guides a market.

The approach holds that the market will find its equilibrium without government or other interventions forcing it into unnatural patterns. That’s true enough, but at the same time, we ought to distinguish between necessary and unnecessary business failure and explore how government intervention can actually support otherwise viable businesses.

A growing body of new research reveals that too often viable businesses fail due to poor management practices and poor basic business skills.

This resonates in Africa where, according to World Economic Forum data, 35% of Africa’s youth lack the basic skills required to perform a job, these young people are not likely to have the necessary skills to successfully grow a business.

This means that a lot innovation and new ideas that could change the outlook for African economies are not diffusing, not because the ideas are bad, but because the inventors don’t know how to bring them to market and how to scale. There is a skills deficit at the heart of the entrepreneurship agenda and therefore at the heart of all the good work being done on economic reform.

Brainstorming Business Stay-up

Picture: Using 'Business Stay-Up' research to help brainstorm ideas for strengthening the blue economy on Africa’s eastern shores.

How to shift the conversation

Following extensive research across 21 countries and 10,000 start-up stories, ABE launched the 'Business Stay-Up' campaign. Because alongside a start-up culture, we need a stay-up agenda.

This means encouraging small firms to adopt formal and teachable management practices. Research shows that those which do are more productive, grow faster and have a better survival rate.

That may sound obvious, so I was surprised when our research revealed just how little business skills were considered as part of the entrepreneurial equation. Enthusiasm, whilst critical - is not an adequate substitute for business smarts.

It also means encouraging governments to focus on stimulating the quality - not just the quantity - of small businesses.

The conclusions show that when it comes to assessing the factors of how successfully firms took new ideas to market, management is as important as R&D and twice as important as IT.

Therefore, we may consider management skills as a form of technology in itself, it’s something which can be acquired, applied and repeated.

Quite simply, when small businesses are well-managed they are more likely to create jobs, pay higher wages and sell better, and cheaper products. It makes sense, both morally and economically to want as many innovators as possible to have the skills to give it their best shot.

'Business Stay-Up' is an idea, it’s a movement, anyone can engage with the Business Stay-Up research, hold events and participate in the debate. Stakeholders as far afield as Zambia, South Africa, Myanmar, Sri Lanka and Guyana have already taken up the cause as a useful touchstone for shaping entrepreneurship policy and services.

And after this week, I’m hopeful that policy experts from Botswana, Tanzania, Mozambique, Mauritius, Seychelles, Rwanda and Kenya, will join them in rethinking the skills-based policies underpinning their growth plans and embrace “Stay-Up thinking”.

Africa does not have a problem with energy, passion and creativity. 60% of the entire continent of Africa are aged below 25, making it the youngest continent in the world. Therefore, it’s so important that we recognise that young people are Africa’s greatest natural resource.

How policy experts give the invisible hand – a visible nudge

  • Evidence-led policymaking is sometimes in short supply it seems, but with government sponsoring randomised trials of education interventions they can explore what works, cut through the fog of agencies working in this space and ground educational initiatives in local contexts and problems. Partnering with expert groups will help ministers to evaluate what works in their region.
  • Entrepreneurs already on their journey usually sink a great deal of capital and leverage into getting the business off the ground, an effort which can feel like (and actually is) a monumental achievement in itself but taking the business up through the gears sometimes means attracting venture capital. VCs have various philosophies underlying their approach to investing, but many are strictly in it for the return. The founder’s charisma and passion can be persuasive, but it needs to be backed-up with solid metrics and evidence, a solid management team, a differentiation strategy and an expansion plan. Entrepreneurs need help not just getting started, but to get through the ruthless interrogations with potential partners that could help them survive and scale. Almost from day one – they need a 5-year plan.
  • Large employers, either domestic or FDIs, could pay a levy; a human capital tax which funds a pot of money that could pay for entrepreneurship training in the local community. In particular this could focus on supply chain innovation, where large employers rely on the creativity of local suppliers and stand to benefit from the efficiencies that indigenous entrepreneurs could bring to their value chain.
  • Introducing competitions and prizes could challenge teams of entrepreneurs to solve public sector issues or institutional voids. The prize needn’t be cash, it could be government endorsement or contracts. But such a tactic could also support youth-led innovation directed towards the SDGs.
  • Importantly, national skills policies must recognise that entrepreneurship itself is a distinct skillset, which as well as boosting private enterprise, is increasingly demanded by corporate and political recruiters.
  • Creating pathways and backing the creation of peer-to-peer networks is essential. A government’s role is to be a convener, a connector, a catalyst and a creator of conditions for humans to thrive and businesses to succeed. Government’s arguably should not directly supply information but can guide entrepreneurs to what works and champion it in the media.

Policy makers can lead a manifesto to improve the small business environment and make their country the best place in the world to not just start, but also successfully grow a new business.

The challenge is to consider which public policy interventions, particularly education-focused ones, could improve the quality of management and high-impact entrepreneurship.

Only through sustainable, high-quality entrepreneurship can Africa fulfil its potential. And I really hope it does.

@rob_may

The Commonwealth Africa Innovation Workshop, was an initiative led by the Secretary General, Baroness Scotland, which brought together officials from southern and eastern Africa with partners including the United Nations, Next Einstein Forum, Global Innovation & Technology Alliance, NESTA and ABE, as well as some of the most ambitious and imaginative minds from the Commonwealth Association of Young Entrepreneurs.

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