Africa is open for business! Or so we have been told. There is enthusiasm from investors; there are entrepreneurs with great (and some terrible) ideas; and there are businesses to be found all over the continent. Yet the flow of capital and investment into Africa are still slow. There are undoubtedly lots of reasons for this, but the question is: what can be done to encourage more catalytic investment in Africa and more successful African entrepreneurs?
As with all complex problems, the solutions are also complex and vary across the continent. For example, while Somalia is famous for its entrepreneurial and business-minded people, the chronic insecurity makes it a very hard place to invest. Meanwhile Nigeria has one of the biggest domestic markets on the continent and its $800 million ‘Nollywood’ film industry produces around 50 movies a week, making it second only to Hollywood (even bigger than ‘Bollywood’ on a per capita basis); yet the country is hampered by a reputation for corruption. Or in Kenya, where there are some fantastic, innovative businesses emerging (watch ‘mobile money’ take over the world and know it all began in Kenya); but the challenges of setting up a business and the political climate mean any investor will need a strong stomach for bureaucracy.
Here in Rwanda, there is a great deal of attention on and energy around entrepreneurial development and, indeed, the subject is now on the national curriculum for secondary school students. So I caught up for breakfast with Sara Leedom and Julienne Oyler, founders of African Entrepreneur Collective, to talk entrepreneurs, development, investment and the value of cows. Its pilot company, of Inkomoko Business Development, (which means ‘origin’ in Kyinrwanda) has been working in Rwanda since 2012 and, with a local team of eight and a rolling supply of international mentors, has supported over 170 businesses.
Kate: What is it that inspired you to get involved in supporting entrepreneurs here in Rwanda?
Sara & Julienne: For us it is all about jobs. Across the continent there is a real need to generate a huge growth in employment. In general, African economies need to grow 8-10% per year just to keep up with the growing labour market population and maintain current levels of unemployment. If you want to reduce unemployment, then even more growth is needed; and this growth has to come from the private sector. So, across the continent, there is a need for businesses that can set up and grow to create new jobs. For us at Inkomoko, it is all about supporting the entrepreneurs to build and grow the businesses that will create these jobs.
As for starting in Rwanda, well we actually explored a number of countries and there are a few things that make Rwanda a great place for entrepreneurs and investors. For a start, structurally, Rwanda is really well set up for entrepreneurs. It is easy to open a business; it is politically stable; there are efficient systems around tax and employment; and so on. Also, politically, there is a real encouragement for entrepreneurs with things like subsidised training and support for people to start businesses. In fact it’s the only place we have worked where starting a business is seen as ‘patriotic’. So while in the USA or UK, your average entrepreneur is often quite individualistic and there is a real emphasis on personal success, here in Rwanda, being an entrepreneur is much more about collective effort and about contributing to your community and country.
There are challenges too – it is a small country and so any successful business really needs to be looking beyond national markets. Also, outside of Kigali, infrastructure such as Internet is more limited; and, culturally, there can be a more cautious, less ‘risk’ taking, approach than you traditionally see in entrepreneurs in the West.
Kate: I feel like I read and hear a lot of enthusiasm at the international level for investment in Africa. Yet on the ground and certainly here in Rwanda, it seems that enthusiasm isn’t quite translating into actual investments. What’s your perspective on the challenges entrepreneurs here face?
Sara & Julienne: Matching investors and business is not simple. While it is easy to talk about and get investors excited about ideas, actually getting capital into businesses is much harder. Often investors, particularly those from mature markets in the West, have unrealistic expectations about what it will be like investing in an African business. They don’t necessarily know what it means to invest in, say, an agricultural business in an emerging economy and they have unrealistic expectations about levels of mechanism, or the ways labour will be organised, or how a business will plan and report on activities. Interestingly, what we are increasingly seeing is ‘South – South’ investment, particularly from Indian investors. They often have a better understanding of how markets and supply chains work in an emerging economy and are more able to understand the risks and recognise the opportunities. I think we will see increasing flows of investment into Africa from various parts of Asia.
The other challenge is in the types of businesses that international investors are drawn to. There can be an over enthusiasm for what are seen as ‘innovative’ ideas in, for example, technology business. While tech businesses are important, especially here in Rwanda, they are not going to be the engine of large employment. In a country where 80% of the population is involved in agriculture, the business opportunities and types of business that are likely to create significant numbers of jobs, are in agriculture and, particularly, in processing. For example, at the moment we are supporting a great business focused on avocado oil and we are also trying to work out how to structure financing for some cows for a diary business. But it can be a challenge to get investors, who are new to agriculture, to really explore these sorts of businesses.
What next for Inkomoko?
Sara & Julienne: At Inkomoko, we are committed to expanding our work in Rwanda. Everyday we are seeing local businesses with tremendous potential and opportunity, and we want to continue to provide the support and resources necessary to see these grow.
For African Entrepreneur Collective, we want to see take our learnings from Rwanda and move to new geographies. We want to explore working with partners in other countries across the continent, to see how we can grow the model we have developed here, to support more businesses, in more countries, to grow and create more jobs. I think what we have found here is the importance of working with entrepreneurs in a very tailored, individual way. All their businesses are different and so are their challenges; and while we have developed a really good training curriculum for business skills, helping entrepreneurs really scale up their business is about supporting them at all stages.