What would you do as a leader to address the challenges facing African businesses?

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By Peppy Akaniro

21st March 2013 remains one of the best days in my life. I was dressing up for work when I received a text message saying I had been awarded six million naira in a business grant competition by the federal government of Nigeria. I applied for YouWin business grant in 2012 and had long forgotten about my application before that fateful day in March. After receiving the grant money, I invested it in my fashion business and this enabled me to increase production capacity and employ more skilled workers. I felt privileged to be running a business I was very passionate about.
Three years later, the thought of my business gets me depressed. I was slowly being forced out of business by the hostile business environment in Nigeria. The cost of running the business was just too high and this was largely due to external factors. Due to the epileptic power supply, I had purchased a diesel generator and I spent four hundred thousand naira annually on fuel for power supply, official monthly power bills not inclusive. Multiple taxation was very common and I was forced to pay tax to seven different agencies, with some of these agencies having duplicity of functions. Thugs were used by some government agencies to harass business owners into paying these taxes. These thugs walk into any business office and if they cannot verify that the business taxes have been paid up to date, they confiscate products and business equipment.

I once had an encounter with these thugs and products belonging to an international client who had made bulk orders were confiscated. Because of this, I lost a contract worth seven hundred thousand naira with this client. These examples and many more factors increased the cost of running the business hence our products were highly priced to cover expenses and this reduced our competitiveness in the market. After three years of enduring untold hardship and facing numerous challenges in the name of running a business in Nigeria, I quit.

My story is not very different from that of numerous entrepreneurs in Africa who are giving up on their businesses due to the hostile business environment in Africa. Despite the fact that small businesses are the engines that drive economic growth in most economies, small scale enterprises in Africa are at a great disadvantage in this race for growth and profitability. A number of developments and long-standing issues have combined to endanger the ability of small firms in Africa to survive in today’s global economic system. Some of the key challenges include globalization of markets and production, lack of financial support, poor infrastructure, unfriendly government policies, too much bureaucracy, lack of capacity, international expansion issues, and government assistance and support.

However, the most serious challenge to the growth of the African economy and subsequently, African businesses is the mindset of leaders and youths in the continent. Africans have developed a beggar’s mindset and this is encouraged by International Aid. International AID is now doing more harm to Africa than good because it fails to reaffirm the truth that Africans are responsible for Africa.
African leaders should stop looking somewhere else for solutions and start looking for solutions internally. If Africa needs any aid, the most urgent one is to get rid of the industry called International Aid that shackles its youth and elite, cultivates and maintains the beggar mentality.

How would you develop any country when the dream of the majority of its youth and elite is not entrepreneurship, innovation, education and self-sufficiency, but the dream to have a job with a humanitarian organization or to get their project financed by some International aid Agency or proxy?
As a leader, the first step to addressing the challenges facing African businesses is acknowledging that we are fully responsible for the state of our economy. Only when we stop looking outside for solutions can we begin to tap into our enormous potential to improve our economy and business climate. The most important step towards a more favorable business climate is investing in economic infrastructure such as electricity, water supply, roads and information technology services will ensure that local enterprises are not at a competitive disadvantage in today’s global economy.

Majority of businesses are fully dependent on constant electrical power to operate their machines and in the absence of this, resort to using alternative power sources like generators and this greatly increases their overall cost with a corresponding increase in price making these products less competitive in the global market. If the government recognizes its inability to provide constant power in the short term, alternatives can include developing policies to encourage the development of innovative renewable sources of energy and subsidizing the purchase of these renewable power sources by business owners in Africa. This should not stop an effective long term solution from being developed. Secondly, favorable policies should be developed. Sector based training sessions can be organized periodically by regional government because lack of capacity is one of the greatest challenges African business owners face.

While it is widely agreed that lack of finance is a major constraint to business in Africa, effective training sessions will not only educate the business owners on the numerous options they can explore to access finance but also enlighten them on the need for quality products which meet international standards, while teaching them how best to go about developing quality products. Also, government funded business development agencies should be set up and services of qualified professionals such as accountants, business consultants, strategists, etcetera should be made available at no cost to small business owners. Taxation laws should be modified to counter multiple taxation practices and tax incentives stated in the law for businesses should be complied with by government agencies. Effort should be made to help small firms to meet international product and process standards. Local businesses should be equipped to take on International Expansion.

Unlike their counterparts in other parts of the world, small African firms have mostly sold their products in their home market or in adjacent countries that belong to the same regional economic block as their home country. The reasons given for the favoring of gradual internationalization by small firms in Africa include unsaturated domestic markets, reputation for low quality products, technological requirement for success in markets in developed economies, and difficulties in joining international supply-chain networks. To establish a strong presence in the global marketplace, the number of small African export firms has to increase. Participation in international trade opens up new markets for these firms. African governments should devise policies and regulations that encourage small manufacturers to export. The era of complete dependence on sales in the domestic market is over, and newly minted entrepreneurs should be made aware of this situation to ensure their long-term survival.

Finally, “made in Africa” goods must be made to become appealing to Africans. Most Africans especially elites prefer foreign goods and services to local ones and continually patronize foreign companies at the expense of local ones. Patronage of local businesses can be improved by insisting government officials fully patronize local products and services and developing laws and policies that enforce this. While this may be seen as an infringement on the certain rights, government officials should be made fully aware of this clause before they accept government positions. If this is the case, these officials will have no choice but to invest in these businesses so the businesses can grow to the standard they want. They will also push for bills to be passed to facilitate the growth of these businesses to their desired standard. An African proverb says “Where one’s mouth is, that is where he invests his money”. Africans are responsible for Africa.

Additional info-
I didn’t quit the business. I just sold it and moved on to something I was more passionate about. I don’t encourage anyone to quit if what they are currently engaged in is their passion. I just wasn’t passionate enough about fashion.
Right now, I’m relentlessly following my dream path. Irrespective of how hard it gets on this one, I ain’t quitting. Because I have found my purpose.
Find your purpose and dont quit on it.

Xoxo

This essay, by Peppy Chidinma Akaniro, was the 3rd Runner-up for the 2016 African Leadership Essay Competition.

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