Unlocking the potential of Africa’s next generation of entrepreneurs

When Ugandan entrepreneur Daniel Mukisa founded his award-winning e-commerce delivery company, Ridelink, he had his mother in mind. As a young boy, he had seen her struggle to find an affordable way to deliver her goods to the local market and vowed that he would find innovative transport solutions for SMEs.

The environment for female entrepreneurs in Africa has moved on since Daniel’s mother ran her business. In research released by Mastercard into SMEs in the Middle East and Africa in August this year, 81% of the region’s female entrepreneurs have a digital presence for their businesses compared to 68% of their male counterparts but few have access to funding for their business growth. And yet, recent research by the Harvard Business Review shows that investing in women pays off, often achieving greater credit turnover and delivering double the return of other businesses.

In fact, most African SMEs struggle to leverage appropriate capital from formal financial sources. According to the World Bank, the SME financing gap in Sub-Saharan Africa sits at $331 million. Blockages to finance for this ‘missing middle’ exist on both the supply and demand side of the SME financing ecosystem. For SMEs deficits in corporate governance and technical skills as well as lack of collateral or proof of concept make access to credit or equity challenging. For investors and banks these same factors contribute to the high-risk perception of African markets and make it difficult to accurately assess credit ratings and potential market share. Bridging the finance gap for African SMEs is critical to the Continent’s recovery and can offer investors an opportunity to tap into growth in the world’s youngest continent.  

Although access to finance remains difficult for these SMSE’s, the growth in this area continues and is represented by multiple Pan-African organisations, from the Lionesses of Africa to the Branson Centre for Entrepreneurship, the Graca Machel Trust and the Cherie Blair Foundation for Women, to name a few.

The Cherie Blair Foundation for Women helps release the potential of women entrepreneurs in low- and middle-income countries and close the global gender gap in entrepreneurship. In a space of 13 years, they have directly supported over 175,000 women, many of whom are based in Africa. Backed by global entrepreneur and philanthropist Sir Richard Branson, The Branson Centre in South Africa helps entrepreneurs get investor ready, by supporting them through a six-month go-to-market programme. The Centre’s current focus is on businesses with an impact across the themes of Zero Waste, Create Local and Tech4Good. “South Africa sees some 10 million tonnes of food at a cost of more than R61.5 billion go to landfills each year,” says Rowan Le Roux of the Branson Centre Zero Waste & Circular Economy Advisory Board.

Another organisation that is focused on food and the agricultural sector is the Graca Machel Trust, headed up by Dame Graca Machel, former First Lady of South Africa and a huge advocate for the rights of women and children. She has long called for African women to “be in the driving seat of national discourse…women need to be at the centre of our economies”.

The African Women in Agribusiness Network (AWAB) that she created aims to address challenges in food security and identify opportunities for women in the agricultural sector. The network connects women to projects in this sector, with the goal of improving their access to resources, knowledge and training.

The SME agricultural sector in Africa is showing interesting developments, with on one hand, the Covid pandemic increasing the challenges to smallholder farmers while at the same time accelerating innovative efforts in digital technology, leapfrogging past practices and traditional solutions.

There are plenty of successful examples in this sector. Since 2014, Twiga Foods in Kenya has provided a business-to-business, mobile-based, e-commerce marketplace platform, that sources quality fresh and processed food from farmers and food manufacturer and delivers it to thousands of vendors, at a fair price.

HelloTractor, a Nigerian agricultural tech company, connects tractor owners to smallholder farmers in need of tractor services. As the founder of HelloTractor Jehiel Oliver points out on their twitter feed, “most farmers can’t afford to own a tractor but if they have easy access to it, that’s as good as owning one”.

In an interview that Invest Africa did earlier this year with Nick Allan, CEO of Control Risks, he discussed the findings of their most recent Africa Risk-Reward Index. In relation to tech, Allen stated that, “The pandemic has increased the tech uptake everywhere and Africa is no exception, [we will see] tech being used to deal with some of the business challenges that are distinctly African”, although Allan warned that rooting solutions in a local context is key to success. 

The continent has a wealth of entrepreneur ideas and opportunities and SMEs who are providing innovative solutions for local problems. To unlock the potential of Africa’s next generation of entrepreneurs, access to patient capital and hands-on support are essential. 

Invest Africa hosts its (digital) flagship event, The Africa Debate on the 14th – 16th September. The third day of the event will showcase Next Generation Africa – the MSMEs that form the backbone of Africa’s economies.