MALAWIANS are the most likely to start a first business in sub-Saharan Africa this year, a newly-released survey of global entrepreneurial intent shows.
The survey of 131 countries, by research firm Gallup, further found residents of Cote d’Ivoire, Botswana, Guinea and Sierra Leone as also highly likely to start a new business on the continent, which had the highest drive for self-employment globally.
From the findings, in 14 countries, more than 40% of people who did not already own a business reported the inclination to do so, with 11 of these countries being in sub-Saharan Africa. However, only in Malawi was there an outright majority—of 57%.
Niger, Zambia, Uganda, Kenya, Liberia and Nigeria also feature at the top of the list of countries where residents are most likely to start a business, though significantly, more than half of the residents in these countries did not have plans to start their first business this year.
The findings would appear to burnish the drive credentials of a continent on the rise and which has attracted many investors looking to have a share of the opportunities mushrooming in different African corners.
But there is a catch: Gallup noted that this entrepreneurial spirit was “born out of necessity rather than opportunity”. Essentially, a severe lack of job openings was the continent’s main driver towards self-employment.
The International Labour Organisation (ILO) notes that while 297 million in sub-Saharan Africa are employed, three in every four of these are in self-employment, and mainly in agriculture.
In Europe and other more developed countries, the firm observed, entrepreneurial activity was informed by opportunity, but only 4% there were planning to start a business this year due to their having more well-paying jobs.
Researchers also found that many of the countries heading the list lacked mature markets, offered few job opportunities and were primarily either agricultural economies or exporters of natural resources, “all conditions that propel a large proportion of the population toward self-employment, especially in the informal sector”.
“Starting a business in such environments may be the only way for residents to generate income,” Gallup said.
Malawi is currently looking to recover from a politically turbulent past five years, which included unpopular economic reforms in 2012 and a big fall out with donors which saw many throttle support. An election earlier this year was seen as significant in stabilising the southern Africa country, which has one of the lowest per capita incomes and which the World Bank notes is “highly vulnerable to shocks”.
While in Africa a lack of regular paying job opportunities pushes many into self-employment, other factors account for the reticence of other regions to engage in entrepreneurism. For the residents in the the former Soviet Union, among the most likely to set up businesses, a general business climate perceived as poor due to a legacy of the bumpy move towards market economies was blamed.
Another challenge for already-strained Africans is a poor investment climate, as the recently released Mo Ibrahim governance index showed. Of the 52 countries surveyed, only 18 improved their overall business climate over the last five years, with Rwanda having the biggest jump and Burkina Faso the biggest drop of sub-Saharan Africa countries.
Catch-22?
What does this all suggest? A potential conundrum is that economists generally note that the desire to start a business reduces as economic growth increases. And Africa’s economy is growing robustly: the continent is expected to grow faster then the 6% clocked last year, far brisker than the global average.
Many have also argued the African private sector has the greatest potential to create most jobs, including many African countries in their own poverty reduction papers. Not to add the continent’s expected demographic dividend given new population projections.
Is this growth then a double-edged sword? Not necessarily so. Analysts note that Africa’s twin challenge has been in creating enough jobs in the first place, and then those with high pay, leading to the concept of the working poor—those earning less than $2 daily, and in vulnerable employment.
Many of the continent’s development partners seem to be recently sold on this, and have tailored deals that focus on general employment creation. Last month the African Development Bank (AfDB) and Japan’s main international arm signed a $300 million agreement, the fifth such and part of a $2 billion plan, to encourage entrepreneurship in Africa.
But the answer lies in Africa’s expected population boom, which will provide a mass market and in improving the purchasing power of its residents. The Ibrahim index and others are reliable indicators of pinpointing just where Africa is positioned in taking advantage of these opportunities, including in investing in its people, to building infrastructure and accountable institutions.
Malawians’ nose for business in this sense thus highlights both the job challenges and opportunities for sub-Saharan Africa.
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