Why African Entrepreneurs Hit the Jackpot in Africa

The number of African entrepreneurs and those of African descent is growing significantly around the world. That is wonderful news, because frankly, I think nothing will be more empowering to Africans psychologically, economically, and politically in the long-run. Entrepreneurship is not a job, it’s a way of life that can potentially put you in control, enable you to expand your potential, increase your influence, and ultimately allow more freedom.
But there is more to it: one can actually make a significant impact in this world. And when you focus on Africa, you will contribute towards the future of a continent that has struggled to shine for far too long.Lack of knowledge is a key obstacle hindering us to strive towards entrepreneurial and business success in Africa. Too many people – be it on the continent or in the Diaspora – are still looking for jobs or think that fortune is easier to find in the West.
Well, we all have our own circumstances and preferences. I myself, originally from Eritrea, am based in Germany, but even here I’ve managed to start a new business that revolves around Africa and the fulfilment and potential it holds excites me each day. I believe that the potential for realising African entrepreneurial success and financial freedom is so much greater in Africa than anywhere else.
While consumers in the West have almost everything that their hearts desire, the African consumer is just waking up to new spending power abilities. According to the McKinsey Global Institute, by next year Africa’s consumer spending will be around USD1 trillion, driven by the continent’s exploding new middle class of over 300 million people. In fact, analysts fear that the demand for many products and services cannot be sufficiently met. Right now, there is a huge demand for a wide range of products and services across markets and industries – simply not enough is available or the quality is poor. This potential not only allows for faster growth within a market, but often also enables you to expand fast and relatively easily across borders.
The level of market competition is one of your biggest challenges in the West. Take bottled water, for example, or baby diapers, pasta, or make-up. The store shelves in the West are filled with a huge range and variety, but above all, with leading international brands that are hard or impossible to compete against.
Now in many African countries you will only find one or two brands – often they are overpriced if they are imported, which means there is a lot of room for local production. Or they are of such poor quality that they don’t meet the standards of more affluent consumers. Or they simply don’t exist.
Although competition in Africa is increasing and one should develop a sense of urgency, the amazing thing is that you can still have a clear first mover advantage with many simple concepts in Africa right now.
The return on investment on average in the United States was about 2.3Pct in 2015. In fact, many investors in the West have started complaining that the returns were so small that they felt discouraged or started looking elsewhere. Foreign investors in Africa widely report ‘super returns’, many making 15-25Pct returns on their investments. The figures speak for themselves and are not based on stocks, but on direct investment into local companies.
Tom Speechley, a senior partner of the Abraaj Group, a leading private equity investor in global growth markets, said at an event in 2013: “The interesting thing about Africa and emerging markets is you can make a lot of return just with equity—you don’t need to use leverage to generate return. We typically don’t use any…. We just put in equity and hope the business grows three or four times over three or four years and you make three or four times your money.”
Some of those who have returned to Africa report of the personal challenge to fit into the society, but this will probably only be temporary and sometimes it is also down to how critical you tend to look at life and people.
But here is the thing: In the West, you are more often than not a ‘nobody’ and especially in Europe (except perhaps the UK), it is difficult to find a high-paying job as an African, let alone become a widely respected CEO. While one may face some societal challenges when returning to Africa, people there will usually welcome you and look up to you admiring the skills and experiences you are bringing into the community. There is currently also a very visible shift happening: driving localisation of executive leadership and cutting down the number of expats in Africa. In short, being African will work for you, not against you, if you want to grow into a new business leader.
In Africa you actually have the potential to create a business empire from scratch. You will be amazed to hear that many successful entrepreneurs in Africa did not start off with a rich dad or an investor. They started with nothing. Their success was achieved one step at a time, with vision, hard work, and the right concept.
Patrick Ngowi, a Tanzanian, just 29, received a small loan from his mother to start a business ten years ago with just a little over USD1,000. He started off selling Chinese mobile phones, but then discovered that only a tiny fraction of Tanzanians enjoyed access to electricity, so he saw a gap he wanted to fill. He continued travelling to China, but now bought small solar supply and installation systems instead.
To make a long story short: A couple of years ago, his company Helvetic Solar earned more than USD5 million in revenues and KPMG East Africa recently valued the company at USD15 million. He had no real capital, no investors, no prestigious position or friends in the government, and not even experience when he started and today he belongs to the richest ‘under 30’ CEOs on the continent.
He started from scratch without having really invented anything. He simply met a basic demand – and had no serious competition.
The success of a business depends vastly on the passion one has for it, on the right business model, and on your determination and creativity. Operating in Africa has many challenges (patience is a virtue!), but having worked in Africa myself, I know nothing can beat the level of appreciation, personal engagement, and fulfilment you get when serving the needs of Africans.
While your attempts in the West may go unnoticed and you can be replaced too easily, any venture you start in Africa can be turned into one with purpose. When you make a difference, people notice you, respect you, and appreciate you for it.
There are so many products and services Africa needs right now. Business ideas may meet basic needs, yet chances are that it will be very easy to turn any business model into one with purpose.
These are some of the most important facts that accelerate the chances of doing business in Africa – but truly the gates are open. Of course, the truth is that many entrepreneurs and businesses in Africa still fail or just make enough to get by, so it’s still very important to research properly, know the industry and market, and plan accordingly in order to be successful.

4th Year • May 16 2016 – June 15 2016 • No. 39

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