Enterprising Africa

Transformation through Entrepreneurship

Stephen Dobson, Paul Jones, Daniel Agyapong, Gideon Maas

• Publisher: Routledge
• Year: 2020
• Print ISBN:
  9781138371231
• eBook ISBN:
  9780429764837
• Topic: Business
• Subtopic: Business General
• Index: Business

Enterprising Africa explores the future opportunities, challenges, growth areas and key themes that will shape entrepreneurship in the African continent over the next decade. Entrepreneurship can be the key to unlock resilient growth, but only if it is driven by both socially productive and growth-oriented new businesses. The book considers entrepreneurship as an enabler for socio-economic growth and development in Africa, especially in the context of youth unemployment and increasing youth population for which the traditional, and indeed emerging, industrial sectors will not be able to produce sufficient jobs to meet demand. Organised around three thematic parts, Part I covers the notion of inclusive growth and the role that entrepreneurs can play supporting this. Part II considers the dynamic between entrepreneurs and the environment since social, economic and environmental concerns need to build upon each other rather than vie for recognition. Finally, Part III offers chapters exploring policy contexts and the wider institutional ecosystems that need to be developed and enhanced to ensure a strong and vibrant environment for the future entrepreneurs of Africa to thrive. Edited and authored by leading experts in the field, this fascinating text will be of interest to academics as well as students of International, Transformational and Social Entrepreneurship, and International and African Business.

PART I

Inclusive growth

1
Transformational entrepreneurship and SMEs

An emerging country context

Daniel Agyapong and Rosemond Boohene

Background

Traditionally, countries south of the Sahara have been found to lag behind in socio-economic development (Heidhues, 2009). These countries, many of which now form the league of emerging economies, have huge deficits in basic infrastructure, high unemployment levels, chronic balance of payment problems, and suffer from the problem of over-reliance on primary and crude exports (Strauss, 2016). Furthermore, they face the problems of non-performing state-owned enterprises, agencies and parastatal organisations. The non-performance of these organisations has resulted in rural and urban poverty and migration, malnutrition, hunger, “streetism”, ¹ low human resource development, corruption and political instability. Previous studies have linked poverty to corruption (Anderson, Kaufman and Recanatini, 2004), high unemployment and streetism (Bimerew, 2015). Despite being part of a global network of emerging countries, Nigeria, South Africa, Angola, Columbia, Kenya and Ghana continue to experience huge political, social and environmental problems including poverty, corruption and loss of confidence in governments.

In response to these problems, many people in these economies go into start-ups to help improve their standard of living. A predominant form of business found in emerging countries (e.g. Ghana) is the microenterprise, although a number of these are self-styled ventures (business setup according to the lifestyle of the owner). Start-ups and small businesses have been found to provide jobs and income and are a cradle for innovations in such economies. In fact, previous studies (Fritsch and Kublina, 2018; Shan, Jia, Zheng and Xu, 2018; Coulibaly, Erbao and Mekongcho, 2018) show that entrepreneurship transforms an economy and contributes positively to society including sub-Saharan African countries (Felzensztein, 2016 and Wonglimpiyarat, 2015). Doran, McCarthy and O’Connor (2018) found entrepreneurial attitudes stimulate GDP per capita in high-income countries but have a negative effect in middle- and low-income economies. Despite the findings in Doran et al., other studies such as Kritikos (2014) provide the significance of entrepreneurship at the micro and macro levels. This lack of consensus of empirical literature creates a gap and calls for much more investigation and analysis into entrepreneurship and its role in emerging economies. This chapter discusses the role of entrepreneurship in emerging economies with special emphasis on Ghana. Key challenges facing entrepreneurs in emerging markets and efforts aimed at transforming and sustaining such efforts are discussed.

The rest of the chapter is divided into five parts. Part 2 looks at the theoretical underpinning of entrepreneurship in emerging economies; part 3 discusses the role of entrepreneurship in the economy of these countries. Key challenges facing entrepreneurs in such countries are highlighted in part 4. The efforts made at transforming and sustaining entrepreneurship as a tool for economic growth and development are contained in part 5. Finally, part 6 deals with the conclusions and policy recommendations.

Entrepreneurship economic prosperity argument

The idea of entrepreneurship as having a positive driving effect on the economic prosperity of a country has long been established in economics literature. In Schumpeter’s economic theory, innovation (a feature of entrepreneurship) is found to be a driver of economic change (Sledzik, 2013). He opined that seeking profit must be innovative and ultimately entrepreneurial. By extension, a society that seeks economic well-being of its citizens must be innovative. An exposition of the theory reveals innovation creates new opportunities for investment, growth and employment (Sledzik, 2013). In his view, entrepreneurs occupy a central position in economic development through innovation. Within developing and emerging contexts, sociological theories argue from three perspectives describing three people and situations that promote entrepreneurial inclination. These include the marginalised, minority and migrants (Heilbrunn, 2019 and Morgan, 2019). These individuals have a high need for achievement, power and affiliation according to McClelland’s Theory of Needs. Such situations serve as catalyst and push factors to explore start-up and entrepreneurship. However, a number of ventures started are mainly for meeting immediate needs (necessity entrepreneurship) as opposed to developing and managing sustainable businesses.

Empirical results on the impacts of entrepreneurship have been mixed. The roles that have been looked at are 1) the impact of entrepreneurship at micro and macro level and 2) the impact of entrepreneurship on developed and developing economies. Whereas studies (Smith and Chimucheka, 2014; Rada, 2007; Peretto, 1999; Murphy, Schleifer and Vishny, 1991) found positive effects of entrepreneurship on economic development, others (Fritsch and Kublina, 2018; Bruton, Ahlstrom and Obloj, 2008; Valliere and Peterson, 2010) found a positive relationship in the case of developed countries but inverse or nil for developing economies. Bosma, Sanders and Stam (2018) provided evidence to support the relationship between entrepreneurial activity and GDP per capita through an institutional framework.

Though the effect of entrepreneurship at the macro level on the economies of developing countries has been found not to be significant, it has been found to play a critical role at the micro level in emerging economies. First is the creation of employment and provision of jobs for the economically active, but jobless. Entrepreneurship and small businesses form the bulk of organisations registered annually in Ghana. According to the Organisation for Economic Co-operation and Development (OECD), SMEs and Entrepreneurship Outlook (2005) the small and medium-sized enterprises (SMEs) sector is the backbone of the economy in high-income countries but is less developed in low-income countries. The OECD reports that more than 95% of businesses in the OECD region are SMEs. These businesses contribute to about 60% of jobs provided by the private sector, contribute extensively to innovation and support local and regional development. They are major contributors to income and employment in low-income countries (OECD, 2005). Statistics from the Registrar of Companies in Ghana revealed that SMEs form about 90% of registered companies in Ghana (Peprah, Mensah and Akorsah, 2016; Laary, 2015; Adom, Amakye, Doh and Anku, 2013).

In developing economies like Ghana, entrepreneurship provides the bulk of employment. Although the statistics on the volume of jobs created by entrepreneurship and SMEs in Ghana are inconsistent, existing studies estimate this to be 60–75% (GSS Report, 2017; Bamfo, Asiedu-Appiah and Oppong-Boakye, 2015; Adom, Amakye, Doh and Anku, 2013; Ahiawodzi and Adade, 2012). Such employment cuts across all sectors; from agriculture through manufacturing, services and technology. The sector provides the bulk of jobs for women and in recent times students and the youth. Cornish (2017) indicated that in Africa and Asia, about 75% of women are in consumer-oriented sectors. However, most of these women operate self-styled ventures rather than growth-oriented businesses.

Due to high graduate and youth unemployment in Ghana, the employment and job-creation ability of entrepreneurs and SMEs is critical to national peace and security. In most cases, unemployed youth have engaged in riots and demonstrations that have threatened local, national and global security. The 2015 Ghana Labour Force Survey Report indicated more than 1.2m people (11.9% of the population) were unemployed. This number constituted 714,916 (57.2%) females and 535,997 (42.8%) males. As expected, more than half (64.8%) of employed females are self-employed, with a relatively small number working as paid employees. This situation, therefore, brings to the fore the importance of female entrepreneurship and start-ups.

Furthermore, entrepreneurship and SMEs have been found to impact on national income through increased tax and export revenue, reduced import expenditure and improved balance of payments in emerging countries (Toma, Grigore and Marinescu, 2014; Subhan, Mahmood and Sattar, 2014; Braunerhjelm, 2010). A Goodman AMC 2017 report indicated the wealth of successful entrepreneurs and investors in Ghana, who have US$100m or more in assets and investments. The report revealed the top 80 richest people have a combined wealth of US$29.3bn and employ over 150,000 people. This represented about 6.4% of Ghana’s GDP in 2015 (Goodman AMC, 2015).

Previous studies (Śledzik, 2013; Lefebvre, Mason and Lefebvre, 1997; Hyvärinen, 1993; Docter, Van Der Horst and Stokmnan, 1989; Schumpeter, 1911, 1950) have found that entrepreneurship is the basis for innovations and creativity. These come in the form of technological breakthroughs, inventions and innovations in agro-processing. There is the effort at processing agricultural products which have been traditionally exported in a raw or semi-processed state.

Moreover, studies such as Varadarajan and Kaul (2018), Fritsch and Wyrwich (2017), Doda and Turan (2014) have evaluated the social impact of entrepreneurial activities in emerging economies. They found that it helps in poverty reduction, brain drain and in the search for greener pastures; reduction of economic migration; reduction in streetism; youth, graduate and female empowerment and employment; youth uprising and reducing urban poverty by setting up social enterprises (Nwokolo, Dywili and Chimucheka, 2017; Bonito, Daantos, Mateo and Rosete, 2017). Entrepreneurial activities have the ability to curb social and political instability arising from mass unemployment, thus reducing social frustration (Koltai and Muspratt, 2016). According to Koltai and Muspratt (2016), joblessness is the root cause of global unrest, threatening international security, but this can be solved through entrepreneurship. It is critical to the process of economic growth and development that promotes peace and social harmony (Dutta et al., 2013).

Key challenges of entrepreneurship and SMEs in emerging markets

A major constraint of entrepreneurship in Ghana is the absence of national policy frameworks concerning entrepreneurship. Furthermore, existing programmes have been ad hoc, uncoordinated and fragmented. They have been mainly a party political agenda rather than a n...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Contents
• List of contributors
• Introduction
• PART I Inclusive growth
• PART IISustainable entrepreneurship: Environmental, financial and cultural contexts
• PART III Entrepreneurial ecosystems: Education and policy
• Index