When you take a closer look, Africa is the hub of possibilities. The only downside is that these possibilities are buried deep in an ocean of challenges.
While some of these challenges are natural, others are self-generated. For instance, some government policies or restrictions could be limiting factors.
But that doesn’t mean every African entrepreneur- existing and aspiring, should throw in the towel. On the contrary, you should dig deeper.
Embrace the challenges that are intertwined with the opportunities in Africa. To help you appreciate the gold mine that Africa is as an entrepreneur, We will explore the top 10 challenges that African Entrepreneurs face and how to overcome them. Let’s dive right in.
The Top 10 Challenges African Entrepreneurs Face And How To Overcome Them
- Government Policies
- Electricity
- Capital/Funding
- Entrepreneurial Education
- Poor Infrastructure
- Taxes
- Culture
- Purchasing Power
- Globalization
- Underskilled Labour Market
Government Policies
When it comes to government policies in Africa, there’s a high level of uncertainty. The government of some African countries has a track record of whipping up weird policies overnight that could potentially shut down an entire business.
For instance, the Lagos state government in Nigeria suddenly introduced an “Okada” (also known as a motorcycle) ban in January 2020. The ban affected a new crop of businesses that had sprung up in the country- “Oride” and “Gokada.”
These companies ran a motorcycle-hailing app that made it easy for Nigerians to order a bike to any destination in Lagos state. However, the government of Nigeria shut down its operations indirectly with the “Okada” ban.
Now, while no one can predict the government policies of an African country, one of the ways an African entrepreneur can overcome this is to remain flexible and stay close to the drawing board.
For example, after the ban in 2020, the companies in the field “Gokada” and “Oride” quickly moved into the logistics industry.
They partnered with small business owners to help distribute their products to their customers around Lagos state.
Also, you might want to conduct deep research about the nature of government policies in an African country or state before you start your business.
Electricity
Electricity is another big challenge that African entrepreneurs encounter. Africa has struggled with constant electricity supply for as long as the world can remember.
However, some African countries have improved the electricity supply to their citizens. Nevertheless, the lack of constant electricity in other African countries can slow down operations.
On a large scale, it limits a business’ ability to hit its production and financial goal at the end of a business year. There are two ways entrepreneurs can overcome this challenge.
You can either consider setting your base in one of the African countries with better electricity supply like Ghana, South Africa, Egypt, etc.
Or, you can get an alternative if an African country with an electricity problem harbors your target audience. An option would be to invest in a diesel generator that would power your operations base.
Capital/Funding
Before the age of Fintech in Africa, Entrepreneurs had to approach the bank for business loans. Sadly, these business loans always had ridiculously high interest.
Of course, you couldn’t blame the banks for the high interest as there was no way for the bank to access the creditworthiness of the entrepreneurs.
But the downside to the high interest is that it ends up sapping every opportunity for the business to grow. But that was before Fintech stepped in as the savior.
Fintechs have helped African Entrepreneurs overcome this challenge. Entrepreneurs can now access funding for their businesses without the high-interest rates.
Entrepreneurial Education
While it takes a lot more than passion and an innovative idea to grow a business in Africa (and any other part of the world), few African entrepreneurs have access to high-quality business or entrepreneurial education.
The majority of African Entrepreneurs only bristle with knowledge from books and try to pull as many strings as possible to get ahead in their business. While that might work, it would grow the company to an extent and then leave it in survival mode.
That’s why the majority of African businesses never enter their expansion phase. They mostly thrive in survivor mode, which could become frustrating eventually.
African entrepreneurs need to invest in quality entrepreneurial education to overcome the “survivor mode curse.” They’ll get the necessary skill set required to grow a business.
With the existence of business schools like the Lagos business school, tech hubs, and online learning platforms like Coursera, Udemy, etc., an African Entrepreneur would well be on his way to business expansion- once they start to implement their learnings.
Poor Infrastructure
The poor infrastructure in some African countries poses a challenge to business owners in Africa. A common infrastructural problem in the majority of African countries is the road.
It affects the transportation of products from the manufacturer to the consumer. For instance, the bad roads could damage the products that are being shipped to their end-user.
When there’s a fault with the product, end-users are forced to use their warranties to return the product and order a new one. One bad product could destroy the chances of the end-user making a second purchase from a manufacturer.
End-users could tag the manufacturer as unreliable and try out competitor brands. Consequently, that results in a loss on the path of the entrepreneur.
One of the ways to combat possible road hazards is to partner with suppliers, distributors, and reliable logistic businesses to get your products from point A to point B safely.
Taxes
In some African countries, taxes are excessive. Business owners have to pay taxes on almost anything they use, from their business’s land to the electricity they use. While large-scale companies can keep up with the numerous and outrageous taxes, small business owners struggle with it.
Some small business owners often shut down as a huge chunk of their profit is diverted into taxes. As a result, they struggle with investing in their business for growth. One way African Entrepreneurs can overcome this is to find creative ways to cut costs.
Culture
Sometimes, culture can be a significant hindrance to African Entrepreneurs. There are diverse cultures and traditions in different African countries. There are 250 ethnic groups in Nigeria with unique cultures, beliefs, traditions, and, possibly, superstitions.
Ghana has over 100 ethnic groups, and South Africa has been referred to as a melting pot of diverse cultures and ethnic groups. The point is that Africans- regardless of the country, are people of culture.
They have a deep respect and reverence for their culture and tradition. To sell your product to an African man, you have to appeal to his traditional side.
Otherwise, they would most likely not feel the need to invest in it. For instance, many brands wrap their products in African culture and language to make them enticing to Africans.
Guinness is a global brand, but in trying to sell to African countries, they utilize elements of culture that resonates with Africans to sell to them.
It would help if African Entrepreneurs tapped into the aspect of culture to get their products out to their target audience.
Purchasing Power
Like other countries, Africa is a blend of poor and wealthy people. However, there seem to be more poor people in Africa than the rich.
Consequently, not many people have great purchasing power. But this is not a problem at all. African entrepreneurs can devise a means that makes their products affordable and accessible to an average African.
For instance, few businesses have devised a way to make it easy for the average African man to own gadgets. With the advent of “Easybuy” and “Ogabassey,” the Average Nigerian can afford to purchase the latest iPhone series and Macbooks.
All they need to do is pay in installments, which makes it easy for them to own. If your target audience is the average African, you’ll have to create payment plans as an African Entrepreneur that make it easy for Africans to afford your product.
Globalization
Although globalization encourages business growth, it also comes with its demons. For instance, it can give foreign businesses in Africa an edge over local businesses.
Foreign businesses can easily export the production of their products and services to other countries. As a result, they’ll spend less cost producing their products.
Since they can manufacture their products at lower prices, they can also sell at low prices. But the case is different with African entrepreneurs.
While it’s difficult for the majority to manufacture their products within the country, they spend too much outsourcing the production of their products. In other to make a profit, they’ll have to sell higher.
Then, a competitive gap is born as end-users would be prompted to purchase cheaper products. The way out would be for African entrepreneurs to find a way to manufacture their products at a more affordable rate. They could also build their manufacturing plant in the country.
Under skilled labor market
The lack of talented and skilled individuals within Africa’s labor market is another issue African entrepreneurs must combat. With a wide skills gap in the labor market, it’s difficult for entrepreneurs to execute their dreams and grow their businesses.
College education doesn’t align with the labor market in many African countries. Although Africans invest in getting their kids educated, the school system doesn’t equip the youths for the labor market.
African entrepreneurs can bridge the skill gap by training their staff on the job. They could curate internships that allow youths to learn the company’s scope of operations and earn.
Conclusion
Now that you know the 10 challenges African Entrepreneurs face and how to overcome them, don’t just let this knowledge lay dormant.
Instead, you should embrace the challenges and draft strategies to help you tap into the opportunities while you rise above the challenges.
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