Batswana more entrepreneurial than African peers-Report
Pauline Dikuelo | Friday February 19, 2016 15:12
In its 17th consecutive edition, the GEM annual report looks at the entrepreneurship and business activity around the world. This year about 62 economies around the world participated in the study including eight African economies. These include; Botswana, Burkina Faso, Cameroon, Egypt, Morocco, Senegal, South Africa and Tunisia.
The report indicates that entrepreneurship is increasingly perceived as ‘high-status’ in Africa and that around two-thirds of adults see entrepreneurship as a way of improving their lives. Sixty-six percent of adults worldwide see entrepreneurship as a good career choice, and in Africa, more than half of the working-age population feel they have the ability to start a business.
Top-performing African economies with regards to entrepreneurship are Botswana and Senegal. The two exhibit an upward trend year-on-year in terms of the number of adults starting new businesses 33% and 38.6% respectively measured as Total Early-Stage Entrepreneurial Activity (TEA).
Botswana and Senegal also have one of the highest stated rates of entrepreneurial intentions with over 60% of adults in these countries reporting that they intend to start a business over the next three years. The global average for this across all 60 participating economies in 2015 was 21%.
High intentions in these two countries are consistent with high opportunity and capability perceptions – meaning that people are optimistic that they have the skills to start a business (75%) and believe that there are good opportunities to do so. They also have a low fear of failure, with less than one-fifth feeling constrained by this.
One of the surprise findings of the research was that the majority of entrepreneurs worldwide are fuelled by opportunity rather than necessity even in less developed factor and efficiency-driven economies, which tend to comprise most of Africa, Asia and Oceania, and Latin America and the Caribbean.
An average of 69% of entrepreneurs in these economies state that they started their businesses because of an opportunity and not out of necessity. By contrast, 78% of adults in innovation-driven economies, which account for both North American and most European economies in the sample, said they were motivated by opportunity.
“It is often a misperception that most entrepreneurs in less-developed economies are necessity-motivated,” said Babson College Professor and report lead author Donna Kelley.
“The reality is that entrepreneurial opportunities of all types exist in every part of the world, and there are ambitious entrepreneurs everywhere with the aspirations to pursue them.”
However, despite buoyant entrepreneurship intentions the GEM data also reveal a persistent imbalance between the rate of early-stage entrepreneurship in Africa and more established businesses. While Botswana has one of the highest TEA rates in the global sample, established business ownership is less than 15% of the TEA level.
According to GEM Executive Director and report author, Mike Herrington this should be a cause for concern about business sustainability.
“Whether these numbers are due to societal values, individual attributes and/or components of the entrepreneurship ecosystem – policy makers need to understand what is causing this so it can be addressed,” he says.
It is important that economies foster more established businesses because generally it is such businesses that create much-needed jobs and fuel economic growth and development, Herrington explains.
“Understanding what inhibits and what enhances entrepreneurship in various contexts has never been more important, as many economies are struggling - especially those in developing countries, and unemployment is increasing,” says Herrington.
“The Global Entrepreneurship Monitor allows us to gain additional perspective on entrepreneurial activity, and to look at best practices that are helping to promote small and medium enterprise development.”
GEM data show that one of the key factors contributing to business discontinuance across all economies is a lack of profitability.
About one third of business exits cite lack of profitability as a factor. Factor- and efficiency-driven economies including Botswana and Senegal – as well as other African countries such as Tunisia, Morocco and South Africa – additionally identify lack of finance as a major reason for leaving a business. Together with a lack of profits or finance explains half or more of the exits in these African economies.
According to Herrington, key areas that policy makers need to address, especially in factor- and efficiency-driven economies found in Africa include enriching the availability and variety of funding sources via appropriate regulatory frameworks.