In 2010, my family and I had a vision for Africa’s transformation. The Tony Elumelu Foundation (TEF) was our direct intervention to catalyse and build the next generation of African entrepreneurs. As my family actively invests across Africa — and in the US, UK and France — I understand the critical role of the private sector in any economy, and believe that it is only through entrepreneurship and empowering young entrepreneurs that we can create a sustainable model for Africa’s transformation.
Philanthropy has long been defined by hand-outs and aid. These have their place, but are not the most effective approach to eradicating poverty and creating wealth and broad-based prosperity. At the foundation, we have pioneered a 21st-century philanthropy: a new way of giving that empowers young African entrepreneurs and gives them the funding, mentorship, training, resources and access to networks to allow them to create jobs, grow revenues and build innovative solutions leveraging local insights.
To date, we have disbursed more than $100m through TEF to empower African entrepreneurs. We have not only driven this new narrative of philanthropy, in which young people are better positioned to support themselves through their labour and talent, but have also contributed to the discourse of entrepreneurship on the continent.
Entrepreneurship remains a tested and trusted way of creating job opportunities across the continent. The World Bank estimates that micro, small and medium-sized enterprises represent around 90% of businesses and generate more than 50% of employment worldwide. Our impact over the years has demonstrated that an ecosystem that supports and encourages entrepreneurship is one that will automatically aid the creation of job opportunities.
Africa’s working-age population is starting businesses and the continent boasts the highest entrepreneurship rate in the world, with 22% of its working-age population starting businesses. Addressing some of the challenges and identifying opportunities to drive entrepreneurship form the core of our mission. Every year we encounter lessons that invite us to reflect on how entrepreneurship is changing local economies and individual lives.
A rejuvenation tool for the post Covid-19 era
For 2021, the TEF Entrepreneurship Programme was a post-Covid intervention for small and medium-sized enterprises (SMEs) in the wake of the pandemic, disbursing $24.75m to 5000 entrepreneurs from across 54 African countries. The continent is faced with the challenge of how to harness our youth demographic and leverage youth start-ups as tools to rebuild a sustainable SME sector.
Starting and running a small business is fraught with risks, which are in turn exacerbated by infrastructural challenges across much of the continent. Programmes such as ours exist to empower entrepreneurs end-to-end by targeting the underlying constraints for small businesses, including access to training, mentorship, funding and enabling a value-add community through our digital hub, TEFConnect.
Increased inclusion for sustained growth
In Africa, access to finance for women entrepreneurs remains a challenge. The majority of women do not have access to the required collateral or appropriate networks to access financing that will enable them to sustain and grow their businesses. Yet Africa’s female entrepreneurship rate is also the highest in the world: 27% of the female adult population is engaged in early stage entrepreneurial activity. Women make up 58% of Africa’s self-employed population and are twice as likely to start a business as women elsewhere in the world.
Our 2021 programme also prioritised women entrepreneurs, knowing very well the economic pressure brought about by the pandemic. More than 68% of the 5000 beneficiaries of the programme are women, with businesses in both the start-up and growth phases. This is a total of $16.8m disbursed by TEF directly to 3369 young women across Africa.
Financial inclusion will accelerate women’s participation in local economies. The United Bank for Africa, the foundation’s financial partner with a presence in 20 African countries, is also working to ensure that more SMEs have access to affordable loan schemes. Ultimately, smart financing models, gender representation and access to loans remain a prerequisite in empowering entrepreneurs across Africa.
Leveraging a demographic dividend
While Africa is the world’s youngest continent, with nearly 60% of its inhabitants under the age of 25, the continent’s impressive economic growth over the past decade has not resulted in a significant improvement in job creation to meet the demand of the labour market. Youth unemployment and underemployment are fundamental development challenges.
Before the Covid-19 pandemic, out of 18 million jobs required annually, only three million were created, leaving many youths in the labour market without any prospect of finding a decent job in the formal economy. The pandemic has worsened this situation and, more than ever, alternative approaches to creating decent opportunities are required to harness Africa’s demographic dividend, which is a crucial driver of sustainable economic growth.
As a philanthropic organisation empowering young entrepreneurs from across all 54 African countries, TEF is championing entrepreneurship development across the continent to enable these entrepreneurs to contribute to the economic growth of the continent.
Creating policies that bring hope
Beyond needing jobs, our youth also need favourable policies that will support their entrepreneurial objectives and enable their businesses to thrive. In addition to paying closer attention to strategic growth sectors, governments need to pay attention to basic infrastructure.
Power shortages remain a huge challenge across much of the continent. Without a reliable source of electricity, most businesses in Africa struggle in their operations, or are obliged to allocate their often precious resources to acquire an alternative source of energy. Governmental support is needed for the stabilisation and reconstruction effort the private sector is championing.
Intra-Africa trade opportunities
Africa’s move towards becoming a single continental economy will be an economic revolution and must be greatly encouraged. The African Continental Free Trade Area (AfCFTA) offers the opportunity to economically unify more than 1.2 billion people with a combined gross domestic product of over $3.4tn.
The possibilities of growth and prosperity offered by the AfCFTA are endless. Considering the large percentage of young people on the continent, it is evident that young and enterprising Africans will be the key drivers on our path to becoming a single economy.
An increase in intra-continental trade will invariably lead to an increase in economies of scale. Business owners will be able to purchase raw materials at a much cheaper rate and be easily integrated into the global market.
A recent report by the World Bank indicates that the AfCFTA trade pact could boost regional income by 7%, or $450bn, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035. The pandemic has had an obvious negative effect on Africa’s growth and development, and a successful implementation of AfCFTA would help cushion these effects by supporting regional trade and value chains through the reduction of trade costs.
A successful implementation of the AfCFTA will greatly increase regional trade levels, boost the continent’s annual economic growth, create wealth more inclusively and reduce poverty.
Another advantage of the AfCFTA will be tariff reduction or a total elimination of custom duties on imported goods from within the continent. This way businesses within Africa can trade with each other without having to worry about the tariff barrier that currently exists.
Given that the world is fast growing into a global economy, the possibilities for growth and development are endless — especially for developing nations in Africa that are essential to this pivot.
Flattening boundaries via digital connectivity
In a recent report from Start-up Genome and the Global Entrepreneurship Network, to which TEF contributed, it was discovered that African start-up ecosystems are collectively worth $6.6bn, of which $6bn is concentrated in just five cities: Cape Town and Johannesburg in South Africa; Lagos, Nigeria; Nairobi, Kenya; and Accra, Ghana.
As an entrepreneur myself, one of the ways I believe we can achieve growth and development is by rolling out a massive digital infrastructure that African entrepreneurs can use to expand their addressable markets. Digital connectivity will support the acceleration of innovative solutions to Africa’s most pressing challenges by supporting, and connecting entrepreneurs to, an entire ecosystem that is fast emerging.
Investing in young entrepreneurs and women entrepreneurs presents an opportunity to redeem Africa from the stagnancy and decline posed by the pandemic and other challenges facing the continent. There is a strong need for all the relevant stakeholders to ensure that the ecosystem within the continent is one that actively encourages and supports entrepreneurship.
Small businesses generate most of the new jobs on the continent and help diversify a country’s economic base. They also promote innovation, help deliver goods and services, and can be a powerful force for integrating women and youth into the economic mainstream.
Awele Elumelu is the chairperson of Nigerian insurance provider Avon Healthcare and is a trustee of the Tony Elumelu Foundation, a champion of entrepreneurship across Africa. She was writing here.