Every entrepreneur in Africa faces one challenge or another. From poor economy to insecurity and bad government policies, these problems pose a daily threat to their survival.
Little wonder, reports suggest that 80% of businesses in Africa don’t survive beyond 5 years. Out of the remaining 20%, some are struggling to keep up. Only a few are thriving. These successful entrepreneurs detected the challenges earlier and adopted strategies to solve them.
So, in this article, let’s see the 10 challenges facing entrepreneurs in Africa and how the top moguls overcame them. If you are a new or struggling African entrepreneur, kindly pay attention as we begin the countdown.
1. Limited access to capital
This point has been one of the oldest challenges entrepreneurs face in Africa. Poor funding and limited credit facilities have crippled promising firms.
Low start-up capital has prevented brilliant business ideas from seeing the light of the day. Speaking on the challenges faced by SMEs, Nigeria’s former minister of industry, Adeniyi Adebayo, said:
“The lack of access to credit has stifled economic growth, leading to a decline in investment and job creation, ” the minister said.
Unfortunately, many young entrepreneurs are on the verge of shutting down their businesses for similar reasons.
Solutions
Try the following options if your business needs funds and financial support:
1. Explore Microfinance Banks: Find a reliable microfinance bank and apply for a loan and other financial support. Many successful companies and entrepreneurs get loans to boost their ventures.
2. Try Crowdfunding: This is another way to navigate your way out of the financial challenges facing African entrepreneurs. Create a crowdfunding account and seek public help. However, ensure your pitch or business proposal is catching and convincing.
3. Explore government grants: Try some government grants available in your country. Nigerian entrepreneurs should apply for the Presidential Intervention Fund and obtain sufficient financial support worth millions.
2. Insecurity
Insecurity is fast becoming one of the most significant challenges limiting business growth in Africa. Many businesses have been crumbled by Boko Haram insurgencies in Nigeria, xenophobic attacks in South Africa, and Al-Shabab terrorists in Somalia.
Solution
While the government has significant roles, entrepreneurs can engage in one or two activities to overcome insecurity challenges.
1. Take tough security measures: Install surveillance cameras and employ security personnel to safeguard the environment. That way, customers will patronize your business without fear, and your employees will function to the best of their abilities.
2. Cooperate with security agencies: Cooperate with law enforcement and security agencies to promote peace. Report any suspicious movement around your business premises to the appropriate quarters.
3. Explore online trading or change location: Change your business location if the insurgency is unbearable. Though you will lose some customers, it’s better than losing your business to insurgency. Alternatively, you can create an online store where customers can order your products and services.
Kenzz, Chari, and Shawar are some successful North African brands that took similar steps after the COVID-19 pandemic.
3. Poor infrastructure
Poor road networks, expensive transportation fees, and insufficient storage facilities are some infrastructural problems many entrepreneurs face in Africa.
Solution
Overcoming infrastructural challenges can be difficult for many young and rising entrepreneurs as it requires lots of spending. You should provide a conducive means of transportation and a suitable warehouse to cushion the adverse effects of poor road networks.
Purchase vehicles that will transport raw materials and distribute the finished products across the nation and beyond. However, entrepreneurs who can’t afford such extensive equipment can digitize their products and services.
4. Limited market size
This factor was a top challenge some years ago, but things have improved drastically. Notwithstanding, business owners still face this challenge in some sectors in African countries.
For instance, single plastic traders in Rwanda once lamented low patronage due to limited market size before the government eventually banned the product.
Solution
The solution to the limited market size problem is simple:
1. Digitize your product: Try online customers if those in your location are uninterested in your services. Improve your digital marketing game, attract more online-based customers, and deliver top-quality home services.
2. Change location: Move to a favorable place to boost your business.
5. Bad government policy
Here’s arguably the greatest problem in Africa’s business sector. Many African governments are known for poor decisions that affect business owners and average citizens.
For instance, Nigeria’s decision to remove fuel subsidies without adequate preparation has weakened the struggling economy, and many entrepreneurs are feeling the heat.
“People are already dumping their businesses to look for something else, such as tricycle riding and farming.” John Omeh, a provision store owner in Akwa, lamented.
Likewise, the Kenyan government recently announced a massive increase in taxes and commodities, leading to a brutal nationwide protest.
These few instances show some African governments don’t consider the people and entrepreneurs in their decisions.
Solutions
1. A responsible government: The governments should consider the citizens and the public’s welfare before making major policies.
2. Adaptability: You must learn to adapt to unfavorable policies and deploy business strategies to cushion the effect.
This includes diversifying your products and services to limit dependency on a single regulatory environment.
6. Corruption
This is a major crisis in every African sector, including the business world. Favouritism and nepotism are not only common to politicians, entrepreneurs and ordinary people are culprits.
Some established business moguls won’t partner with young entrepreneurs without extorting them. The same thing is seen among government officials; they award contracts to incompetent entrepreneurs due to personal benefits.
Solution
1. Maintain transparent practices: Don’t compromise your product’s quality and brand reputation. Ensure your service remains one of the best in the country because that’s the best way to stay ahead of the competition.
2. Join entrepreneurs’ associations: While maintaining your integrity, join necessary associations and build strong relationships with other entrepreneurs. The association will collectively protest against corrupt leaders and practices affecting the industry.
7. Entrepreneurship skill shortage
Many African entrepreneurs lack the skills, knowledge, and drive to grow their businesses. They can’t develop a sales strategy, choose the right product, or maintain a budget for a long period.
Solution
1. Proper entrepreneurship education:
Attend workshops, read entrepreneurship books, and study other successful entrepreneurs.
2. Organize employee training programs: Don’t exclude your staff from the growth journey. Teach them ways to be productive as a person and professional. Tony Elumelu of UBA does this a lot.
8. Lack of quality market information
African entrepreneurs and CEOs don’t have access to reliable market information, stats, and numbers that can help their decisions. Hence, some businesses crash due to ignorance.
Solution
1. Leverage technology: Thanks to the advancement in technology, you can obtain reliable information about a product on the internet. Discover the latest market trends, fast-selling products, and more by browsing on your mobile phone.
2. Build relationships: Connect with other entrepreneurs so you can access vital information through them.
9. Gender Inequalities
Despite civilization across the continent, it is sad that gender inequality is still a major challenge facing entrepreneurs in Africa.
Some female entrepreneurs don’t have access to financial loans and grants like their male counterparts.
For instance, A Somali woman in the fishery sector lamented that:
“Financial institutions have made borrowing so restrictive that it’s almost impossible for women to borrow.”
Nigerian women also experience similar treatments, which isn’t good for business and the continent’s reputation.
Solution
1. Join association: Women entrepreneurs should form an association that will advocate for policies that ensure equal rights to property and business ownership.
2. The government should provide grants to women entrepreneurs and should equally support women-oriented programs that encourage financial literacy and management training.
10. Inadequate access to technology
Though Africa is witnessing a tremendous rise in science and technology, there is still a long way to go.
Some entrepreneurs and new firms can’t access state-of-the-art equipment that will boost their productivity.
Some companies in the Horn of Africa and local areas in Nigeria face poor internet connections.
Solution
To improve access to technology for African entrepreneurs, the government must invest in affordable infrastructure and support tech education.
Entrepreneurs should also build partnerships with tech companies for better and more affordable accessibility.
Conclusion
It’s not enough to launch a business; every entrepreneur must develop the ability to overcome challenges like capital, insecurity, bad government policies, and gender inequalities in Africa.
The journey to the top isn’t easy. Hence, you must learn to leverage microfinance and crowdfunding platforms, enhance security measures in your company, and adapt to market dynamics.