Business startups hold promise for Africa

Encouraging more Africans to start their own businesses is an efficient option that can help countries on the continent move toward industrialization and create more jobs, a senior Chinese researcher on Africa issues says, noting that success is not only about foreign direct investment.

Many African economies are still commodity-driven, says Liu Qinghai, head of the Center for African Economics Studies at Zhejiang Normal University's Institute of African Studies.

"Most African countries' economic performance was not good in past two years because commodity prices were falling during a period of global uncertainty," she says.

According to the latest Africa Development Report issued by the Institute of West Asian and African Studies at the Chinese Academy of Social Sciences, the performance of African countries' exports in 2014 was poor compared with the global average level.

In 2014 African countries' exports saw a 7.6 percent decrease year-on-year, while the global average export value increased slightly - by 0.25 percent. Weaker commodity prices and the slowdown of big nations' economic growth were major reasons behind the decrease, the report said.

Job creation and industrialization are the most important things for today's Africa, Liu says. Other measures, just as comment of a former finance minister of Nigeria, such as medicines for the poor, food relief for the hungry and peacekeepers for those who are facing civil war are less effective.

"None of those things is really productive and none will create wealth for Africa," she says.

Starting a business, on the other hand, has become popular in some African countries. In some cases, the notion of entrepreneurship may be well-rooted in society - so commonplace that it may not capture much media attention. But relative to other career pursuits, entrepreneurship may represent a better option, said the 2015-16 Global Report from the Global Entrepreneurship Monitor.

Over 60 percent of people in Senegal and Botswana say they intend to start a business within the next three years, according to the GEM report. The ambition in these two countries was consistent with high opportunity, perception of capability and low fear of failure. In Tunisia, 71 percent of adults believe entrepreneurship is a good career choice, the report said.

Liu says the continent still has strong development power and a favorable economic outlook - fundamentals that can prompt people to start their own businesses.

"The average annual growth rate in Africa was more than 5 percent in the past 10 years. Even though many countries were shocked by sharply decreasing commodity prices, the growth rate on the continent was still about 3 percent," Liu says, adding that the effect of regional economic integration, rising markets and the "learning-by-doing effect" brought by foreign direct investment, especially in manufacturing, can also help the continent move forward.

More governments have began to improve the entrepreneurial environment in their countries, Liu says - one more advantage to encourage local people to found a business.

"African governments have realized the importance of industrialization and infrastructure development. They also tried to improve legislation and provide favorable tax or duty policies for local industries and enterprises. Compared with foreign companies, local enterprises often can get more favorable treatment in some African counties," she says.

Africa, which many experts say will be a key driver of the world economy in the 21st century, has won support from the international community. For example, President Xi Jinping announced that China would offer $60 billion of funding support in order to roll out 10 major plans to boost cooperation with Africa in the coming three years at the Forum of China-Africa Cooperation last year.

However, business startups also face many difficulties and challenges in Africa, Liu says. The infrastructure development in most Africa counties is still weak. The lack of electricity and water supplies, along with higher energy prices, push up the cost of production, which in turn makes it hard for the local companies to expand. They tend to stay small and less competitive than they might otherwise be.

Most African countries still lack the ability to innovate and don't have strong industrial chains, Liu adds, so even though they have abundant cheap labor, the high-quality talent - which is key for a company's development - remains scarce.

"The ability of a country or a region to produce a certain product depends on its ability to produce a diverse set of inputs, goods and services. Nowadays, African countries still lack the critical mass of industrial inputs required to manufacturing production. Many services required have to be imported, which is costly," she says.

renjie@chinadaily.com.cn

(China Daily Africa Weekly 11/11/2016 page24)