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African Entrepreneurship: The Challenge of Scaling Up
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In Africa, Small and Medium Enterprises (SMEs) generate close to 80% of employment and are estimated to account for a third of GDP. Yet most SMEs have difficulty obtaining the finance they need to grow. In this interview, AFD’s former CEO Jean-Michel Severino – now Chairman of Investisseurs & Partenaires, a pool of funds dedicated to MSMEs in Sub-Saharan Africa – examines the need to invest in African entrepreneurship to help African start-ups and companies scale up.
Jean-Michel Severino – former AFD CEO and now Chairman of Investisseurs & Partenaires:
African entrepreneurs must be given the support they need to become full-size businesses. Intermediaries working with African entrepreneurs – incubators, accelerators, business angels and investment funds – are increasingly numerous and professional. The innovation and pilot-testing phase is nearing an end and it is time to “scale up”.
This requires formal recognition by both public and private decision-makers of the need to make this a priority on the development agenda. The need for finance will entail the mobilization of development agencies, public agencies specializing in private sector funding, foundations, ‘family offices’ and private companies operating in Africa including banks and investment funds.
The New Africa-France Summit in October was an important step in placing this approach firmly on the development agenda and AFD Group has been a pioneer in this domain. It has continued to innovate with programs that cover the entire range of needs, such as SIBC or the Creative Africa acceleration program, interest-free loans for tech businesses, and of course the FISEA+ fund – part of the Choose Africa initiative that provides really excellent impact investing support.
The latter program will also tackle the challenge of professionalizing and scaling up, while accepting the indispensable accountability in terms of ambitious public policy objectives that should hopefully lead to a massive influx of investment.
Further reading: all the issues of Private Sector & Development
Obviously, African governments must continue the efforts made over the past two decades to improve the business environment, spurred on by the World Bank's Doing Business rankings, and everyone with influence needs to keep things moving in this direction.
Working in Africa remains very difficult for everyone – especially entrepreneurs – in the face of still cumbersome public administration requirements and the reality of omnipresent corruption.
But if we accept the importance of strengthening the productive sector and the entrepreneurial environment in resolving the issue of employment, then continuing to focus exclusively on the business environment is just like building a football stadium with a beautiful pitch in the hope that this will enable teams to emerge and a match to be played – i.e., essential, but not enough. And we should also add that it’s not just about one match – we need many teams to participate in a successful cup of nations for employment.
Read the full interview in Private Sector & Development