African Governments Must Inspire New Enterprise

Local governments across Africa should make every effort to promote entrepreneurship, says Flavian Marwa, SF ’10, but they shouldn’t enter the risky business of picking and backing winners. Founder of Sebelda Global Development Advisors and a consultant for the World Bank Group’s Africa region, Marwa is responsible for developing sustainable models of technology-based startup incubators with a focus on Africa.

“When governments provide seed money,” he says, “new enterprises tend to rely on it rather than learn to compete in the real marketplace. They lose their incentive to make it work when they know they can get capital infusions from the government.” Marwa believes that governments can best promote a healthy enterprise culture by partnering with industry to create mentorship programs. “Governments need to facilitate connections between young entrepreneurs and seasoned business leaders who can help them anticipate and navigate thorny patches,” he says.

Marwa also stresses the importance of promoting a healthy lending climate. He notes that government investment is critical, but not straight-out subsidies. “It costs investors a relatively steep sum of money to write a loan, and that discourages them from making the small-scale loans that would be appropriate to help a startup.” He believes that governments can offset loan origination costs with incentive programs—and similarly provide economic perks in the form of tax breaks or subsidies to motivate established businesses to invest in new enterprises.

Establish an entrepreneurial mindset early on

Marwa adds that education plays a key role in generating new business. But in Africa, he explains, the educational component must begin in an individual’s earliest years. “Governments looking to create a strong climate for invention and entrepreneurship,” he says, “must be committed to creating a world-class educational system from primary school to university that will empower citizens to develop a keen eye for opportunities and the skills and confidence to follow up on those opportunities.”

Communication across borders is especially important in Africa, where information asymmetry is holding every nation back, Marwa says. “There’s very little information sharing between countries about emerging best practices. Entrepreneurs could use that information to create thriving businesses. Tanzania recently discovered huge oil and gas reserves. It could learn from countries like Ghana and Nigeria about best and worst practices for developing those industries. Government programs in Africa that reach out across the continent for information and knowledge could have a significant impact on the lives of Africans—and not just an economic impact. Entrepreneurship is about more than economics. It empowers and injects new solutions into societies that raise the standard of living.