Stop Celebrating Entrepreneurship In Africa
It is cool being an entrepreneur. Or at least it is in pop culture in the United States. With the rise of internet celebrities and the tech bubble, the self-employment dream is the new American Dream.
That’s great. I’m starting a business too but the rate of self-employment in the US is only 10% (2015). And that is DOWN from 12% in 1994. Apparently not as many are pursuing that dream as we think. In Europe the rate is even lower at 4%. But that’s not the story. The story is how we have taken this grand ideal of entrepreneurship and exported into Africa.
Microfinance was the first “tool” that fed on the notion that entrepreneurship is unquestionable good. Yes, we have all heard the story about woman with the sewing machine that was able to get a loan that launched her business. She is the exception not the rule.
Often half of micro loans are used for business at all! Many studies have found that even when they are used for business, there is no effect on household income.
Graduation models have gotten some traction with organizations like Village Enterprise or the company I used to work for in Uganda. There are some successes but the majority fail or remain where they were prior to the intervention. Training has shown to be both expensive and ineffective at helping entrepreneurs.
Universal basic income is the latest intervention being pioneered by organizations like Give Directly. It actually shows some promise but there is a lot that we don’t know and saying that it is better than the alternatives isn’t saying much. Check Give Directly out though. It is interesting work.
Shortly after I moved back to the US from Uganda this headline came out “Why Uganda Is The World’s Most Entrepreneurial Nation”. Uganda was “crowned” the title despite being one of the poorer countries in the world. In Uganda, 28% of the workforce had started a business in recent years while in the US the same metric was 4%. Countries like Spain and France at a paltry 1–2%.
The rate of entrepreneurship correlates very strongly with a countries income. The only problem is that it is a negative correlation.
Why did Uganda “win the top entrepreneurial spot”? Because Ugandans have no other option. The high rate of entrepreneurship in the developing world should not be celebrated or encouraged but lamented. Self-employment is a response to the environment in poor countries. Not their golden path out of it.
When most Americans graduate college they go get jobs. The vast majority do not start businesses. They have options. Ugandans and most other Africans don’t. Ugandan are reluctant entrepreneurs. They are not there by choice but out of pure survival.
All the press stories about Uganda mention the obvious truth that it is out of hardship that Ugandans are turning to self-employment. Yet it comes in the last paragraph after showering adulation toward the country because we can’t wrap our head around entrepreneurship being a bad thing in today’s pop culture.
Finally, there are great stories of entrepreneurs out of Africa which are remarkable and their stories should be told. Yet if that is the narrative we push, we are fooling ourselves.