Labour cost, skills biggest challenges to Africa’s start-ups – report

An Anzisha Youth Entrepreneurship Survey 2016 conducted by African Leadership Academy and Mastercard Foundation shows that Africa’s start-ups are mostly affected by high labour cost, inadequate skills and lack of motivation.

“Employee cost (43 percent) is the greatest obstacle facing entrepreneurs when it comes to human resources. This is understandable as the majority of companies which participated in the survey are less than five years old and therefore less likely to have the resources to hire top talent,” says the report.

“A lack of adequately-skilled talent (20 percent) is the second biggest hurdle, followed by motivating staff (12 percent) and attracting talent (10 percent),” the reports adds.

Many African countries are facing headwinds in the form of falling commodity prices, less accommodative global financial conditions and a strong US dollar.  However, African entrepreneurs are still very positive about the future of their businesses.

“Entrepreneurs who participated in the survey are overwhelmingly upbeat about the future of their companies. Some 79 percent indicated they are very positive, while the remainder said they are somewhat positive. None expressed any negative sentiments,” says the report.

The research-report, which surveyed 101 respondents across the continent, shows that funding is the greatest impediment to growth for start-ups, with 48 percent of respondents highlighting it as the biggest obstacles to expanding their companies.
The report states that vast majority of the entrepreneurs surveyed are currently only doing business in their home markets, therefore missing out on regional and global opportunities. Only 14 percent indicated they export their products and services.

This suggests a need to make young entrepreneurs more aware of the opportunities to sell their products and services internationally, especially in other African countries. With initiatives such as the Tripartite Free Trade Area, momentum for greater regional integration is gathering steam, and it is likely to become easier for African countries to trade with one another, discloses the report.

According to the survey, contrary to conventional belief that there is little assistance for young entrepreneurs in Africa, the majority of the entrepreneurs surveyed described the level of support available in their countries as fair. However, 24 percent and 17 percent labelled the situation as poor and very poor respectively, meaning significant work remains to make it easier for young entrepreneurs to succeed.

“When asked what should be the top priority for government to better support young business owners, the majority said that entrepreneurship should be taught in schools (32 percent),” the report states.

This suggests many were ill-prepared for the rollercoaster world of entrepreneurship. The second most popular suggestion is to improve infrastructure (20 percent), followed by the introduction of tax incentives for young entrepreneurs (14 percent).

Josephine Okojie