The ‘African Curse’- Is it a myth or reality- Why are African businesses not built to last

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The ‘African Curse’- Is it a myth or reality- Why are African businesses not built to last

In a recent article published by knowledge@wharton titled ‘Why African Entrepreneurs Outperform Their Peers When the Playing Field Is Levelled’ they said Entrepreneurs in some of the world’s poorest countries should find cause for optimism in Explaining Africa’s (Dis)Advantage,” this is from a recent study co-authored by Wharton management professor Ann Harrison and published by the National Bureau of Economic Research.

They came out with this submission that “If you were to give African entrepreneurs the same kind of environment as an American or European entrepreneur, they would outperform their counterparts,” Harrison says

According to the researchers, insufficient infrastructure, scarce access to credit and political monopolies cripple these economies. Inefficient telecommunications, a proxy for infrastructure, consistently retains top ranking among the reasons for their perennial disadvantage. The difficulty to gain financing due to a lack of formal lending sources garners second place. Single-party rule also inhibits progress to a lesser degree.

They said “If one could adjust the daunting list of geographic, infrastructure, political, economic and institutional factors to the levels that exist elsewhere,” the authors write, “Africa possesses an inherent advantage.” Harrison adds that this could be because African firms have had to become stronger and work smarter in order to survive such a challenging environment.

The above arguments sound logical and convincing to a large extent and I can see some of our African entrepreneurs nodding their heads that the research hit the nail right on the head.

Now, let us assume there are level playing fields and some of the reasons why African businesses are disadvantaged are resolved or put in place, the question to ask next is why is it that African businesses are not built to last? Are the reasons above the only militating factors? What predisposes our businesses to early death?

Don’t let us forget the fact that the researchers have adjusted for those regional militating factors like bribery, tenacity of regimes to stay in power, predilection for armed conflict, ethnic fractionalization, difficulty firing unsuitable workers and a sizeable “informal” business sector that doesn’t report bottom lines. The above factors were fittingly described as ‘Daunting’ Business Environment.

The authors conclude that their study attacks a paralyzing preconception. “There is no inherent Africa ‘curse’ that hinders its development,” they write, “only a need for action to address the poor political and business environment is what is needed”

I think there are other equally important factors to me that look more in-born and deep seated with an African entrepreneur that makes him susceptible to failure apart from the factors already enumerated above.  Some of these factors may not be too well known to the researchers. The reasons are not too far-fetched, it may be a case of not knowing the mother better than her son or better still it is a case of divorcing a woman and you are still admiring her waistline.

Beyond the above factors, there are other underlying forces that are peculiar to us Africans particularly the entrepreneurs and business people that lend credence to the title of my article which is why African businesses are not built to last.  These other dynamics usually cause our business untimely death and inability to outperform their peers in other continents of the world.

The reasons why African businesses do not survive beyond the original founders may be summarised under five main headings. These are bitter pills that we must prepare to swallow or the brutal fact that we must be willing to confront.

  1. Weak Strategic Planning
  2. Non adherence to Core values if any
  3. Unwillingness to experiment
  4. Lack of management continuity
  5. No mechanism for self-improvement

The above factors are much stronger in the causative effect of reasons why our businesses are not built to last. Harrison said we should not blame the myriad problems facing the region on local firms. She said ‘They often have the right stuff to succeed. Instead, blame governments and a corporate climate that fails to furnish what the sector needs in order to flourish and grow to the next level. “The implications for what needs to be done to nurture a strong business sector are clear: promote infrastructure, expand access to bank and trade credit and encourage political competition,” she notes.

Most of her arguments are very valid but to a large extent many countries in the region like Ghana have been able to solve the critical issues of infrastructural challenges, accessibility to bank and trade credit is far better now no matter what the cost of borrowing fund is which is still another major concern to many businesses in Africa and healthy political rivalry is visible and democratic governance is the order of the day.

Let’s take time to look at these other factors very closely and give our own suggestion as to what should be done to ensure that our companies become premier institutions- the crown jewel in their industries, widely admired by their peers around the world.

WEAK STRATEGIC PLANNING

Chief among the problems with African business inability to continue beyond a given time after the demise of the founder is weak strategic planning structure of our businesses.  The holy book says, ‘Any enterprise is built by wise planning, becomes strong through common sense, and profits wonderfully by keeping abreast of the facts’. (Proverbs 24 v 3-4 TLB).

For your business to become strong and produce wonderful results that would last generation to generation, it must be built on wise ‘strategic’ planning and also must continuously keep abreast of the facts that make business enjoy what the Accountants called going concern concept.

The foundational plans are structurally defective and subsequent ones are usually built on a weak foundation that could not stand the test of time. This happens either because of lack of knowledge of what a good plan is or impatient to see their long term plan translate into realism. The so called plan cannot support a successful, trans-generational business model. They are not built on robust financial models capable of delivering long term financial future for the business.

Non Adherence to Core Values (if any)

What are core values or what some people called core ideologies? The core values of an organization are those values we hold which form the foundation on which we perform work and conduct ourselves.  In an ever-changing world, core values are constant.  Core values are not descriptions of the work we do or the strategies we employ to accomplish our mission.  The values underlie our work, how we interact with each other, and which strategies we employ to fulfil our mission.  The core values are the basic elements of how we go about our work.  They are the practices we use (or should be using) every day in everything we do.

We don’t have them in our businesses. If we do have them, they only exist on papers or hanged deceitfully on the wall. Ideally, it should be the written or unwritten laws that govern personal relationships, guide business processes, clarify who we are, articulate what we stand for and help explain why we do business the way we do it.

If these are not in place, success and continuity become a mirage. Remember, God the Almighty Himself when he was giving the master key of success to Joshua in Joshua 1:8 This Book of the Law shall not depart from your mouth, but you shall meditate in it day and night, that you may observe to do according to all that is written in it. For then you will make your way prosperous, and then you will have good success. That book of the law is the core values of the organisation it forms rock solid foundation and do not drift with the trends and fashions of the day so say Jim Collins in his book Built to Last.

Unwillingness to experiment

No serious investment in research and development, they rely solely on common sense that can only produce common result. And when the common sense dries up, they move on to guess work that leads to another predictable dead end.

Research and Development (R&D) is a key element of any organizations and, when well-planned and used, enables a business to generate increased wealth over a period of time. Closely related to this is power of experimentation. Ability to make bold commitment to Big Hairy Audacious Goals (BHAGs). We used BHAGs to stimulate progress and blast past the competition through proper R&D which is an essential input to keep ahead of the field.

This is much needed in our quest to build successful, enduring and sustainable businesses in Africa. Staying in the comfort zone does little to stimulate progress. That is why our businesses must appreciate the need for BHAGs in their planning processes to stay competitive and enjoy longevity.

Let me conclude here by using Jim Collins summary he came up with in his book titled ‘How the Mighty Fall’. My two other points which time may not permit me to explain but much more self- explanatory; they are lack of management continuity and no mechanism for self-improvement.

These two other militating factors can be summarised in the concluding part of this article.

  • Arrogant believe that we are entitled to success: In our own peculiar system in Africa, success is viewed as “deserved,” rather than fortuitous, fleeting.  Business owners have deceitful believe that success will continue to come anyway no matter what the organization decides to do, or not to do.
  • Decline in Learning Orientation:  Successive leaders lose the inquisitiveness and learning orientation that mark those truly great individuals who, no matter how successful they become, maintain a learning curve as steep as when they first began their careers.
  • The Error of Confusing Big with Great:  Most a times little success creates pressure for more growth, setting up a vicious cycle of expectations that we can do bigger things but in actual fact this strains people, the culture, and systems to the breaking point. The company becomes vulnerable and unable to deliver consistent tactical excellence they are well known for and by so doing, the institution frays at the edges and before you know it they are no more.
  • Declining Proportion of Right People in Key Positions:  Another key point to note here is the decline in the proportion of right people in key areas. Why this is so is due to lack of proper policies and procedures in hiring and retaining key personnel. Secondly, growing beyond the organization’s ability to get enough people to execute on that growth with excellence.
  • Problematic Succession of Power: Another problem we got to deal with is when we transit from one leadership to the other. The organization experiences leadership-transition difficulties, be they in the form of poor succession planning, failure to groom excellent leaders from within, political turmoil within the family hierarchy, bad luck, or an unwise selection of successors.
  • Placing Personal  Interest Above Organisational Interest:

People holding corporate power or managing our businesses allocates more to themselves or their constituents – more money, more privileges, more fame that spoils success – seeking to ‘share or enjoy dividend of their labour’ as much as possible in the short term, rather than investing primarily in finding a great place for their business and themselves in years ahead.

 

Mike Osikoya
He is an Accountant and a banker. He leaves in Ghana.
m.oyemade@gmail.com