Is the Engine of Africa’s Economic Growth Really Running? (1) –An Introspective Analysis

“An engine (or motor) is a machine designed to convert energy into useful mechanical motion”—Wikipedia. Hence, as the engine of economic growth, the private sector should convert creativity and innovation (energy) into motion (growth, development). Yet is that the case of the private sector in Africa? If it is, how can we improve it (mind you, there is always more room for improvement in any situation)? If not, what can we do to make it such?

The literature is replete with what government should and should not be doing in positioning the private sector as the engine of growth of the economy. Thus I do not intend to focus on that. We all appreciate that the political environment is very crucial to business for it can either positively or negatively affect it. However, I want for us to place emphasis, this time around, on what you and I should be doing—irrespective of government’s actions or inactions—for our respective businesses to flourish.

The Engine

Going by the definition of an engine above, I would like to use a car engine—due to my proclivity to cars—as the basis of my analogy:

Car engines range from 1-cylinder engines to 12. The number of cylinders a car has, the number of valves on each cylinder, plus the amount of fuel each cylinder displaces determine the torque. The amount of torque thus produced determines the speed of the car and the distance it is capable of covering within a given time.

In the light of the foregoing, we need to know how many cylinders has the African private sector and at what speed it is driving the economy.

By private sector, I mean all income-generating activities aimed at a profit that take place apart from government. These range from micro businesses such as the table-top tomato, ‘koobi’, pepper and onion seller; small businesses that employ less than 100 people; medium-sized and large enterprises that employ upwards of 100 and 500 respectively.

Personally, to be charitable, I believe the private sector in Africa is blasting on only 2 cylinders, even though the engine is a V12. And this, in spite of the fact that the private sector in Africa (formal and informal) employs about 90% of the total workforce. The reason? Majority of those in the private sector are either self-employed or running businesses that employ less than 5 people (micro).

So then, what are the challenges? And having identified them, what can we do to make the private sector more viable to really live up to its role as the engine of economic growth?

The Challenges

I would categorise the challenges into the following: cultural, leadership, management style/model, educational, succession, human resource/capital, adoption of IT, banking and strategy.

They say charity begins at home. If that is true, then the way we are socialized has a bearing on the private sector and the way we run our business. I can identify a couple of such cultural factors for now. The first is over-dependency:

Traditionally, we have been molded to look up to leadership for direction. Certainly, for any society or organization to function properly, there should be good leadership. And those being led do well to submit to authority and direction. However, when we are overly dependent on our leaders to the extent that we are resigned to despondency and are incapacitated, then there is a big problem. We often blame our fathers, mothers, uncles and others for not taking us to the best schools, sponsoring us to travel abroad (as if one can only make it abroad) and so forth. The list is endless. And the same goes for the way we perceive government. Thus whenever we feel that those we look up to are “not living up” to our expectation, we just as it were, place our hands between our shanks and whimper and lament! Sadly, this translates to the way we do business.

We expect government to provide a near-to-perfect environment for us to do business. Hence, we do not have a nudge when we sit on radio or call into radio programmes lambasting politicians, past and present, for hours every morning for whatever they did wrong for which reason the economies of our respective countries are in the present state. Yet those same radio stations hypocritically charge prohibitive advertising bills that send shockwaves through many a micro-to-small businessperson’s spine, thus preventing most from affording advertisement. If only we braced up ourselves for action, look into ourselves and used that resource called “time” better! In that case, we would be concentrating on making the best out of whatever situation we find ourselves in, irrespective of government’s demeanour or misdemeanour.

Second, you see, they say “Necessity is the mother of invention”. I always say that Africans in general are “spoilt” (pampered kids). We have so many resources such that we do not seek to think hard about survival—we have arrived and settled. Let me illustrate it this way:

Culturally, our fore-fathers married several women and created cities out of their wives. One’s wealth was judged according to, among others, the number of wives and children he had. He used these as labour on a fertile land that he did not have to suffer to cultivate. From the farm he came home and sat down in his lazy chair with a pot of fresh palm wine beside him while his wives cooked. After dinner, he organized the children around the fire and told them stories. In such a “satisfied and settled” condition, how would the composite African feel the urge to create, innovate and produce more? On Abraham Maslow’s hierarchy, where is he? At best, he is at level three—Love/belonging, Period! He goes no further!

Let us translate this to business. To explain this better, let me share an experience I had about 20 years ago during one of my sales efforts that shocked me to the core:

I called on this entertainment centre proprietor to explain to him how having a Web site could help his business grow. To my chagrin, this man responded:” Oh my son, don’t worry ok? I don’t intend this business to expand. I’m a pensioner, you see, and I need just something little to get-by.” Can you believe this? Yet, that is how many of us run our businesses in Africa. Although we may not have said the above personally, we imply it. We get to stage three up the Maslow pyramid and we are satisfied; sometimes even deluding ourselves into believing that we have arrived at the Self Actualisation stage.

With this level of motivation, then, how can the private sector really propel the economy to grow? Before we begin to point fingers at the politicians—past and present—we do well to scrutinize ourselves first by asking “How have I utilized the opportunities I had, and how am I using the opportunities I have right now?” If we look for opportunities, our businesses will grow. But if we are skeptical, the private sector will either remain where it is now or even slow down to a single cylinder, even though we have the potential of blasting on eight our even all 12 cylinders!

Third, the religious world-view of most Africans is yet another set-back to the growth of the private sector. Are you surprised? Many or maybe most Africans wrongly believe that God blesses the faithful with material wealth. As a result, they spend an inordinate amount of time at church and prayer camps, asking God to bless their businesses when they should have been doing something practical.

 Another is that God has already pre-destined everyone on earth. If that is true, then why would one have to work hard since it does not count? The result? Some have resigned themselves to virtually begging, hoping that “my day will come one day”.

In a society with such beliefs, how would those people challenge themselves to achieve something worthwhile; whether as employees or entrepreneurs? Such beliefs tend to cripple initiative, innovation and creativity. And if as business-owners we have such a world-view or have people who think that way as our employees, clients or suppliers….hmmm!

I am not sure if I can equally lay this blame at the door-step of culture, but we are not creative and innovative enough in Africa, another reason why the private sector is in this shape. We all concentrate on just a few business ideas that have seemingly succeeded—, import/export, credit transfer, mobile money and the like. When we are able to develop more innovative products and services we will realize a tremendous growth in the private sector. There are, indeed, a plethora of opportunities in Africa; we only have to sharpen our sight.

The Solutions

The problems of the world is the problem of leadership. Bringing that further home, the problems of the private sector is the problem of leadership. We have always been taught to think of leadership in terms of charisma, vision and what have you. Great! Charisma is not bad in itself, for a charismatic leader can move people to do what they ordinarily would not dream of accomplishing. Vision is also good. For without a visionary leader, how can an organization find its way?

However, what we sometimes forget is that one may be charismatic and visionary but not the “repository of wisdom”. If we continue with that mind-set that leaders are “all-wise” and yet, all our business leaders can do is satisfy themselves with attaining to “love and belonging” on the Maslow motivational hierarchy, we will get no where. True business leaders should bring all on board in the decision-making process and move away from creating a shrine of themselves. In the knowledge-based world of the 21^st Century, the employee is unlike his/her 19^th-20^th Century counterpart who had to wait on the leader for absolute direction. Good leadership today involves discerning when to allow others to lead, when to join in leading and when to lead, depending on the situation at hand. This way, micro, small and medium-sized entreprises (MSME) will become more flexible and result-oriented.

It is also important to look at our management style. One may be charismatic and visionary but not a good manager. There are many small and medium-sized enterprises (SME’s ) who have charismatic and visionary leaders but with poor managerial skills, especially in people management. It is, therefore, high time we de-coupled leaders from managers. What I mean is this: The entrepreneur should not necessarily be the managing director or chief executive officer. He can take the lead in developing the strategic blue-print for the organization and raise the needed capital to run the business. However, where he does not have what it takes to manage efficiently and effectively, he should humbly take the back-seat and allow others to handle that for him.

Another factor that impedes the effective running of the engine of growth is education. A driver who is well-instructed does well in driving efficiently and avoiding accidents as much as possible; call it defensive driving. And the converse would be disastrous or even fatal. However, can you imagine one instructing others to drive when he himself does not know how to drive? Well, that person may have access to and read the Highway Code and understand it very well. But when it comes to practical driving can he be effective? Yet, that is the way we run our business schools! Many of our teachers/lecturers, if not the majority, have never run a “pure water” business by the road-side of their own. Hence, irrespective of their experience in research and teaching they cannot give enough practical guidance that will enable budding and existing entrepreneurs to reach their self-actualisation stage on the Maslowan hierarchy.

To mitigate the above, there should develop a closer link or liaison between business schools and enterprises whereby some experienced entrepreneurs and managers are appointed as part-time lecturers to support the academic ones. We have had enough of the theory which we can always read in textbooks. The day-to-day application is simply not in the text books! We may have case-studies, for example. But who can better explain the human emotions and other dynamics that led to a certain result than the actor(s) himself?

That leads me to yet the next challenge: Human resource. Dear reader, this is a big problem faced by business owners today. Our educational systems are continually churning out a stream of unemployable graduates. Mind you, the problem is not the students but the curriculum! Well, I do not want to dwell so much on what should be. After all, you and I can only whine and cry about it. But now, given this situation what can we do as business owners?

Before I come back to that what do you think; should one be employed on the basis of what he/she studied in school or ability? This is an area that HR/HC has to carefully evaluate. Of course, there are some positions that require specialized knowledge, such as Accounting and Engineering. However, even within those specialized-skill areas, should appointment to a leadership or managerial position be based on a string of degrees or on competence? Of what use is a manager who earns a fat salary and bonuses because he has a chain of university degrees when practically, it is the diploma holder that does all the job?

Coming back to what we should be doing, expensive as it may be, MSME’s have to devote more money to training and development. However, this has to go hand-in-hand with re-orienting the workforce toward the strategic mission and vision statements of the organisation. It is certainly not an easy task. But given the right consultant it can be achieved.

However, those strategic mission and vision statements are included in the business plan. Yet there are several companies that do not have one. They only think of drawing one when a certain requirement, such as accessing a banking service, calls for it. And once that requirement is met, the document is shelved and never again consulted! This has to change if our individual businesses will flourish, contributing to the overall growth of the private sector.

What happens when the owner of a car dies, leaving behind a good V8 SUV? What if there is no will and that car finds its way into the hands of a reckless son. Or let us grant; a son who although responsible and level-headed does not know how to drive. What would happen if this son decides to move the car with the little theory he has? Your guess is as good as mine! Similarly, many of us in the private sector do not have a succession plan for our business. Once again I would place this blame at the door-step of the ‘satisfied’ “love/belonging” attitude of our businesspeople. So long as we can afford the best education for our children and live a relatively comfortable life-style we seem to think that we have arrived. Dear reader, please pause and go through your mind: In your life-time how many good-looking businesses have you not seen that died with the founder?

However, this succession plan should not necessarily mean that the business should pass on to the children as Chairmen/MD’s/CEO’s. Inasmuch as not all of us can be good entrepreneurs/managers, not all children of entrepreneurs can take after their parents’ skills. Hence, even though the company remains a family business, it should be possible that others who are more competent are employed to run it. Family members, on the other hand, should be hired and fired just like all others. That way, the MSME’s can develop and live beyond a generation.

Another challenge yet is the adoption and effective deployment of IT technologies. IT technologies are one sure way that MSME’s can develop and propel the economy. However, many MSME’s see a basic Web site, for example, as a liability. They see it more as what you need after you have achieved your end, rather than the means to that end. A simple but professionally designed Web site with corporate e-mail sends your business beyond the boundaries of your country and Africa and creates a positive corporate image that can positively impact on your business. Certainly, by adopting effective IT technologies, MSME’s will be able to reduce cost, improve productivity and thus drive the economy on the right number of cylinders.

The financial sector is yet another area to look at. I feel pity at times for the banks due to the way we take them on. However, since they are partners in developing the private sector, we can only criticize them constructively for our mutual good. Certainly, we do appreciate the effort they put into developing innovative products that encourage SME’s, especially. I personally know a number of banks that have departments dedicated to SME’s which I think is a fine step, even though, they are not getting it perfectly right. And I think that is where the views of we customers come in to sharpen such laudable initiatives and/or create new ones.

For now, I want to use a friend’s experience and a personal experience with two of the banks a few years back to illustrate some areas that need improvement:

Let us call him Yaw. Yaw runs a small business that for some time was not doing too well. As a result, several months passed without him depositing any money into his bank account. But for his tenacity, Yaw would have joined the job market looking for almost non-existent jobs just like his mates from the university.

One day, Yaw gets a modest order that can sustain him awhile. And even though he needs cash urgently, he was paid in cheque and needs to ‘special’ clear it. However, there is another problem; he gets to the bank too late to have his cheque included in the last dispatch to the clearing house. He then decides to seek help from the branch manager.

The branch manager checks Yaw’s company account and wonders why it has been dormant for so long. Yaw explains to the seeming ‘satisfaction’ of the manager. However, the manager apologises that there is very little he can do since the account has been inactive for such a long time, so Yaw should simply go through the normal clearing procedure. Yaw, disappointed, thanks the bank manager any way and approaches the teller to deposit the cheque.

At the teller’s he is advised to go see the manager again. When he gets back the manager tells him: I thought you might be operating another account with another bank so I was testing you to see if you’d walk out with the cheque, which would’ve confirmed my suspicion. But since you didn’t do that I acquiesce that you genuinely don’t have an account elsewhere. So go to the teller and she will give you the cash. Yaw, elated, thanks the manager profusely and goes for the cash.

Good customer service? By all standards some may say; in fact even Yaw felt that way. But let us reflect on this incident:

This is a bank that claims to provide the best customer service and has even won a couple of times the banking award for “Best Customer Care”. That bank also claims to live by the principle of KYC (Know Your Customer). Now, please tell me, dear reader, can this bank really claim to know its customers? Is it customer knowledge when you notice that an otherwise active account has gradually become dormant and yet, not take the time to approach the customer to find out what challenges he/she is facing in his/her business and figure out how to help; even if it takes just the concern and encouragement? Yet this manager sits in his air-conditioned office and drives in the bank’s car and enjoys a fine salary and other benefits. And all he decides is that this customer has gone to open another account with a competitor! If this is customer service, someone please help me identify a mediocre service!

My personal experience:

I went to cash a cheque drawn on an account which belongs to a different branch of the same bank. After queuing for over 45 minutes (in fact, this particular bank gives the impression that it is fanciful to queue and so it always creates plenty of room in their banking halls for queues than for tellers) the teller told me I could not cash the cheque at that branch since I was not a signatory to the account, so I had to go to the branch that held the account–suffice to say I had been to the original branch but the queue there was as winding as a mosquito coil! Hence I decided to move across town to this one, braving the traffic–I wondered, “In this 21^st Century?” Of course, I protested and she asked me to talk to her supervisor who simply told me “Sir, I’m sorry but this is the policy of the Central Bank and there’s nothing I can do about it!” Well, I wondered if really it was the Central Bank that set that policy since my bank and others I know do not operate like that (or rather, are they flouting that policy?). So, if this is how a bank in 21^st Century Africa runs, then….. (Please fill in the gap)

Thus far, I have been analysing some of the factors from within that make it a challenge for the private sector to run smoothly and what, in my humble opinion, can be done to mitigate such. In my next in the series, I will turn attention to some management practices that we have been practicing over the years but which need a re-examination. Meantime, what are some of these obsolete management practices in your estimation? Till then, please take good care of yourself!

The author is CEO/Managing Partner at Soleil Consults (US), LLC, a Strategy, Management and ICT firm.