Business success depends on mindset. This study of African entrepreneurs explains why

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Ifeyinwa Ugochukwu, Chief Executive Officer, The Tony Elumelu Foundation

• Most entrepreneurs in Africa are women – yet their businesses are less profitable. The reasons might be linked to mindset.
• For entrepreneurs in Africa, success can depend largely on mindset and culture.
• To support more African entrepreneurs to develop growth-oriented mindsets, the role of training, mentorship and access to funding cannot be overemphasized.

With a labour force of over 400 million that will surge by at least 70% before 2035, Africa is at a crossroads. The continent could either harness this active, viable human capital to deliver astronomical growth, or could suffer from even greater insecurity, unemployment and a host of economic challenges if this population is left idle.

New research on African entrepreneurs by the Tony Elumelu Foundation in partnership with Stanford University reveals insights into the divergent cultural factors that influence the entrepreneurial journey (of women especially) in Africa. The conclusions point to some patterns and qualities that favour entrepreneurial success, offering lessons in entrepreneurship in Africa and beyond.

The entrepreneurial gender gap

Most entrepreneurs in Africa are women, yet their businesses are less profitable and they experience delayed growth in comparison to their counterparts. The differences across gender are not a uniquely African issue. In the United States, for example, men comprise over 90% of the partners in the top 100 venture capital firms and receive disproportionate funding.

What distinguishes the outlook for African women is the fact that their options outside of entrepreneurship are few and far between. Being successful within their small businesses can make the difference between earning a decent livelihood and falling into economic fragility.

The study uncovers gender biases within entrepreneurship. Women and men report different business motivations and aims, especially with respect to how they discuss their customers and products. For male entrepreneurs, motivations revolved around “profit”, “growth” or “capital”, while motivation for female entrepreneurs leaned towards social impact via specific products, services and industries.

For male entrepreneurs, motivations revolved around “profit”, “growth” or “capital”, while motivation for female entrepreneurs leaned towards social impact via specific products, services and industries.

Access to capital

Capital consideration is also a defining aspect for most African entrepreneurs. Using a select pool from the almost 140,000 African entrepreneurs that applied to the Tony Elumelu Foundation Entrepreneurship Programme between 2015 and 2017, access to capital was identified as not only playing a critical role in running a business, but how it was initially conceptualized – from size and scope to design and goals.

African entrepreneurs, aware of their limitations in raising capital, often restrict their ideas. With increased access to and more opportunities for seed funding, African SMEs dream bigger, and launch businesses with a larger footprint.

With increased access to and more opportunities for seed funding, African SMEs dream bigger, and launch businesses with a larger footprint.

Mindset: exchange versus organization

The research further investigates the mindset of entrepreneurs, presenting a unique understanding of the challenges facing African start-ups and the areas for growth across multiple sectors. It provides an opportunity to rethink how entrepreneurship is approached and supported, identifying two categories.

The first set of entrepreneurs – described as the exchange mindset – are grounded in their purpose of providing products and services, nurturing relationships with employees and customers, and providing value to others.

The second set – the organization mindset – are more concerned about their ability to create, grow and expand their company.

The exchange mindset has a micro-level, ‘on-the-ground’ view, while the organization mindset focuses on ‘being an entrepreneur’, with a more macro-level view of themselves and their activities.

Rather than just orienting themselves around the exchange of products and/or services with customers, organization mindset entrepreneurs orient themselves around their purpose of creating and growing a company. The study found that individuals with this mindset often discussed growth and performance, managing people and assets, and industry dynamics. Their attention is directed toward the characteristics of their business and its performance and expansion.

The exchange mindset entrepreneurs show concern about the quality of products and services. In contrast, the organization mindset is likely to express internal motivation such as feelings of ownership and control, leading to an individualistic focus.

Both mindsets have varying management styles, with the former viewing and describing their employees as equals whose opinions are valued, and the latter as resources to be managed. Although differences in entrepreneurial mindsets might exist, African entrepreneurs are fundamentally characterized by their zeal to make significant impact.

Cultural differences

These differences were most visible geographically across North, West, East and Central Africa. In West Africa, entrepreneurs – particularly Nigerians – had motivations embedded in profit-oriented language while Central Africa and Eastern African entrepreneurs seemed to be more oriented towards social justice, and community development.

North African entrepreneurs were more disposed towards cyclical, project-based work. In Eastern and Western Africa, there was a greater emphasis on farming and agriculture. Central African entrepreneurs had a lot of overlap in how they discussed why they became entrepreneurs with Eastern Africans.

In West Africa, entrepreneurs – particularly Nigerians – had motivations embedded in profit-oriented language while Central Africa and Eastern African entrepreneurs seemed to be more oriented towards social justice, and community development.

And the winner is

The research comes to a singular conclusion: we need more African entrepreneurs to adopt the organizational mindset which is linked to higher business success.

The research comes to a singular conclusion: we need more African entrepreneurs to adopt the organizational mindset which is linked to higher business success.

Most entrepreneurs with the exchange mindset were women, highlighting the less formal level with which women view entrepreneurial activities. Women entrepreneurs, in particular, must be empowered to think differently. African entrepreneurs must embrace the language of creation alongside a clear vision for growth. This could make all the difference.

To support more African entrepreneurs to develop disruptive and growth-oriented mindsets, the role of training, mentorship and access to funding cannot be overemphasized. Such targeted support is critical to enhancing the sustainability and resilience of entrepreneurs, giving them the confidence to grow, and build businesses that will drive prosperity and social progress.

To convert the young African workforce into creators of prosperity, the Tony Elumelu Foundation’s (TEF) flagship Entrepreneurship Programme (launched in 2015), offers training, funding and mentorship to thousands of African entrepreneurs annually. The programme has directly empowered and funded over 9,000 SMEs from across the continent and continues to support over 1million through the training, mentorship, and networking opportunities available on its digital hub, TEFconnect.com.