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Despite the continent’s economic challenges, young African entrepreneurs are overwhelmingly upbeat about the future, says a new report by the Anzisha Prize.

ImageDespite the continent’s economic challenges, young African entrepreneurs are overwhelmingly upbeat about the future, says a new report by the Anzisha Prize

Africa has the youngest population in the world, with an estimated 200 million people between the ages of 15 and 24, according to the African Economic Outlook report. But despite fast economic growth over the past decade, many young people struggle to find productive employment, according to a new survey. Unless these young people can be put to meaningful work, the demographic dividend can easily turn into mass frustration and unrest. Entrepreneurship has an important role to play in creating employment, say the authors of the 2016 Anzisha Youth Enterprise Survey.

The goal of the survey, produced by the Anzisha Prize and the African Leadership Academy in collaboration with Maritz Africa Intelligence, is to provide a snapshot of the realities facing young entrepreneurs in Africa. It focuses on five areas of operating a business, namely (1) Growth, (2) Sales and marketing, (3) Human resources, (4) Funding and (5) Support. With a relatively small sample size of 101 young entrepreneurs aged between 15 and 25 located across Africa, the survey does not purport to be a scientific study but, say the authors, the results can be seen as indicative of broader trends and attitudes and stakeholders such as policy makers, support organisations, and entrepreneurs themselves will benefit from these insights.

Critical Data

"There is a large deficiency of knowledge and insights on young African entrepreneurs," says Koffi Assouan, Program Manager at The MasterCard Foundation, one of the partners of the Anzisha Prize. "This report provides critical data that can drive programs and strategies to support youth entrepreneurship and spark a much needed conversation among practitioners and stakeholders in this space."

The entrepreneurs who participated in the survey are overwhelmingly upbeat about the future of their companies despite the challenges of falling commodity prices, tight global financial conditions and a strong US dollar. Some 79% indicated they are "very positive" while the remainder said they are "somewhat positive". None expressed any negative sentiments.

"The entrepreneurs who participated in the survey are over-whelmingly upbeat about the future of their companies despite the challenges."

Key Findings
  • Those who participated in the survey are confident about the future. More than three quarters are "very positive" (79%), while 21% are "somewhat positive" about the outlook for their ventures. None ex-pressed any negative sentiments.
  • Funding is by far the greatest impediment to growth, with 48% of respondents highlighting it as the biggest obstacle to expanding their companies, and only 3% of respondents cited technological change affecting their industries as the largest challenge. From the responses, only 27% of respondents have secured outside funding/investment for their businesses. Family and friends (59%) are the top source of capital, along with grants (52%) and crowdfunding (22%). Bank loans (4%) are the least common, trailing venture capital (7%), angel investors (11%) and development finance organisations (11%).
  • ImageOnly 14% of respondents currently do business internationally, indicating an untapped growth opportunity. The vast majority of those surveyed are currently only doing business in their home markets, therefore missing out on regional and global opportunities. Only 14% indicated they export their products/services. According to the report, this suggests a need to make young entrepreneurs more aware of the opportunities to sell their products/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.
  • Only 27% of respondents have secured outside funding/investment for their businesses. Family and friends (59%) are the top source of capital, in addition to grants (52%) and crowdfunding (22%). The majority of those who have not secured outside funding said it is because they don’t know how to find potential backers.
  • Respondents receive support and advice from a variety of sources, such as networking events (64%),mentors (62%), training programmes (54%) and online resources (52%), to name a few.
  • The report’s findings suggest that there is little assistance for young entrepreneurs in Africa, the majority described the level of support available in their country as "fair" (43%). However, 24% and 17% 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%). This suggests many were ill-prepared for the rollercoaster-world of entrepreneurship. The second most-popular suggestion was to improve infrastructure (20%), followed by the introduction of tax incentives for young entrepreneurs (14%).
Sales and Marketing

When it comes to marketing their businesses, young entrepreneurs invest in paid-for advertisements on social media networks (58%), as well as exhibitions and events (50%). However, word-of-mouth (83%) is by far the most popular marketing medium. Relatively few make use of more expensive channels such as television (10%), outdoor (17%) and radio (18%).

In their responses, 56% of respondents use face-to-face client visits as their primary sales channel, followed by online (24%), walk-ins (11%), direct customer enquiries (7%) and telephone sales (2%).

Almost three quarters (73%) indicated they don’t employ customer relationship management (CRM) software, highlighting an opportunity to operate more efficiently by utilising technology.

Word-of-mouth (83%) is by far the most popular marketing medium. As could be expected, given the relatively small size of the business­es surveyed, more expensive marketing channels such as television (10%), outdoor (17%) and radio (18%) are less utilised. These young entrepreneurs do, however, make use of paid-for advertisements on social media platforms (57%) as well as exhibitions and events (50%).

Human Resources Challenges

In terms of human resources, the bulk of respondents employ relatively few people - 56% have one to five employees, while 19% hire six to 10 people. Some 16% have no employees. employee cost (43%) is the biggest challenge facing young entrepreneurs, followed by a lack of adequately-skilled talent (20%), motivating staff (12%) and attracting talent (10%).

Young CEOs reward and incentivise their employees in a variety of ways, with training programmes (51%),bonuses (47%) and gifts/days off (43%) being the most popular. A large percentage also allows their employees to participate in the success of the business through profit share (37%) and equity stakes (22%). Over 50% of respondents indicated they do have a partner in the busi­ness and in many cases more than one. The top reason cited for not having a business partner is: “I haven’t been able to find someone suitable” (46%).

The Anzisha Prize is the premier award for Africa’s best young entrepreneurs. The Prize is managed out of the African Leadership Academy’ Centre for Entrepreneurial Leadership, which was established through a multi-year partnership with The MasterCard Foundation. www.anzishaprize.org
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