Business incubation in Africa
8 May 2010
62 Comments“Almost 60 percent of new businesses fail within the first 5 years in operation. But startups nurtured within an incubator has an 80 percent chance of surviving,” Jim Robbins, an incubation guru who was formerly part of the ford foundation incubation team – the nation’s largest incubator said. At present he is a partner of Business Cluster Development - an incubator that helps form sector focused incubators and is working in Uganda, Nigeria, Senegal, China and Japan.
Incubators – What is in it for you as an entrepreneur?
* An incubator helps to build confidence and trust between you and the existing entrepreneurship community – i.e. facilitates creating your own business network
* Has Connections with local investment community i.e. the magic rolodex with contacts of where the money is. (Not really – but something close)
* sounding-board for ideas. Easy access to experienced mentors who could point out the pitfalls.
How do you make an incubator work?
According to Robynne Erwin, CEO of smartExchange, an ICT hub/ technology incubator in Durban South Africa said that it was a battle to find companies and people to volunteer to make an incubator work.
According to Erwin creating dialog platforms between government and industry that helps create a vibrant local industry is a key way to create a rich watershed to support small businesses. “Therefore, we are creating a windfall industry in one hand and give to the incubator on the other hand – that is working. But if you say here is an incubator, it would fail,”she said.
Jim Robbins stressed on the importance of having multiple revenue flows to sustain an incubator. He listed the following
* Equity stake in the business- “the one you have to be most patient on collecting” said Robbins.
* Government grants/ subsidies
* Universities – funded / subsidies
* Non-profit -use revenues fro
* Fees charged from start-up businesses.
* Royalty – percentage of actual sales
Incubation in Africa -the challenges
* One aim of incubators is to proactively reducing unemployment – Therefore, the assistance must be a more hands on approach since the target audience is not a “natural entreprenuers”
* Massive skill shortage – specially due to skill mismatch between graduates and what the industry wants. this specially refers to inadequate exposure to business and basic economic and technical knowledge required at the industry level.
* Digital divide – low internet penetration.
* No culture of lifelong leaning – due to an oppressive government that curtailed access to education to a large part of the population
* Lack of professionalism
* Emotional immaturity
* Poor time management
* Chasing cash – lack of focus
* Lack of business language sills
* Capacity to quickly upscale when markets open
* Financing the development of SMMEs – very few financiers are attracted to financing SMME’s due to the high risk
* Vulture capital – big companies wanting to acquire successful small players for nothing
* Lack of advocacy for SME products/ services – companies governments not using local products.
(Source – Robynne Erwin, CEO of smartExchange)
Opportunities (in Africa)- the bright-side
Govt. tenders must be open to small businesses
Several govt. agencies aiding small businesses
Govt. grants and subsidies entrepreneurs from under-represented communities.
The comments were made at the Africa Business Forum held at Stanford University on May 8, 2010
Resources:
* National business incubation Association - runs training and educational conferences –
* Santa Clara university’s Global Social benefits incubator - a good program for social entrepreneurship
* www.VC4afrcia.com – Africa-North America incubator alliance that encourages investments in african startups .
* World Bank- social entrepreneurship marketplace in Washington DC
* Infodev - incubator created by the World Bank that supports over 40 ICT incubators in developing countries. It supports incubators in 12 African countries –
* African incubation network –
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18 July 2011 at 9:50 pm