Diamonds "in the rough": The case for Africa's largest entrepreneurial class.
It should be easy to see why to build Africa, we must help women build their small businesses. Are we seeing that yet?
My mother was a trader for more than half her life. She lived to be just 46, and the rough life of being a foodstuff trader is partly why.
Selling snails is hard. She had to leave the house as early as 4:30 am to catch the bus going to the small village near Bayelsa in Southern Nigeria, and she had to fight for every bag she bought, bring them to her shop, and proceed to haggle with city buyers, and hoteliers until darkness called it quits for the day. And sometimes, even the dark couldn’t tell her when to stop.
Like my mother, thousands of women join several buses to small villages and big towns to get the farm produce and goods that sustain Africa’s urban centers - and the families of these women. Their model is simple. Identify the best supplier, secure your order with on-the-spot payment, and carry your goods whichever way suits you. Rinse and repeat. On these trips, each woman is her army, fighting the common demons that plague all entrepreneurs in Africa, on her turf, driven by sheer will and the faces of the children who might go hungry or lose school days if she fails.
Obviously, one of the biggest constraints for these hardy entrepreneurs and the growth of MSE in Africa is the difficulty associated with accessing finance. It is particularly relevant for women-owned and led MSEs who face additional structural and socio-cultural barriers compared to men who own and run a business. Given the fact that these women-owned and led MSEs are the major part of MSEs in Africa. It doesn't take much to understand how action, not just policy for MSEs, should be oriented.
Spoiler alert! We’re obviously not that concerned : )
Being a diamond in the rough is no compliment
Our “diamonds in the rough” entrepreneurs are largely that way because of the very strong default of African economies. That Africa’s informal entrepreneurs (largely women) are diamonds “in the rough” NOT rough diamonds is perhaps why they have survived, and even managed to thrive in some cases.
It’s easy to fawn over yet another e-commerce app. And while a lot of e-commerce value is still untapped, e-commerce entrepreneurial experiments have been with us for quite a while, and thankfully, still abound. What is yet to be significantly impacted by technology is still African micro and small businesses. And, as WhatsApp and Instagram are proving, social selling is where a lot of small single-person businesses are unlocking value from.
Bridging the digital adoption gap and ultimately, increasing value for MSEs does not necessarily mean aggregating everything on yet another e-commerce store. Simply improving data availability, and simplifying processes, are enough innovation for Africa’s market squares for starters.
First things first. Bring data. Plenty of it.
Organizations like Briter Bridges are very helpful for Africa’s tech startup ecosystem. The data they collate and make available every day is helpful for VCs looking to make decisions about investing in African tech startups.
Similarly, Africa’s micro, small and medium enterprises will go nowhere without the kind of data that can guide private capital. The result of the status quo is predictable. Building new tools for or attracting more “investment” in MSEs is like walking blindfold across a road in Lagos on any good day. The result of that adventure is very predictable - and might be a bit gross. While government and aid agencies can survive this, private capital will probably be declared dead-on-arrival.
As Victor Asemota notes, “Without basic data available to almost anyone, there is no ecosystem. Fiefdoms and feudal structures only.” The converse is true. With sufficient data, even MSEs can become vibrant, and “included” part of Africa’s economic pulse.
Next, improve access to credit
Here’s a quick exercise for you.
Open a new tab now, and search, “Funding for African MSEs”. Next, repeat this on a different tab replacing the search phrase with “Funding for African startups”.
What is the difference?
It’s obvious, isn’t it? Private capital likes the first and doesn’t care too much for the other. On the other hand, aid and government agencies are very comfortable with MSEs. The reasons for this are pretty obvious, and hard to argue with. What is not hard to argue with though, is the fact that micro and small businesses are the lifeblood of many African cities and an unrecognized part of Africa’s economic pulse. And aid capital has had little impact to show for all the talk.
My submission is that private capital can meet African entrepreneurs at this junction too.
Meet Spoon Money
Spoon Money is relying on one of Africa’s oldest capital accumulation systems, the social credit union to empower women entrepreneurs in South Africa.
The system is simple. All over Africa, social credit unions exist and are called, 'tontine', 'ajo', 'stokvel', 'maround', ‘osusu’, ‘chama’ etc. depending on which part of the continent you’re fortunate to be in. Spoon Money has simply built its product on the stokvel principles that South Africans are familiar with to train, support, and provide credit for female entrepreneurs.
Spoon Money’s small groups of women-owned and led MSE are able to grow their businesses as part of a community and gain access to Spoon Money’s resources, and support to run viable businesses. Because Spoon Money is community-based, it can gain a lot of on-the-ground understanding of the business dynamics in areas it covers, data that will be valuable for both the MSEs and interested third parties.
Teach as you go…
Spoon Money is not just providing access to credit. Informal businesses need a lot more than capital to grow, training, a network of peers, and business tools are a necessary part of the arsenal of any serious entrepreneur looking to provide value. There is a lot that cannot wait in Africa where a lot is also happening. Is it too far-fetched to trial a YC for MSEs in Africa?
Help women entrepreneurs stand on two feet
Doing business in Africa can quickly devolve into a war of attrition between the business, the entrepreneur’s health and sanity, and the rest of the “world”. If you’re building or supporting an African founder you have likely met or will meet some of these familiar co-travelers.
Take Mrs. Gatenyek in Jos, Nigeria for example. Gatenyek makes Koko (pap) and Akara every evening in a small town in Plateau state. Her food is a beloved evening snack in the community. She often has to stop frying because, despite her popularity, there are only so many Akara balls she can fry with her meager capital. Credit is scarce, and that capital often dries up when family emergencies force her to cut into her business money. The result is predictable. No capital means no business and no profit. It also means disappointed and hungry customers that evening.
Lengdung, my friend who told me about Gatenyek, has often loaned her cash to start again whenever her meager capital and life savings fall short. She is quick to pay back, but even Lengdung’s loans are barely enough to sustain a business cycle. Because of this, he is crowdfunding a small trust fund to raise N500,000, to help businesses like Gatenyek’s food shack in Jenta, Jos that need that crucial micro capital.
Gatenyek’s story is familiar, and like the others, it demonstrates that ultra-small capital in the right hands can make a huge difference. Money can meet Africa here too!
Who is doing that now? Send me an email, if you’ll like to share your story and what you have learned.