Innovating our way out of poverty?
By: Sabirah Oniyangi
From Nairobi to Lagos, Kigali to Accra, it seems as though innovations are popping up on every corner. Start-ups springing up left and right and each city crowning itself the new tech hub of the region. There is no doubt about it, it’s an exciting time and there is growth happening on the continent. Technological advances have given access to African youth on a global scale and learning has never been more accessible through technology. Africans are innovating and taking advantage of global opportunities in this digital age, it is great to see. But on a continent that still has the highest percentage of people living in poverty, what does this mean? Will innovation and entrepreneurship solve all our problems? Is this it? Can the average African experiencing poverty feel this growth? Does it improve their lives?
Well, yes and most likely, no.
When entrepreneurship and innovation flourish, small businesses are born. Multiple small businesses create an agile economy, creating opportunities to build wealth and providing much needed job opportunities. In an enabling environment, having many small and medium enterprises can help lift people out of poverty.
Unfortunately, many African countries lack what it takes for such businesses to thrive. The truth is we can’t quite innovate ourselves out of poverty. Without adequate infrastructure, government support and enabling environments, it will be difficult to see any big changes in the numbers of people living in poverty. Entrepreneurships is not new to the African continent and Africans have been trading for thousands of years. In more recent times, entrepreneurship has been borne out of necessity rather than innovation.
A look at the recent ‘Ease of Doing Business’ ranking released by the World Bank shows that African countries are quite varied in their rankings. Rwanda, which scores the highest in the region, is 38th in the world rankings (amongst 190 countries) which is pretty high. Nigeria, which has a larger economy than Rwanda is further down on the list at 17 within Africa and 131 on the world ranking. There are several topics that are used to arrive at this score such as the ease of starting a business, getting credit and getting electricity with a number of different indicators used to measure each topic. While a score doesn’t always exactly measure what is happening in reality- it is helpful to use as a benchmark to see what is lacking and what can be improved.
Take for example, the topic “Getting electricity”; shortages in power supply are quite common in low- and middle-income countries and mostly affect rural areas, but in some African cities like Lagos it is a major problem, with individuals and companies having to provide their own power through the use of fuel-guzzling generators. The indicators used to measure “Getting electricity” are the number of procedures, how long it takes, cost and reliability of supply, all of which matter greatly in doing business.
This issue of “Getting electricity” is particularly a problem for Nigeria’s booming tech industry. According to a survey of 93 Nigerian tech startups released this month by the Center for Global Development, Nigeria’s tech industry is the biggest on the continent and accounts for nearly 14% of the country’s GDP. The survey found that 57% of startups, most with fewer than 10 employees, find electricity problems to be a “major” or “very severe” obstacle to their business, beating out other challenges such as corruption, taxes and government red tape. Political instability and government regulations also ranked high on the list. Even a sector that offers perhaps the most promising opportunity to create skilled, high-paying jobs for young people, cannot surpass the infrastructural and regulatory challenges.
It will take a combination of things to bring a large number of people out of poverty and entrepreneurship and innovation can definitely be one of those things. For now, we can stop with the “Africa-Rising” sentiments and focus on the real big changes that need to happen. Solutions are multifaceted and will definitely involve cooperation between public and private entities, but entrepreneurship alone is not the answer.