Entrepreneurship in Africa is primarily dominated by small businesses and micro-entrepreneurs. These firms are usually unregistered ones and employ less than 5 people, preferably the ones from the family. A Recent study reveals that most marketplaces in Africa, especially the sub-Saharan ones face a lot of struggle and are going to fail because of the existing unfavorable conditions. This instability can be related to the uncertainty of risk in the local environments coupled with major influences like the political and economic factors and varying global commodity prices respectively.
Discussed below are the top 5 challenges that pose a significant threat to all the micro companies in Africa.
- Giving the business a basic start
The very first aspect that we need to consider regarding a marketplace is the amount of effort and required capital to start it. In Africa, this is relatively a costly affair. Statistics suggest that around 0.3 percent of income per capita incurred, launching a business can be quite a lengthy procedure. The property registration takes around more than 20 days and 6 different systems, which might further fluctuate depending on the quick availability of the rates clearance certificate from the authority.
Additionally, the required capital investment is much more than the individuals can provide, owing to the existing economic downfall. Then, the chances of the company surviving in such non-favorable conditions make it all the harder to get it started in the first place.
- The issue of market fragmentation
Africa is an ethnically diverse continent with a variety of cultures imbibed in it. Unfortunately, this diversity is observed in the economic and political factors as well, which pose a hindrance to the scalability of any business establishment. Analyzing this from an ecommerce perspective, that barriers in languages and cross-border payments make it all the more difficult for any business consider about expansion plans.
Studies reveal that if a company sticks to one particular product, it is more likely to suffer long- term damages, owing to the unstable economic conditions in the given scenario. Hence, the scalability remains stagnated, making it impossible for any company to thrive in the existing market.
- Supply and distribution chains
Another of the significant challenges facing the businesses in Africa is the non-functioning supply and distribution chains. Since most of the postal systems have gone completely still, it has become quite difficult for the corresponding vendors to ship the products across the continent.
Of course, there are the buses and the motorbikes, but they are quite ineffective when considered from a wider perspective. Since a successful business is all about reaching your customers at the particular moment; it would be highly favorable if one resorts to latest marketing techniques and implementation standards. Keep yourself updated with the latest trends in business exclusively at Naij and implement your ideas accordingly for the best of market solutions.
- The inevitable corruption
The inherent corruption that haunts this continent has had its toll on the private sector of as well. As per the 2014 ranking statistics by the Transparency International, South Africa ranked 72 out of the 177 countries that are famished by the corruption (Source: Statistics indicate that this corruption costs around 25 percent of the GDP of the continent, which is quite unfavorable.
It is worth noting that corruption not only affects the investment capital, but it also drains the business of possible resources. Whether it is the tenders, the recruitment of the staff, the business registration in the official records or just the procurement of the necessary resources, corruption exists in practically all the government regulations and is not a profit initiative in its kind.
- Poor Power Supply
Having a consistent power supply has always been an issue for most of the businesses in Africa. Sadly, but the government has not been able to resolve the issue. One feasible solution would be to harness the solar energy using solar plants and generator, but it would incur additional costs on the business. The reasons can be closely related to the fact that the companies are now spending money on power supply instead of other areas of business. Also, these additional costs prove expensive on the final consumer, thus rendering the business at a stake of losing their customer base.
However, things are not all bleak and hopeless as they seem to be. With proper planning, strategy and a whole lot of patience, one can grow a business from a startup to a highly successful conglomerate. The best solution would be to keep oneself updated with the latest market trends and receive the action plan accordingly!