Technology, government support and mentoring programmes all offer potential ways to address this challenge
SMEs (Small and Medium Enterprises) in East Africa are rapidly increasing. Most of these entrepreneurs are resourceful and creative, yet they lack time and the support they need to innovate in their businesses. The most effective approaches to address this would be availing technological infrastructure and know-how especially through the government and mentoring programmes. Sage East Africa is one such organization whose commitment is in future technologies, with a focus on new and existing partnerships that power business growth. It majors in payroll and accounting softwares that aid business functions while saving on time and money.
Sage began as a small business in the U.K. 30 years ago, and over 13,000 colleagues now support millions of entrepreneurs across 23 countries as they power the global economy.
“We reinvent and simplify business accounting through brilliant technology, working with a thriving community of entrepreneurs, business owners, trades people, accountants, partners, and developers,” says Billy Owino, the Regional Director of Sage East Africa.
Through Sage Foundation, Sage East Africa is active in supporting local communities and investing in making a real difference as a philanthropic endeavour. Owino observes that many Kenyan entrepreneurs have great ideas but struggle to develop them into new business offerings and ventures. This parallels the challenge entrepreneurs face worldwide – Sage research shows that businesses worldwide rank development of new ideas as the most common area of neglect in their organisations.
The problem stems from a lack of time, despite small business owners working over 40 hours a week, according to Sage Research. “We see the same challenge throughout East Africa,” Owino says, commenting on issues raised by the Innovation Africa Summit 2016 in Kenya.
The regional director says that there are many promising shoots of innovative growth in East Africa – the challenge for government and the business community is to nurture them and ensure that innovative thinking spreads across the region.
One focus should be on simplifying red-tape so that smaller businesses can focus their energies on customer service and new ideas rather than on admin and compliance.
“It is pleasing to see that most East African governments are committed to simplifying the day to day basics of business red tape – like paying taxes, securing licences, processing imports and exports, or registering a business,” he adds. “But we should be looking at ways to make it even simpler to do business.” For their part, large companies can help by making their paperwork easy for smaller suppliers and paying promptly.
Since broadband is an important enabler of innovation, governments and the telecoms industry should work together to build the necessary infrastructure. Rwanda offers a great example in this regard, with a government-led project to lay down a 4,500km fiber optic backbone.
Likewise, the cooperation between Kenyan government (which is luring tech investors to Nairobi), the private sector and development-focused NGOs has helped to create Nairobi’s Silicon Savannah as hub of innovation and entrepreneurial energy. “Efficient and affordable internet access allows small businesses to innovate by creating new products, services and channels,” says Owino. “It also enables them to become more efficient.”
Training and mentoring small business owners in leadership should be another priority, says Owino. “Many entrepreneurs have innovative ideas, but need help bringing them to life,” he adds. “They need strategic and operational support – help in the practicalities of commercializing a product, marketing it and supporting it.”
Mentorship is crucial to most of these small and medium businesses. According to the American Small Business Association, a large percentage of small enterprises fail within the first five years of operation. In Kenya, the situation is even worse as most start ups fail to take off.
The rise and rise of incubation centers is however a timely intervention, as incubators walks with entrepreneurs in their journeys, helping them up until they become stable.
An incubation center helps new and startup companies to grow by offering them support through management training or office space.
In 2013, the Kenyan government partnered with NaiLab, a Kenyan incubator; to launch a $1.6 million technology incubation program in an effort to support growing information and communications technology (ICT) startup community. The Kenyan government aims to become one of the top 10 ICT hubs in the world.
NaiLab is based in Nairobi and tries to lower the entry barriers for ICT entrepreneurs who want to start and scale their businesses in Kenya. It was launched in 2011 by NaiLab Ltd in partnership with the crowd funding platform.
Business incubation provides entrepreneurs with access to critical information, education, contacts, capital and other resources crucial to the growth of the business that may otherwise be unaffordable, inaccessible, or otherwise unknown to ICT startups in Kenya.
Incubators offer training to start ups, helping them evolve into successful companies. Training involves technological ideas which help investors, software designers, programmers and young entrepreneurs to connect with each other.
With over 41 million people, 70 per cent of them being under the age of 35, technology is becoming an integral part of Africa’s rise. For Kenya, which is the most developed economy in Eastern Africa, almost 1 out of 3 Kenyans is connected to Internet, 75% have a mobile phone and 1 out of every 2 uses his or her mobile phone to make mobile payments.
It is therefore easy to see why technology hubs and accelerators like iHub are doing a commendable job in supporting entrepreneurs in this regard, Owino says. NGOs like Educate! in Uganda are also helping by providing secondary school students with practical and entrepreneurial education. But much more could be done – for example, larger businesses and multinationals could mentor start-ups.
Innovation should also be nurtured from a young age by encouraging school children to think in creative and entrepreneurial ways and by exposing them to the latest technologies. Governments should work closely with educational experts and other stakeholders to put innovation in the curriculum. In Kenya, for example, the Digital Literacy Programme will distribute more than 12,000 digital devices to 150 primary schools in the pilot phase.
Owino notes that entrepreneurs in East Africa can also create time in their schedules for innovation by putting the right systems and processes in place. Mobile technology, cloud business applications and other tools can help small business owners to boost their productivity so that they have more time to focus on developing ideas, he adds. For example, payroll and accounting software streamline much of the financial administration business owners need to do.
“As we have seen from successes like Ushahidi, M-Farm and M-Pesa, East Africa is taking its place on the world stage as place of innovation and opportunity. For our region, it comes naturally to leapfrog legacy technologies, find ways to work around infrastructure limitations, and reuse and combine old ideas into something new,” Owino says. “This is the work that East African entrepreneurs do every day as they power the economy. It is their entrepreneurial spirit that makes the difference and they deserve our support.”