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September 24, 2018

Structural Reforms Good For Entrepreneurship

Something that Ory Okolloh said in an interview with Quartz a few days ago really resonated with me: “I’m concerned about what I see is the fetishization around entrepreneurship in Africa. Like, don’t worry that there is no power because, you are going to do solar and innovate around that. Your schools suck, but hey there is this new model of schooling. Your roads are terrible, but Uber works in Nairobi and that is innovation.”

Of course innovation comes from wanting to solve problems, no matter where those arise. You need entrepreneurs for a thriving economy. So it is not a question of these not being valuable and necessary – and in the interview, Ory repeatedly gave a nod to the fact that she is actually working in the promotion of innovation and entrepreneurship through her position as the director of investments with the with Omidyar Network. So that is not the issue.

What Ory criticises is not that new. When you go back through development policy, you find that donors – and their recipient country counterparts – have supported this approach for a long time. It just wasn’t always in the more managerial terminology for entrepreneurship, but in a fuzzier development lingo, speaking of ‘income-generating activities’ and ‘projects’.

The [simplified] problem: Many people in developing economies are unemployed or underemployed and therefore poor. Are there jobs for poor people so that they can earn an income? No. So off you go, create your own job, your mini micro-enterprise. 'Do It Yourself', basically. Makes sense, no? Except it doesn’t entirely.

There are two fundamental problems with this approach: One, as Ory says, it does not fix the system. If we fetishise entrepreneurship, then we let not just government off the hook, but also only take into account part of the problem: “I feel it is distracting us from dealing with fundamental problems that we cannot develop. We can’t entrepreneur our way around bad leadership. We can’t entrepreneur our way around bad policies. And we have to questions why is there this big push for us to innovate ourselves around problems that our leaders, our taxes, our policymakers, ourselves, to be quite frankly, should be grappling with.”

There’s an element of condescension in this, too – a rich or poor countries' divide. As Ory says: “During the Greek bail out, no one was telling young Greek people to go and be entrepreneurs. Europe has been stuck at two per cent or one per cent growth. I don’t see any entrepreneurship summit in Europe telling them you know, go out there and be entrepreneurs.”

That’s because people there still expect to rely on a system, including unemployment benefits.

The other one is that entrepreneurship is just not a realistic option for the vast majority of the people. Being an entrepreneur is incredibly tough. Not everyone is cut out for that, not everyone has the nerves or the instincts for it.

Often, what people pursued under ‘income generating activities’ wasn’t really so much entrepreneurship as what Tom Dichter once called ‘survival activities’. Try onion selling today, and if that doesn’t work, move into mitumba(second-hand goods especially cloths) or try chapattis.

Some people are indeed very entrepreneurial, and manage to turn their effort into companies: There are lots of people in the mitumba business who are small-time hustlers – but also a good number who have turned into wholesalers with significant operations.

But in the end, many people simply need boring old jobs. And jobs are provided by companies.

So this whole story circles back to what is plain old homework for governments: that you need to fix the structural problems rather than launch another fund here, another National Youth Service programme there or another glossy entrepreneurship conference.

If traffic is ridiculous, operational costs are high, if Nairobi City askaris get away with harassing companies and their staff, that is a problem and prevents service delivery.

If insecurity is high, that increases operational costs or deters people from investing in the first place.

If you have to have a generator, this will feed through on your operational costs.

If licensing and permit procedures are long, complicated and interspersed with demands for kitu kidogo(bribes) or not so kidogo, it is a problem.

If there is no vocational training system, it is difficult to find good blue collar workers. This is all often-repeated stuff you find in any country report.

Exciting tales of entrepreneurship will always be an easier sell.

In industrialised countries, “No one is trying to innovate around your electricity power company. So why are we being made to do that? Our systems need to work and we need to figure our shit out”.

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