Businesses are important for wealth creation and development of any society because they undertake huge risks to innovate, create and market value, bringing prosperity to themselves and society. The impact of businesses is not just limited to creativity and wealth creation, they foster interactions in communities and ensure the survival of people tied to the business activities. Many believe that business entrepreneurship is Africa’s best bet to attain economic and social development. Leading entrepreneur, Mr. Tony Elumelu, who professes the Africapitalism philosophy, believes that “entrepreneurs will play a central role in bringing together private wealth and public need and that the transformative impact of economic growth unleashed by a fully empowered, socially conscious entrepreneurial class will dwarf the results achieved by the previous aid-driven approach to Africa’s development.”
Despite Africa’s attractiveness for business, there are still many challenges facing businesses on the continent. While many businesses have fallen on the way, the thriving ones have grown to be resilient to these challenges. But this still comes at a huge cost – a loss in business and social prosperity that could have been attained if businesses do not have to invest in adaptation strategies.
Nigeria is a good case study of how business potentials are unnecessarily undermined by state ineffectiveness. With a youthful population, a growing middle class and a huge consumer base, Nigeria’s business environment is naturally favourable for businesses to excel. But government’s overwhelming presence in some aspects of the economy (doing what it should not be doing) and underwhelming presence in other aspects of the economy (failing where it is needed) is hurting the ability of entrepreneurs to utilise these favourable natural conditions to create wealth. Largely due to state ineffectiveness, entrepreneurs in Nigeria continue to face difficult challenges in several areas.
Finance is key to running any successful enterprise. Lack of access to finance is perhaps the biggest challenge for intending entrepreneurs and a constraint to growth for existing enterprises. Banks generally prefer to invest in government bonds and treasury bills and to lend to influential and billionaire businessmen, most of whom invest majorly in somewhat ‘sterile’ activities like oil importation, rather than lend to SMEs. Thus, government’s overwhelming presence in the economy partly crowds out financing for private enterprises from the banks. Although there are many government intervention schemes for enterprise financing, these schemes are not unified, are poorly co-ordinated and implemented and thus, do not achieve set objectives.
The enabling environment for business in Nigeria is poor. Insecurity is still a major threat to businesses. For example, the Boko Haram insurgency has crippled economic activities in the North-Eastern part of the country. A new wave of militant insurgency in the Niger Delta has led to the destruction of major oil and gas pipelines and facilities, and caused production shut-in. The implication of this for the national economy can best be imagined. Nigeria also continues to suffer from a severe infrastructural deficit. From poor transportation networks to epileptic power supply, the story is the same. One of the key challenges facing entrepreneurs in Nigeria at present is unfavourable government policies. For example, the ideological posturing of the government on the issue of devaluation and the rationing of foreign exchange by the Central Bank of Nigeria (CBN) for about 16 months denied many entrepreneurs access to foreign exchange to purchase critical goods that serve as inputs in their operations. Nigeria’s land tenure system is also a key constraint to business success. Getting a governor’s consent for a land an entrepreneur intends to acquire takes many months and years in some states. Even the process of registering a business is very tedious.
The high level of bribery and corruption and a culture of patronage increases the cost of doing business in Nigeria and reduces efficiency in business operations. For example, the foreign exchange crisis which is harming businesses would have been better managed if the country saved and grew its foreign reserves amidst high oil prices instead of mismanaging the oil windfall. Multiple taxation is also harming entrepreneurs, making many to seek to invest in tax havens. In Nigeria, once you set up shop for business, you are confronted with taxes, rents, rates and levies to be paid to different levels of authorities.
Now, nothing kills businesses more than uncertainty, but in Nigeria, entrepreneurs face many uncertainties. It took President Muhammadu Buhari up to six months to constitute his cabinet, it took a lot of unnecessary drama to get the 2016 budget passed. Thus, the Nigerian stock market that surged and led the gains among world equity markets on the back of the president’s electoral victory almost collapsed due to the uncertainty created by the halt in governance for the six months. At present, the government’s policy direction remains unclear as many final business and investment decisions are put on hold.
The truth is that businesses can help build the Africa of the future, but what is needed is a smarter leadership that can work together with all stakeholders to address the challenges facing businesses and put Africa on the path to transformation.
- Uzoigwe can be reached via [email protected]