By Ben on June 9, 2011
The Legatum Prosperity Index is a global study of the factors that drive and restrain national prosperity across more than 110 countries. As VC4Africa, a leading community of entrepreneurs and investors, we are pleased to see this research and new insights needed to strengthen the business case for investing in Africa. Here is the introduction from the recently published report and a link to the full document at the bottom.
Celebrating entrepreneurship in sub-Saharan Africa is about recognising the key role entrepreneurs play in fostering wealth and wellbeing for ordinary Africans. Entrepreneurs are ‘enablers’ of growth who help break down economic barriers and social constraints.
Entrepreneurship and local private enterprise are critical components of African economic development. This is because “entrepreneurs innovate and assume risks… hire and manage labor forces… open up markets… [and] find new combinations of materials, processes, and products. They initiate change and facilitate adjustment in dynamic economies.”
The entrepreneurial landscape in Africa is multi-faceted. It includes informal and formal sector, traditional and modern, as well as local and foreign-owned enterprises, all of which are geographically dispersed across rural and urban areas. It ranges from small enterprises (providing employment for a single individual) to large corporations (employing hundreds).
Small and Medium-sized Enterprises (SMEs), however, are the dominant form of entrepreneurial activity in sub-Saharan Africa. SMEs constitute around 90% of sub-Saharan African business operations and create over 50% of employment and GDP. SMEs tap into domestic and global markets, engaging in activities from retail to telecommunications. They help to fill a growing demand in the goods and services sector, as consumer demand and discretionary income within Africa rises. Finally, SMEs act as incubators of specialization and innovation within an economy, allowing the country to diversify and industrialise.
Indeed, entrepreneurial activity of this type has played an important role in the period of sustained and relatively high economic growth that Sub-Saharan Africa has experienced over the last decade. Increased foreign direct investment, rising basic commodities prices, and the growth of export-led industries have all continued to aid economic development. More importantly, however, are the liberal economic reforms and reductions in government expenditures that have helped to foster a new entrepreneurial culture, allowing SMEs to drive new growth in the region.
The Legatum Prosperity IndexTM demonstrates that the keys to helping entrepreneurship and opportunity thrive are building a strong infrastructure for Information and Communications Technology (ICT) and creating an environment in which access to opportunity is available for all citizens. Many sub-Saharan African countries fall below the global average in these areas – but the African countries that do the best, or that have improved in recent years, are the ones that have made great advancements on these measures.
See the full report: