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Identifying and Growing Entrepreneurship Ecosystems

Creating an effective South African entrepreneurial ecosystem.

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Entrepreneur EcoSystem

Entrepreneurship is a skill that can be learnt, and is not entirely dependent on natural ability or talent, believes Anthony Farr, CEO of the Allan Gray Orbis Foundation, a non-profit organisation aimed at assisting and developing a new generation of high-impact entrepreneurs and leaders to bring about job creation in Southern Africa. “However of equal importance to the skill of the entrepreneur is ensuring an environment that encourages and rewards high-impact entrepreneurial leadership and is tolerant of mistakes and failures,” he says.

Creating an environment that encourages entrepreneurship is not a matter of chance or accident. “Entrepreneurial ecosystems are usually the result of identifying areas and individuals that can affect high-impact entrepreneurial change and putting the correct systems and support structures in place to make it possible for them to succeed,” says Farr.

The elements of an entrepreneurship ecosystem

Daniel Isenberg, Professor of Management Practice at Babson College in the US and keynote speaker at last year’s Cape Town Entrepreneurship Week, has developed a comprehensive system for identifying and growing entrepreneurship ecosystems. According to Isenberg, such an ecosystem consists of hundreds of elements that can be grouped into six general domains:

1) Markets, which includes early customers and networks such as entrepreneurship networks and multinational companies;

2) Policy, which includes solid leadership practices and support from government structures in the form of institutions, regulatory framework incentives and venture-friendly legislation;

3) Finance, under which micro-loans, venture capital funding and angel investors can be grouped;

4) Culture, including visible successes, tolerance for risk and failure, and social status of entrepreneurs;

5) Supports, which broadly covers infrastructure, support professions such as legal and accounting, and NGOs who support entrepreneurs, and;

6) Human capital, covering labour and educational institutions.

“The powerful consequence of this understanding of ecosystems is the flexible dynamics it brings.  Due to unique cultures, regulatory frameworks and available support structures, each entrepreneurial ecosystem will be unique. The interplay between the hundreds of different elements creates these unique environments, so it’s important not to try to copy the success of another country and simply apply their approach locally,” says Farr.

In the South African context, it is of absolute importance that we start to create a business and regulatory environment that is conducive to entrepreneurial success. “South Africa currently has a 25% official unemployment rate and job creation has become a primary objective of government. Economic studies from around the world regularly link entrepreneurship to rapid job creation, GDP growth and long-term productivity increases. The question is: how do we establish an entrepreneurial ecosystem in South Africa?” Farr asks.

Supporting high-impact entrepreneurs

There is an increasing weight of evidence showing the disproportionate impact that a small number of high growth entrepreneurs can achieve. This reality has recently been captured by the Kaufmann Foundation by way of Schramm’s Law which states: ‘The single most important contributor to a nation’s economic growth is the number of start ups that grow to a billion dollars in revenue within 20 years’.

South Africa’s business environment is unrewarding to high-impact entrepreneurs, and there’s a definite stigma associated with failing at a business venture. This often discourages potential entrepreneurs to take a chance and launch their idea, much to the detriment of our economy. “It is vitally important that we start challenging this culture of intolerance toward failure sooner rather than later, or we risk losing a great many opportunities for high-impact entrepreneurial change. Countries such as Ireland and Chile managed to change their attitudes in the space of a single generation, a so called ‘generation on the move’. There is no reason why the same can’t be done locally.”

Farr argues that only once we have considered the above aspects should we look at the role of government   in helping to support an entrepreneurial ecosystem. “Government should remove legal obstacles to business growth, and implement helpful laws that decriminalise bankruptcy, simplifies tax, and allows entrepreneurs to quickly start over after a failed venture. Government’s role is to unleash – not harness – people’s entrepreneurial energies, and build on and reinforce existing clusters instead of trying to create new ones. It’s a case of putting the correct systems in place and then letting entrepreneurs get on with the task at hand.

“Entrepreneurship should be promoted as a worthy pursuit and should form part of the curriculum – both at school- and university-level. But at the same time, we need to start removing legal hindrances to entrepreneurship and create an environment that rewards risk-taking and innovation in business, or we risk being left behind in the global economy.”

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South African Students To Battle In Universities Business Challenge To Win Up To R50 000

Students will compete in a simulation that encourages business skills.

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Cognity Advisory’s Universities Business Challenge (UBC), sponsored by General Electric (GE), launched in July this year, has seen 500 students from 13 different universities across South Africa participate in a business simulation competition, that’s designed to develop their entrepreneurship skills. The challenge is now down to just 10 teams from five different universities (approximately 50 students), who will travel to Johannesburg to compete in the two-day final event on the 5 and 6th December 2018.

The ten teams competing in the final includes three teams from the North West University, two from Mangosuthu University of Technology, two from the Vaal University of Technology, two from the University of Limpopo and one from The University of KwaZulu Natal (UKZN). These teams will be competing for the chance to win up to R50,000.

Related: Call For Applications: Young Entrepreneurs Global Exposure Trips

The aim of the UBC, now in its second year in South Africa and 20th year globally, is to tackle South Africa’s high level of youth unemployment. Statistics South Africa (Stats SA) announced that South Africa’s official unemployment rate increased by 0.3 of a percentage point to 27.5% in the third quarter of 2018.

The competition simulates a business environment, with students given a problem to solve. The simulation is designed to foster skills such as analytical thinking, problem solving, commercial awareness and team-working. The challenge is designed to empower young people and equip them with the necessary skills to succeed in business.

Tope Toogun, development advisor and CEO of Cognity Advisory says, “Students are very prepared in terms of theory when they leave university, but not the practical skills they need to start and run a business. Seeing as SMEs make up 90 percent of formal businesses it’s really important that these students know how to build a business on their own or at the very least, in small teams.”

Toogun explains how the simulation encourages business skills, “The students competing in the challenge learn all about managing people, customer service, working in teams and how to create a start up without even realising they are being exposed to all these skills. These are the skills that will separate the members in the final. Students must work as a team and make instinctive decisions.”

Cognity Advisory is engaging students through social media competitions and newsletter updates. These competitions include spot prizes for students who post an image or video and receive the highest engagement on it.

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Africarena Forges Global Partnerships To Scale African Innovators

Eleven start-ups from across the African continent, identified as “entrepreneurs for humanity”, were awarded the opportunity to partner with the AfricArena challenge corporate sponsors at the end of the second AfricArena technology conference in Cape Town.

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Amongst others, Air France KLM selected DiscoverIkasi and Sea Monster, both from South Africa, to assist with improving the travel experience and sustainability of its subsidiary Joon. Vinci Energie, will work with Senegal’s Oniriq and South Africa’s DataProphet on innovative energy solutions in Africa.

During 2018, in the run up to AfricArena2018, 60 start-ups pitched their businesses in regional events in eight cities across Africa. Many of which were invited to take part in a series of challenges set by the AfricArena sponsors, all looking to solve uniquely African business problems.

Solutions For The African Market

The AfricArena 2018 conference was anchored and endorsed by major international sponsors La French Tech, Silicon Cape, Vinci Energies, AirFrance KLM, Engie, Saint-Gobain, Methys, Rogerwilco, City of Cape Town, Proparco, RCS, and Leroy Merlin. The following sponsors specifically came to South Africa and AfricArena to explore innovation opportunities within Africa and abroad: RCS, Saint-Gobain, AirFrance KLM, Vinci Energies, VivaTech, Leroy Merlin, Engie, Sanofi and FSAT Labs.

“We expect to have a different approach from these startups, a bright idea that could be easily implemented, and also to benefit from what is very high potential in terms of innovation and entrepreneurial initiatives. And to find solutions that are very well adapted to the African market,” said Jean-Michel Mathieu, CEO of Joon, a subsidiary of Air France.

“African entrepreneurs are very willing to find solutions, to take risks, they address vital expectations and needs, and they are looking at the challenges with a very frugal mindset. I think this is a lesson for us as well, we learn a lot working with them and collaborating with them to find the right solutions and we take this inspiration back to Europe with us,” said Lydia Babaci-Victor, Chief Innovation and Development Officer at Vinci Energies.

Vincent Viollain, co-Founder and Head of Partnerships and Startups at VivaTech, the biggest tech conference in Europe said: “The leapfrog ability of African technology has become a bit of a cliché. But when you get a chance to see it, you’ll see that it’s actually true. African technology is frugal, its smart and it can have an impact locally as well as globally. In our winner, Aerobotics’ case we believe the solution can move beyond physical borders, and also have application in different industry sectors.”

Related: Employees, Not Consultants Or Executives, Are Your Best Innovators

Africarena Winners

The startups who won the challenges, were grateful of the experience and excited to be moving forward with some of the largest corporations across the globe.

“Oniriq provides access to African rural populations through energy and the internet. It’s great to be here at AfricArena, it has been a journey. For two months we’ve been participating in this challenge since the selection two months ago in Dakar with Vinci Energies team and we’ve been in discussions since. For us the win is a great achievement and we’re looking forward to starting our collaboration in Senegal,” said Rodolphe Rosier, Founder of Oniriq.

“We’d like to thank AfricArena and VivaTech for the opportunity to present and we’re really happy to have won and we cannot wait to be in Paris in May. We’re already expanding around the world and this presence at VivaTech 2019 will give us a great opportunity to meet the European market,” said Nasreen Patel, Head of Product at Aerobotics.

“This is not just a win for DiscoverIkasi, it’s a win for the communities we work with across South Africa. It’s going to give them a lot more exposure. This is what we’ve been working towards since starting the business, to get to a platform where I can market DiscoverIkasi, our market, our experiences and the townships on an international stage. Now we need to go back home and form a strategy to scale the business across South Africa,” said Ntsebenziswano (Benzi) November, Founder of DiscoverIkasi.

The startups attending the conference will also each be receiving credit from AWS as part of their prizes. Each startup in attendance, winner or not, will receive $2000 in AWS credit.

A Word From The Eco-System

Kerry Petrie, General Manager of Silicon Cape, host ecosystem of AfricArena, states: “It’s such an amazing opportunity for entrepreneurs from all across the continent to connect and share, building bridges that may hold future partnership, export and market opportunities. It builds the visibility of the pan-African community for a local, regional and global stakeholder audience. We have to work together to increase investment in African ventures from 1%. And AfricArena is playing a pivotal role in making that a reality.”

Reflecting on the event, Christophe Viarnaud, CEO of AfricArena, expanded on the philosophy behind the conference.

“AfricArena’s open collaborative Pan-African model, highly inclusive and embarking all categories of investors, ecosystem contributors, and corporates focused on innovation in Africa, has demonstrated very high impact throughout 2018 with 16 events on 3 continents. The grand finale at AfricArena2018 has shown the energy and excitement from 15 corporates, over 150 investors and 70 startups, with over $2m deals being done, startup-corporate partnerships being struck and a wave of energy and innovation from African entrepreneurs. We could not be more excited about the future, comments Viarnaud.

Related: Developing Partnerships With Fintech Innovators

The Winners:

  • Air France KLM Challenge 1 – DiscoverIkasi
  • Air France KLM Challenge 2 – Sea Monster
  • Engie Challenge – Arnegy
  • Leroy Merlin Challenge – BizAR Reality
  • Saint-Gobain Challenge 1 – Swift GeoSpatial
  • Saint-Gobain Challenge 2 – The Student Hub
  • Sanofi South Africa Challenge – Iyeza Health
  • The RCS Group Challenge – ThisIsMe
  • Vinci Energies Challenge 1 – Oniriq
  • Vinci Energies Challenge 2 – DataProphet
  • Vivatech 2019 Challenge – Aerobotics 

Sponsors And Their Challenges:

  • Air France KLM Challenge 1 – optimising the airline’s travel experience while reducing its environmental footprint
  • Air France KLM Challenge 2 – using technology to enrich subsidiary Joon’s travel experience for its passengers
  • Engie Challenge – ensuing a reliable energy supply in urban areas
  • Leroy Merlin Challenge – immersive showroom experience that shows off a large variety of products
  • Saint-Gobain Challenge 1 – using satellite trend analysis to predict urban and climate challenges
  • Saint-Gobain Challenge 2 — a solution to upgrade professionals’ skills across Africa, especially in remote areas.
  • Sanofi South Africa Challenge – optimising patient treatment adherence and completion rates
  • The RCS Group Challenge – storing and securing customer identity and authentication credentials
  • Vinci Energies Challenge 1 – using digitalisation to optimise industry and energy performance
  • Vinci Energies Challenge 2 – How to make energy more accessible in Africa using technology such as energy efficiency flow solutions, energy flow optimisation, blockchain and artificial intelligence
  • Vivatech 2019 Challenge – using artificial intelligence (AI) to generate growth and sustainability in the agriculture sector

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Tapping Into The Expert Economy

Companies to harness wealth of knowledge offered by retirees.

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The Harvard Business Review previously reported that a wave of around 700 retirements would mean the loss of over 27,000 years of experience. With this much talent leaving the workforce, it would most certainly have a serious effect on the economy. The wealth of knowledge and experience held by retirees is so valuable that it has given rise to the term, the Expert Economy.

The term refers to a sector of retired experts in their respective industries who generally hire out their skills and knowledge on a consultancy or interim management basis during their retirement days.  With the ongoing struggle among employers to identify, hire, and retain top talent, the thought of tapping into the “expert economy” and bringing experts back to the workplace but on a consultancy or ‘associate’ basis is now a popular option.

One such company taking advantage of this hiring trend is EXEO Capital, an Africa-focused private equity firm, who is working with retired and semi-retired senior executives with successful track records from across Africa to assist as ‘associate executives’ on their investee company’s growth strategies. Herman Marais, Managing Partner at EXEO Capital, says that because of these associates’ many years of experience, they are well placed to mentor and support younger management teams in driving operational performance improvement.

Marais explains that nowadays it’s becoming common for businesses to choose to bring in semi-retired executives whose years of industry experience help them advise on specialised short-term projects or problems instead of hiring someone in on a permanent basis.

“It’s not always feasible to hire a full-time specialist especially from a cost perspective, which is why companies are deciding to rather hire in experienced talent from a select network on an ad hoc basis. Often these associates are also able to bring in a fresh perspective and offer valuable lessons for internal company management.”

Related: Alan Knott-Craig Answers Your Burning Start-up Questions On Ideas And Partnerships

Marais says that EXEO also chose to make use of the expert economy to strengthen the execution capacity within the firm’s portfolio companies.  “We have seen that our associate executives can evaluate and guide, in a matter of days, a practical resolution to a problem situation that might take a young manager or analyst weeks to do before any action starts. The feedback from our associate executives is that they derive great fulfilment from the opportunity to plough back their experience into the growth and success of younger companies and managers. Our positive experience in working with associate executives leads us to encourage other retired or semi-retired executives to consider doing the same.”

One such associate executive currently working with EXEO Capital is Willard Zvitya, a retired Zimbabwean executive who is now extending his industry experience to companies in the rest of the East Africa region. Zvitya says “Working as an associate executive has given me a golden opportunity to share my experience with younger executives, however, I am not doing their work for them. I am able to help younger executives to learn and complete tasks faster because I have in the past seen and dealt with most of the problem situations they are encountering”.

Mr Terence Davidson, a retired banking executive from Kenya, founds himself very busy in serving as non-executive and independent director at small and medium-sized growth companies in East Africa. Davidson says “I derive great satisfaction and excitement from working with these younger entrepreneurs and their growth companies. It seems that they value what I can bring to the table. It is a win-win situation.”

Marais concludes by saying that it is counter-productive for businesses and the economy not to capitalise on the valuable experience and expertise of senior executives with successful track records.  “South Africa is one of the focus countries in EXEO Capital’s operations. We find it paradoxical that, while South Africa has the strongest base of managerial and technical experience in the region, this resource is not well utilised in the economy at large”.

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